Saga Over: Big Beautiful Bill Has Passed – For Good Or Bad

Trump’s bill passes, but there will be major repercussions for healhcare coverage

Well, the months-long saga is over. For good or bad, the budget reconciliation bill, known as the One Big Beautiful Bill (BBB), has passed. It marks a tremendous political achievement for President Donald Trump and Republican lawmakers. President Donald Trump signed the BBB and touted it as a landmark major tax and domestic policy bill. The bill extends tax reductions ready to expire and enacts new ones. At the same time, it institutes massive cuts to Medicaid and the Affordable Care Act (ACA) that could remove millions of people from Medicaid and the Exchanges. The bill will mean tremendous changes for healthcare in America.

I have advocated for what I call smart healthcare reductions – ones that seek to reduce price in the system and promote greater efficiency. But the healthcare cuts in the bill are anything but that. While the GOP did not foolishly attempt to repeal the Affordable Care Act (ACA) as they did in 2017, the stealthy reductions in the BBB will take us back in time before the 2010 passage of the ACA to much higher uninsured and underinsured rates. The uninsured rates will not be as high as back then, but the result is most assuredly a step back from affordable universal coverage. And the bill will complicate the problem of the underinsured. Combined, the uninsured and underinsured count is about 25% of the U.S. population. The roughly 85M uninsured and underinsured will grow.

Before we dive into the final healthcare reductions in the bill, I want to state one thing. I do not oppose every healthcare provision in the bill. I will point out below that some elements of the bill done right would have been acceptable to me. They touch on my argument for smart healthcare cuts. Without a doubt, some of our government programs have grown too much and actually threaten the very existence of government programs and healthcare coverage more broadly.

The political backdrop

After the 2024 election concluded, it was clear that President Trump and the Republicans would have a tough time cobbling together enough votes in each house to pass a reconciliation bill with all the commitments made. The House and Senate each had very narrow majorities, meaning just a few votes in either chamber could sink the mega bill. What’s more, the Senate essentially requires a 60-vote supermajority for bills to pass. The only exception is to use the budget reconciliation process – allowed once for each year’s budget package. But the reconciliation process has strict rules related to what can and cannot be put in the bill. These are known as the Byrd rules.

The votes in each chamber and again in the House were extremely tight, but the GOP caucus successfully navigated the intricacies of the process as well as ameliorated the concerns of both sides of the GOP caucuses. The House GOP has a few dozen moderates from Blue or Blueish states as well as the rightist House Freedom Caucus. The Senate has roughly a half a dozen moderates or pragmatic conservatives.

The bill was months in the making and Donald Trump is being given considerable credit for its passage. Whatever you think of the bill itself, its passage can be described as a political master stroke given the tight vote count for the GOP in each chamber of Congress. Trump stayed engaged with lawmakers on each vote – the initial House draft, the Senate recrafted one, and the House adoption of the Senate version. He is credited with creating a full course press to pass the bill, including a mixture of cajoling, education, and even political threats. Trump, Vice President JD Vance, Centers for Medicare and Medicaid Services (CMS) Administrator Dr. Mehmet Oz, Treasury Secretary Scott Bessent, other Cabinet officials, Speaker Mike Johnson (R-LA), Senate Majority Leader John Thune (R-SD), and other GOP leaders in each house all executed on final passage over several months.

Stealth attack vs. a frontal assault

Throughout the saga of the budget bill, I have made the case that the GOP was in stealth attack mode. What I mean by that is they learned a bit from their frontal assault on The ACA in 2017. Then, they attempted to repeal the Medicaid expansion and the Exchanges. While the bill went down to defeat, the Democrats capitalized on the failed effort to take back control of the House.

In 2024, the Republicans are attempting to convince the nation that the stealth reductions to Medicaid and the Exchanges should not lead to massive impacts and are rooted in good government by attacking waste and abuse and ensuring only those who meet requirements obtain coverage. As you will see below, I don’t agree with the argument even though I am a Republican.

The party in power at the White House tends to historically lose seats at a midterm election. With the tight House count, the likelihood was always that the Democrats would win back the lower chamber (the Senate looks still likely Republican in 2024). But will the stealth cuts in 2025 play the same way as the frontal assault from 2017 and swing the House in a major way. Only time will tell. Many of the major reductions to healthcare will have yet to have major impact until after the 2026 vote, but the disorganized Democrats promise to make the bill a huge campaign issue.

