EXPLAINER: When Medicaid Changes Come Home to Minnesota (with flyer)

A few years ago, I overheard a conversation between a business owner and her employee. The owner said people who are relying on government-funded insurance needed to be cut so they stop being a drain on small business owners like herself. The employee, kindly, pointed out that her medical coverage (she seemed to have a disability) was state-funded. The owner said no, she has her own insurance. The employee, again gently, explained that her Medical Assistance insurance is government-funded.

With the levels of misunderstanding about the systems we rely on when we get hospital and clinic care, this Explainer is the first in a series designed to help people understand how the government — and the people we elect to it — serve the common good with the decisions they make about policy and funding priorities that impact the interconnected whole.

New federal rules are cutting into health care protections October 1. For Minnesotans who rely on Medical Assistance (MA, which is known as Medicaid in many states) — and the hospitals, nursing homes and mental-health providers who care for them — the changes could reach far beyond where health insurance might come from.

For more than 1.2 million Minnesotans, Medicaid is part of the health care landscape. In Minnesota, the program is called Medical Assistance, and it covers children, pregnant people, people with disabilities, low-income adults, people receiving long-term care and others whose incomes make private insurance difficult or impossible to afford. The rules governing that coverage are changing.

The federal law enacted in 2025 reduces federal Medicaid spending nationally by an estimated $911 billion over 10 years, according to the Congressional Budget Office analysis cited by the Kaiser Family Foundation. Minnesota officials estimate that as many as 140,000 Minnesotans could eventually lose Medicaid coverage because of the changes. But this doesn’t necessarily mean that 140,000 people will suddenly receive a letter saying they are no longer eligible.

For many, the pathway may be more complicated: a missed notice, a six-month renewal instead of an annual one, difficulty documenting work or volunteer hours, confusion about an exemption, a change in immigration eligibility, or simply an inability to navigate a more complicated system.

Behind the Paperwork

Rachelle Schultz, the CEO of Winona Health, said in a recent conversation with Nina Moini of Minnesota Public Radio that about 8,000 people in Winona County are enrolled in Medicaid. About 70 percent of residents in its long-term-care facilities rely on Medicaid. These Medicaid accounts represent about 16 percent of Winona Health’s business.

Medicaid generally pays providers less than the cost of providing care. Schultz indicated that if a service costs $1, Medicaid might reimburse 68 cents.

That gap is not new. What changes with the new federal law is the increased pressure placed on the entire system when fewer people are insured or when states and providers have to spend more time documenting eligibility.

In Minnesota, for example, the birth of 1 in 3 babies is covered by Medicaid. Cutting a program “doesn’t cut the need in the community,” Schultz said. “We have a whole community to serve. We can’t carve out a population and say, we’re not going to take care of you. Or you can’t have the things that other people do. We service everybody who comes in through our doors. … Cuts to Medicaid will result in uncompensated care.”

• If someone loses Medicaid coverage, they don’t stop needing a doctor.
• A nursing-home resident doesn’t stop needing care.
• A pregnant woman doesn’t stop needing an obstetrician.
• Someone experiencing a mental-health crisis doesn’t stop needing treatment.

Communities will be paying more to support residents, and that trickles down to everyone.

The October 1 change

The first major Minnesota change involves immigration status. Beginning October 1, 2026, certain noncitizen adults age 21 and older who are not pregnant will no longer qualify for federally funded Medical Assistance under the same rules they have previously used. This includes some refugees, asylum seekers, people granted certain humanitarian protections, and other noncitizens who had previously qualified for federally funded coverage.

Children under 21 and some pregnant people will remain eligible under federal Medicaid rules. Some adults losing federally funded MA may qualify for MinnesotaCare or another form of coverage.

The January 1 changes

The biggest administrative change arrives January 1, 2027. Adults ages 21 through 64 — who do not live with children under 19, are not pregnant, are not American Indian or Alaska Native, and are not receiving MA because of a disability — will generally have to demonstrate qualifying community engagement to maintain coverage. That engagement can mean working, volunteering, participating in an approved work program, or attending school. The federal standard is generally 80 hours a month.

