Fighting Back: State Responses to Federal Attacks on Health Care in 2026 and the Advocacy Road Ahead

In 2025, Congress enacted the most damaging Medicaid cuts in history and let enhanced premium tax credits (EPTCs) that made health coverage affordable for 22 million Americans expire. The consequences are already visible: states that have approved their FY2027 budgets are cutting provider rates, restricting enrollment, and spending tens of millions just to implement H.R. 1’s new administrative mandates — and deep federal cuts will continue to compound after major H.R.1 provisions are implemented in January 2027.

But in 2026, states didn’t stand down. Across the country, state policymakers and advocates met the moment, enacting solutions to minimize the harm of federal cuts and responding to what Americans have been demanding for years: real action on affordability and lowering health care costs. While there is still work to do in assessing how state budgets are impacting families and ensuring federal lawmakers remain accountable for H.R. 1, the 2026 state legislative sessions also offer important lessons, both about what is possible, and where the work remains as we look ahead into 2027.

Defending Health Coverage Against Federal Cuts

In Nebraska, advocates successfully defended retroactive Medicaid coverage — the protection that ensures that people who qualify for Medicaid are eligible for coverage for care they received before enrolling — in two key fights. First, Governor Jim Pillen (R) moved to effectively eliminate retroactive Medicaid coverage through a Section 1115 waiver proposal, but after advocates submitted more than 1,300 public comments opposing the proposal — including from Families USA and Nebraska Appleseed — the Governor’s administration was forced to withdraw the waiver.

Governor Pillen then attempted to achieve the same goal through his state budget proposal. In response, advocates helped secure the enactment of legislation — supported by Families USA, Nebraska Appleseed, and leading partners in the state — that preserved retroactive Medicaid coverage. This is a prime example of how organized, persistent advocacy that draws attention to who will be most impacted by a policy change can stop harmful proposals in their tracks.

As states pursued policy options to blunt the harm of Congress’s failure to extend enhanced premium tax credits for millions of Americans who rely on the ACA individual market for their health coverage, New Mexico went further than any other state by becoming the only one to fully backfill those lost federal subsidies for 2026. Governor Michelle Lujan Grisham (D) signed legislation to increase revenue for the state’s Health Care Affordability Fund (HCAF), replacing the expired federal subsidies, eliminating the “subsidy cliff” that would otherwise cause thousands of New Mexicans to lose coverage, and helping address H.R. 1-driven Medicaid funding shortfalls. Through the state budget, New Mexico also set aside $25 million for its BeWell assistance program to prevent coverage losses for people with incomes below 400% of the Federal Poverty Level.

Together, these investments protect affordable health coverage for up to 46,600 New Mexicans and reduce costs for as many as 122,000 people statewide. Recent federal data show that New Mexico was the only state in the nation to see an increase in ACA marketplace enrollment over the past year, gaining roughly 14 percent more enrollees compared with the same time last year. In addition, the legislature approved $40 million to maintain state-funded coverage for lawfully present immigrant enrollees ahead of H.R. 1’s October 2026 eligibility restrictions. Driven by a strong coalition anchored by the New Mexico Center on Law and Poverty and allied advocates, New Mexico demonstrated what is possible when a state commits to fully meeting the moment.  New Mexico was not alone in driving affordability measures forward this year. Recently, Virginia Governor Abigail Spanberger (D) approved a state budget that included $150 million in state-level marketplace subsidies to temporarily minimize the harm of Congress’s failure to extend EPTCs.

When faced with the mandate in H.R. 1 to implement cost-sharing for Medicaid expansion adults, Kentucky lawmakers adopted a less harmful approach than was initially proposed through legislation. The original version of the bill would have imposed copays as high as $35 for inpatient hospital services. Following sustained, successful advocacy from state partners, including Kentucky Voices for Health, the final version of the legislation instead established minimal cost-sharing starting in 2028: a $5 copay for most services and just $1 for prescription drugs. While concerns remain that any copays can create barriers for Medicaid enrollees, these substantially lower amounts represent a meaningful improvement over the original proposal and demonstrate the impact of effective advocacy.

Answering the Call on High Health Care Costs

Beyond defending against federal cuts, several states took on the challenge that Americans across the political spectrum have demanded action: the high, irrational cost of health care itself.