What were the final reductions?

Tracing the many healthcare reductions over the past few months is not easy. Changes were made in the House before it first passed the bill. The Senate then made its mark on the bill with various iterations and changes. I have combed numerous sources for the inventory below, including the bill itself and summaries. I would strongly recommend healthcare policy group KFF’s analysis of the final bill as well as The Hill’s ongoing coverage. Both of them are best in class in terms of covering these things — one from a healthcare policy perspective and the other from a tremendous “how goverment works” standpoint. Studies and articles can be found at the link at the end of this blog. I have broken out the reductions by program area as KFF does. This analysis below is primarily from the KFF briefer at the link. I give them a great deal of credit for their clarity and thoroughness.

The major reductions include:

 Medicaid:

• Eliminates the temporary incentive for states that newly adopt expansion. This is effective January 1, 2026.
• Requires states to impose cost-sharing of up to $35 per service on expansion adults with incomes 100-138% of the federal poverty limit (FPL), with some services excluded. Cost-sharing for prescription drugs are limited to nominal amounts. Maintains the 5% of family income cap on out-of-pocket costs. This is effective January 1, 2028.
• Limits federal matching payments for emergency Medicaid for individuals who would otherwise be eligible for expansion coverage except for their immigration status to the state’s regular state matching rate. This is effective January 1, 2026.
• Requires states to condition Medicaid eligibility for individuals ages 19-64 applying for coverage or enrolled through the ACA expansion group (or a waiver) on working or participating in qualifying activities for at least 80 hours per month. Certain exemptions apply. Those denied Medicaid coverage would also be denied subsidized Exchange coverage. This is effective not later than December 31, 2026, with the ability of states to enact earlier. Extensions can be granted to states showing good faith until December 31, 2028.
• Requires states to conduct eligibility redeterminations at least every 6 months for Medicaid expansion adults. This is effective for renewals scheduled on or after December 31, 2026.
• Requires states to obtain enrollee address information using reliable data sources and that the federal government establish a system to share information with states. The federal and state governments are required to share information. Various effective dates.
• Delays implementation to 2034 of various parameters of two Biden-era rules meant to reduce barriers to and streamline enrollment.
• Restricts the definition of qualified immigrants for purposes of Medicaid enrollment. This is effective January 1, 2026.
• Limits retroactive coverage to one month prior to application for coverage for expansion enrollees and two months prior to application for coverage for traditional enrollees. This is effective January 1, 2027.
• Prohibits states from establishing any new provider taxes or from increasing the rates of existing taxes. It also tightens the conditions under which states may receive a waiver of the requirement that taxes be broad-based and uniform such that some currently permissible taxes, such as those on managed care plans, will not be permissible in future years. These provisions are effective on passage, with states having at most three fiscal years to transition existing arrangements that are no longer permissible.
• Reduces the safe harbor limit for provider taxes for states that have adopted the ACA expansion by 0.5% annually starting in fiscal year 2028 until the safe harbor limit reaches 3.5% in fiscal year 2032. The new limit applies to taxes on all providers except nursing facilities and intermediate care facilities. It also applies to local government taxes in expansion states.
• Upon passage, directs HHS to revise state directed payment regulations to cap the total payment rate for inpatient hospital and nursing facility services at 100% of the total published Medicare payment rate for states that have adopted the Medicaid expansion and at 110% of the total published Medicare payment rate for states that have not adopted the expansion. Existing approved state directed payments are reduced by 10 percentage points each year beginning January 1, 2028, until they reach the allowable Medicare-related payment limit. States that newly adopt the expansion after enactment have a cap of 100% of the Medicare payment rate applies at the time coverage is implemented even for payments that had prior approval.
• Requires that HHS certify that 1115 demonstration waivers are not expected to result in an increase in expenditures compared to expenditures without the waiver and to specify a methodology for applying any budget neutrality savings in a waiver extension period. This is effective January 1, 2027.
• Requires HHS to reduce federal financial participation to states for identified improper payment errors related to payments made for ineligible individuals and overpayments made for eligible individuals. This is effective January 1, 2030.
• Prohibits HHS from implementing, administering, or enforcing the nursing home rule’s minimum staffing levels until October 1, 2034.
• Reduces the maximum home equity limits to $1,000,000 regardless of inflation. This is effective January 1, 2028.
• As of January 1, 2028. allows states to establish 1915(c) home and community based service (HCBS) waivers for people who do not need an institutional level of care.
• Establishes a rural health transformation program that will provide $50 billion in grants to states between fiscal years 2026 and 2030, to be used for payments to rural health care providers and other purposes.
• Requires states to conduct checks at enrollment, reenrollment, and on a monthly basis to determine whether HHS has terminated a provider or supplier from Medicare or another state has terminated a provider or supplier from participating in Medicaid or CHIP. This is effective January 1, 2028.

