Medicaid is one of the fastest-growing programs in Iowa’s General Fund budget. In Fiscal Year 1990, Medicaid consumed just 7 percent of the budget. Today, that number has climbed to 19 percent. The Department of Health and Human Services, which administers Medicaid, now accounts for 28 percent of the state budget. For Fiscal Year 2026, the legislature was forced to appropriate $2 billion to fund the program.
The rising cost of Medicaid offers both a lesson and a warning. As federal COVID-era support winds down, Iowa’s share of Medicaid costs has increased. Medicaid is a jointly funded safety net program administered by the federal government and the states. Due to the expansion of Medicaid in Iowa, the number of individuals covered continues to grow—placing even greater pressure on the state budget.
During the 2025 legislative session, Iowa’s legislature advanced a measure to require able-bodied Medicaid recipients to work, but its implementation depends on federal approval. It is imperative that the federal government allow Iowa to enact this meaningful reform. Work requirements must take effect immediately—not be delayed. These reforms will protect the most vulnerable by ensuring Medicaid remains focused on those who truly need it. Medicaid was never intended to become a vehicle for universal health coverage.
The growing cost of Medicaid should concern all lawmakers and serve as a broader warning. Iowa depends on more than $13 billion in federal funding (as of FY 2024), and any reduction in federal support would force legislators to make difficult decisions—either increasing state spending or cutting programs.
The ongoing debate in Congress over President Donald Trump’s proposed Big Beautiful Bill, and deficit reductions in general, could have major implications. Federal lawmakers are considering a reduction in Medicaid spending, which would directly impact states. Additionally, Congress is working to shift more responsibility for the Supplemental Nutrition Assistance Program (SNAP) to the states. If passed, states would be on the hook for additional benefit and administrative costs. This would require Iowa to appropriate additional funds or find alternative ways to deliver the program without reducing services.
While reversing Medicaid expansion in Iowa may not be politically feasible, lawmakers must prepare for continued cost increases. Reforms such as work requirements are critical to helping able-bodied individuals transition off the program and regain independence.
Medicaid’s $2 billion price tag is yet another reason why Iowa must be cautious about relying too heavily on federal funds. There is no guarantee that federal dollars will continue to flow freely—and when they don’t, Iowa taxpayers will be the ones left holding the bill.
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