In New York, a broad coalition led by 32BJ that includes Families USA, advanced the Fair Pricing Act further than ever before in the state legislature. This first-of-its-kind site-neutral payment legislation would ensure the same health care service costs the same price regardless of where it is delivered. The bill passed both the Assembly and Senate Health Committees with overwhelming support, building significant momentum heading into 2027.

In Maine, advocates, including Consumers for Affordable Health Care (CAHC) and Families USA, worked to introduce legislation that would limit prices for select hospitals to 200 percent of the Medicare price and slow how much prices can grow each year, which would lower health insurance costs, reduce barriers to care, and ensure fair hospital prices for a state with some of the highest health care costs in the country. While the bill did not advance in this session, it is a bold marker for moving toward more rational hospital prices and should inspire advocates in Maine and around the country in future sessions. In Colorado, Families USA and the Colorado Consumer Health Initiative (CCHI) successfully blocked legislation that would have shielded high-cost drugs from affordability review. Sometimes the win is stopping bad policy from becoming law.

Looking Ahead: Setbacks and Lessons for 2027

Not every fight to defend against harmful federal Medicaid cuts succeeded at the state level. Indiana passed legislation that requires Medicaid expansion applicants and enrollees to comply with work reporting requirements for three consecutive months prior to enrollment or renewal (“lookback period”) and mandates quarterly verification. In effect, this means individuals subject to the work requirement must prove their eligibility every single month of the year. Indiana lawmakers did not take up the flexibility offered under H.R. 1 (and in recent federal guidance) that would permit states to verify compliance far less frequently (for example, allowing for a one-month lookback period, with verification only once every six months). The law also limits the self-attestation of work or exemption status, allows the state to impose up to $35 in cost-sharing — the maximum allowable under H.R. 1 — for expansion adults with incomes between 100% and 138% of the Federal Poverty Level, and extends biannual redeterminations beyond the expansion population to most non-elderly, non-disabled adults across the entire Medicaid program. This is especially notable given that roughly 70% of Indiana Medicaid adults are already working.

Other states have focused on similar strict H.R. 1 implementation efforts:

• Iowa enacted legislation providing two-month retroactive eligibility only to pregnant women, children, and residents of nursing facilities — moving far beyond H.R. 1 by stripping the two-month retroactive coverage provided to non-expansion populations and the one-month retroactive coverage provided to expansion populations.
• Utah enacted a bill limiting self-attestation, while a similar effort in West Virginia ultimately failed. New Hampshire, North Carolina, and Wyoming likewise enacted laws prohibiting the use of self-attestation for Medicaid eligibility redeterminations, even though H.R. 1 explicitly allows its continued use.
• Idaho enacted legislation to impose a three-month lookback.
• Legislators in Missouri attempted, but failed, to write Medicaid work reporting requirements into the state Constitution.
• North Carolina went backward more than any other state. Legislation signed by Governor Josh Stein (D) in April to close the state’s $319 million Medicaid funding gap also requires copays at the highest allowable amounts for both traditional and expansion Medicaid participants — even though H.R. 1 only mandates cost-sharing for expansion participants — and ends North Carolina’s adoption of the Immigrant Children’s Health Improvement Act (ICHIA) option for 27,000 lawfully residing immigrant children and pregnant individuals.

Even Virginia — which stepped up on marketplace affordability with $150 million in state subsidies — moved in the wrong direction in terms of promoting policy solutions to lower health care costs. Virginia’s strong advocacy behind the Affordable Medicine Act — legislation to lower prescription drug prices by establishing a Prescription Drug Affordability Advisory Panel — ran into a Governor’s veto after the legislature rejected amendments that would have introduced delays and industry loopholes.

The Wrap-Up

The 2026 state legislative sessions demonstrated that the demand for affordable, accessible health care is not going away — and neither are the advocates fighting for it. The coalitions built and strengthened this year, the policies advanced, and the harmful proposals defeated demonstrate what is possible when advocates organize, persist, and keep the people most affected at the center of the debate. While the federal landscape presents significant challenges, states will continue to be a critical arena for defending health coverage, lowering health care costs, and building momentum for future progress.

To join the fight to protect affordable health coverage and lower health care costs, please visit Families USA’s Defending Medicaid and Stop the Bleed: Cut Costs, Not Care websites to learn more about how you can stay engaged and take action.