ACA/Exchanges:

• Bars any consumer who enrolls in a plan via a Special Enrollment Period that is a non-qualifying life event from receiving premium tax credits and cost-sharing reduction subsidies. This is effective for 2026 plan years and later.
• Effective end of auto-renewals by requiring pre-enrollment verification of eligibility, including household income, whether someone is an eligible alien, health coverage status, place of residence, family size, and any other information deemed appropriate by HHS. This is effective for taxable years beginning after December 31, 2027. Consumers can still enroll in a plan but cannot receive premium tax credits or cost-sharing reductions until after they verify their eligibility.
• Requires that all premium tax credit recipients repay the full amount of any excess, no matter their income. This is effective for taxable years beginning after December 31, 2025.
• Limits eligibility for subsidized ACA Exchange coverage to lawfully present immigrants who are lawful permanent residents (LPRs or “green card” holders), Compact of Free Association (COFA) migrants residing in the U.S. as well certain Cuban and Haitian entrants. This eliminates eligibility for other lawfully present categories.
• Eliminate subsidized Exchange coverage eligibility for all lawfully present immigrants with incomes under 100% of the FPL beginning January 1, 2026.
• Treats individual market bronze and catastrophic plans as an HDHP that can be paired with a health savings account. This is effective January 1, 2026.

Medicare:

• Restricts Medicare eligibility to U.S. citizens, green card holders, certain immigrants from Cuba and Haiti, and people residing under the Compacts of Free Association. Thus, the bill eliminates Medicare eligibility for people not included in the above groups, such as those with temporary protected status and refugees and asylees. It terminates Medicare benefits no later than 18 months from enactment of the legislation for anyone who is currently receiving benefits, but no longer eligible under these changes.
• Delays until October 1, 2034 most provisions of a September 2023 CMS final rule meant to reduce barriers to enrollment for Medicare beneficiaries in Medicare Savings Programs (MSPs).
• Provides a temporary one-year increase of 2.5% to the Physician Fee Schedule conversion factor for all services furnished between January 1, 2026 and January 1, 2027.
• Modifies the orphan drug exclusion in the Inflation Reduction Act’s (IRA) Medicare drug negotiations provisions to include drugs designated for one or more rare diseases or conditions and where the only approved indication or indications are for one or more rare diseases or conditions. The period of time that drugs are on the market with only one or more orphan indications shall not count toward the 7- or 11-year time frame that determines eligibility for selection. This is effective for drugs selected for negotiation beginning in 2026.
• Prohibits HHS from implementing, administering, or enforcing the nursing home rule’s minimum staffing levels until October 1, 2034.
• Because the budget deficit increases under the reconciliation bill, the so-called Pay-Go sequestration of spending could occur unless overridden by a future Congress. Under the rules, Medicare can be cut by up to 4% in a given year. Based on an earlier version of the bill, the Congressional Budget Office (CBO) estimates a $45 billion cut to Medicare in 2026 and totaling at least $500 billion over the 2026-2034 budget period.

Health Savings Accounts/Other Reforms:

• Treats individual market bronze and catastrophic plans as a High Deductible Health Plan (HDHP) that can be paired with a Health Savings Account (HSA). This is effective January 1, 2026.
• Certain Direct Primary Care (DPC) offerings will not be considered health plans, allowing individuals covered by these arrangements to be eligible for an HSA. This will only apply if the fixed periodic fees for the DPC do not exceed $150 monthly, or $300 monthly where more than one individual is covered. DPCs not considered health plans are limited to those offering primary care services and do not include services that require general anesthesia, prescription drugs (except for vaccines), and laboratory services not typically administered in an ambulatory primary care setting. This is effective January 1, 2026.
• Permanently allows HDHPs to cover telehealth and other remote services before the deductible and still qualify as an HSA-eligible HDHP. If an individual has other coverage for telehealth and other remote care services while participating in an HDHP, they will still be eligible for HSA contributions. This is effective for plan years beginning after December 31, 2024.

