Medicaid & SNAP: Federal Cuts Coming into View

UPDATE, October 13 — Medicaid Work Requirement Lawsuit; SNAP Benefits Adjusted

Medicaid:
On September 18, individuals and organizations filed a lawsuit challenging the CMS interim final rule implementing H.R. 1’s Medicaid work and community engagement requirements. A different federal court dismissed a similar case brought by North Carolina and 24 other states this summer. The requirements take effect January 1, 2027. Because volunteering at a 501(c)(3) counts toward the requirement, nonprofits that host volunteers may begin receiving requests to verify hours. Other states are building resources — the Michigan Nonprofit Association launched a site on how nonprofits can help protect coverage, and North Carolina and Illinois have published multilingual toolkits.

SNAP:
SNAP benefits and income limits rose October 1 under USDA’s annual cost-of-living adjustment:

• The average increase is about $18 per month, and no household’s benefit will drop because of the update.
• The maximum monthly benefit for a four-person household rises to $1,023, with an income limit of $5,500; the minimum benefit rises from $24 to $25. The new levels run through September 30, 2027.
• Since February 9, recipients must document shelter and utility costs at application and renewal. Missing documentation will not close a case, but it can lower the benefit.
• Under H.R. 1, veterans and current or former foster youth ages 18–24 are no longer exempt from work requirements.

What nonprofits can do:
Decide now how your organization will verify volunteer hours if asked. Food banks, pantries, and benefits navigators can help clients gather shelter and utility documentation so they receive their full benefit. PANO will share Pennsylvania DHS implementation guidance as it is released.

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UPDATE, September 30 — SNAP Cost Shift to Pennsylvania Begins October 1, 2026

What happened:
The first major SNAP cost shift under H.R. 1 (the One Big Beautiful Bill Act) takes effect October 1, 2026. States will now cover 75% of SNAP’s administrative costs, up from 50%, as the federal share drops to 25%. PANO first flagged this date in April.

What comes next:
A second, separate cost shift begins one year later. Starting October 1, 2027, Pennsylvania will also have to pay a share of SNAP benefit costs. That share is set by the state’s payment error rate: the higher the error rate, the larger Pennsylvania’s share. Based on Pennsylvania’s 2025 error rate of 9.21%, the Commonwealth would owe 10% of benefit costs. The Center on Budget and Policy Priorities estimates that could cost Pennsylvania about $410 million a year; the Central Pennsylvania Food Bank’s estimate, using May 2026 participation data, is about $381 million. State and national food assistance groups are urging Congress to delay the cost shift to give states more time to prepare.

Why it matters for Pennsylvania nonprofits:
Every new dollar the state spends administering SNAP competes with other state priorities — including the human services lines nonprofits rely on. Experts warn the added state burden could lead to program cuts. Food banks, pantries, and human service providers should expect demand to keep rising as work requirements and administrative hurdles push people off SNAP, and should factor the 2027 benefit cost share into planning for the FY 2027-28 state budget.

Where things stand:
The administrative cost shift is set by federal law and begins October 1. The size of the 2027 benefit cost share depends on whether Pennsylvania’s error rate for federal fiscal year 2026 (October 2025–September 2026) comes in lower than last year’s. PANO will share the final error rate and its budget implications when they are released.

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What happened:
The One Big Beautiful Bill Act, signed into law earlier this year, set in motion the largest cuts to Medicaid in the program’s history — roughly $1 trillion over ten years. Implementation timelines are now becoming concrete. The Centers for Medicaid and Medicare Services (CMS) is required to release an interim final rule on Medicaid work requirement implementation by June 1, 2026. Work and reporting requirements for Medicaid expansion adults take effect January 1, 2027. Eligibility redeterminations shift from annual to every six months beginning October 1, 2026.

What this means for Pennsylvania:
Pennsylvania’s Department of Human Services Secretary has warned that more than 300,000 Pennsylvanians could lose Medicaid when work requirements take effect. The state will also absorb a greater share of the Supplemental Nutrition Assistance Program (SNAP) administrative costs starting October 1, 2026. SNAP work requirements are already being enforced statewide, with Lancaster and Lebanon cities currently exempted under a transitional waiver until September 2026. Pennsylvania faces a projected $20 billion reduction in federal Medicaid funding over the next decade if current law is fully implemented.

What it means for Pennsylvania nonprofits:
The demand shift onto nonprofit human service providers will begin before the end of this calendar year — not in some future budget cycle. Organizations providing healthcare navigation, housing assistance, food access, behavioral health services, and workforce development will face increased caseloads at the same moment that federal and potentially state funding is contracting. Rate-based human service providers — already flat-funded for six of the last ten state budget cycles — face compounding pressure from both sides. Nonprofits that have not already begun scenario planning for increased service demand and reduced reimbursements should start now.

What to watch:
The June 1 CMS interim final rule will provide critical detail on how work requirements will be implemented and verified, what documentation enrollees must provide, and how much flexibility states like Pennsylvania will have in implementation. PANO will share analysis of the rule when it is released and will connect members to advocacy opportunities through the comment period.