Exemptions include people who are medically frail, people receiving certain disability-related benefits, people participating in substance-use treatment, and certain caregivers, among others.

But Minnesota officials and advocates are concerned about something more basic: proving that you qualify. The Arc Minnesota has warned that people with disabilities could face significant administrative barriers. Greater Twin Cities United Way has raised concerns that eligible people could lose coverage simply because of paperwork and reporting requirements.

The Minnesota Department of Human Services (DHS) has estimated that the new work-reporting requirements could result in hundreds of millions of dollars in administrative costs and federal funding losses.

“Paperwork” may be the more important word than “work.” A person can be working and still lose coverage if the state doesn’t receive the required documentation. A person can qualify for an exemption and still lose coverage if the exemption isn’t properly recorded. A person can remain eligible and still become uninsured.

Twice-a-year renewals

Beginning in 2027, affected adults will have to renew their Medicaid eligibility every six months instead of annually.

For someone with stable housing, reliable internet access, flexible work hours, and an uncomplicated income, that may simply be an inconvenience. For someone moving between apartments, working seasonal jobs, caring for family members, lacking transportation, or struggling with a disability, it can be very burdensome.

DHS has been developing tools to help people understand their status and prepare for the new requirements. But state officials are also working under federal deadlines and incomplete or evolving guidance.

Rural Minnesota pressure

Rural hospitals already operate with narrow financial margins and fewer alternatives when a service disappears. Medicaid patients need care whether reimbursement covers the full cost or not. Rural hospitals and clinics also serve as safety nets for people who have nowhere else to go, such as for maternity care and mental health. NAMI Minnesota describes Medicaid as the state’s largest payer for mental-health services.

The Minnesota Hospital Association has estimated that insurance enrollment reductions could mean hundreds of millions of dollars in annual hospital revenue losses.

What Minnesota’s members of Congress are saying

Minnesota’s congressional delegation has divided sharply over the federal law.

Republican Reps. Tom Emmer, Brad Finstad and Michelle Fischbach supported the final legislation, as well s Republican Rep. Pete Stauber. Their public statements have emphasized reducing waste, fraud, and abuse; strengthening eligibility rules; and protecting Medicaid for people they describe as its intended beneficiaries. They have also pointed to a $50 billion Rural Health Transformation Program included in the law.

• Emmer cautioned against what he called Democratic “hysteria” over where Medicaid savings would come from.
• Finstad has described his support in terms of accountability, reducing waste and fraud, and broader Republican priorities in the legislation.
• Fischbach has argued that the law strengthens Medicaid by targeting waste, fraud and abuse while directing new resources toward rural health.

Minnesota Democrats have taken a different view. Rep. Angie Craig has warned that the law’s Medicaid reductions put rural hospitals and health clinics at risk. Rep. Ilhan Omar has criticized the reduction in federal Medicaid funding and described the consequences as a loss of health coverage. Rep. Betty McCollum has focused on the effect of reduced coverage and higher costs on patients and health providers. In August, she convened a roundtable at Gillette Children’s to discuss those concerns. [Our story on that conversation is coming.]

Republicans emphasize the success is defined as program integrity, eligibility enforcement, and reducing federal spending. Democrats emphasize the number of people who will become uninsured and the consequences for providers and  communities that lose health care options or find payments increasing.

Minnesota state legislators have also weighed in on what the changes mean in our state.

What happens next?

Minnesota health care leaders need to quickly implement systems capable of determining who qualifies, who is exempt, who has completed required activities, and who needs to submit documentation. Those systems need to work for people who have stable internet and people who don’t; for people who speak English and people who don’t; for people who can easily upload a document and people whose lives make paperwork difficult. The stakes are especially high for people who are already living close to the edge.

The questions now facing Minnesota communities are partly about whether the state can build a system in which people who remain eligible can actually keep it, and partly about whether Minnesota’s hospitals, clinics, nursing homes, and mental-health providers can continue to provide care when the federal dollars supporting that care become harder to access.

The answers will be felt in every Minnesota community.

A flyer to share

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