The bill’s impact?

Medicaid and Exchange reductions in healthcare will be over $1 trillion over a 10-year period. The five biggest reductions occur from:

• Mandating work requirements in Medicaid ($326 billion).
• The Medicaid provider tax limitations and phasedown ($191 billion).
• Repealing the Biden Administration’s Medicaid streamlining rule, ($167 billion).
• Revising the payment limit for state directed payments ($149 billion).
• Increasing the frequency of eligibility redeterminations for the ACA expansion group in Medicaid ($63 billion).

In an analysis of the House version of the bill, the Urban Institute and Robert Wood Johnson Foundation (RWJF) break down how providers (hospitals, physicians, and drugs) are impacted in each state by the reductions to Medicaid and the Exchanges. Over the next decade, the bill would decrease spending by $321 billion to hospitals, $81 billion to physicians and $191 billion for drugs. Spending on other healthcare services would decline by $205 billion. The Senate version that was passed cuts even more than the House one.

Another analysis says hospital uncompensated care costs will grow by $443 billion over ten years.

If the Exchange premium tax credits expire, spending would decline by an additional $262 billion — hospitals an additional $103 billion cut, physicians an additional $39 billion cut, and drugs an additional $50 billion cut. Spending on other healthcare services would drop an additional $70 billion.

Republicans argue that no one truly eligible for these healthcare programs will be denied enrollment and that the bill is focused on fraud, waste, and abuse. But notwithstanding what Republicans say, millions will lose coverage as a result of social barriers, red tape, administrative hurdles, the great inefficiency and lack of infrastructure in state Medicaid agencies, and lower availability of revenue in states to match federal dollars. The Senate version that was adopted by Congress increased estimates of coverage losses from 10.9 million to 11.8 million in Medicaid and the Exchanges. If we add the losses estimated from the expiration of the enhanced premiums tax subsidies at the end of this year (4.2 million) and the just finalized Trump administration rule tightening enrollment in the Exchanges (0.9 million), total losses could become 16.9 million.

Overall, the reductions threaten to destabilize the health plan industry and coverage in general in a major way.

• The Exchanges could see a return to bleeding enrollment, high risk, soaring premiums, exits by plans, leaner benefits, and less plan and provider access. Financially, health plans could see a very troubling financial picture moving forward.
• Due to a loss of enrollment during the reintroduction of Medicaid redeterminations, Medicaid is already reeling from rising risk and a mismatch between costs and rates. This could continue as losses occur under the budget bill. What’s more, state revenue is already drying up due to the elimination of enhanced matches during COVID. The provider tax restrictions and phasedown could mean further troubles funding managed care rates in the future.
• Medicare Advantage (MA) is financially troubled right now due to poor Star ratings, potential recoupment of risk adjustment monies, prior authorization reforms, and poor planning on executives’ part. Statutory Pay Go sequestration could further undermine health plan recoveries in the industry. This could lead to further geographic and benefit contraction, higher premiums, and increased cost-sharing.
• Commercial and employer coverage are seeing huge surges in utilization. Loss of provider revenue in government programs could lead providers to demand higher rates from the commercial sector. This could lead to employers further cutting back on benefits and transferring more costs on to employees in terms of premiums and cost-sharing.

Conclusion

Now I told you I am not against everything the GOP put in the reconciliation bill. As a few examples, I am sympathetic to:

• Some limitations over time on provider taxes and state directed payments. These do seem excessive in many states.
• Some limited cost-sharing. This contributes toward the goal of personal responsibility.
• Some eligibility reform in Medicaid and the Exchanges to root out fraud and improper enrollment.
• Reining in 1115 waivers and the scope of benefits.
• Expanding the use of HSAs.

But the budget reconciliation bill’s passage will mean a huge fallout in healthcare. Instead of looking at so-called smart cuts to reform price and migrate to a more efficient system, Republicans again elected to target coverage as their solution to slowing the growth of healthcare. It is a “penny-wise-and-pound-foolish” approach. While the bill does not technically repeal the ACA, it does take away a great deal of the progress we have made on the coverage front since 2014. The GOP will take away more than a third of the coverage gains. That is disturbing.

Additional reading:

KFF analysis: https://www.kff.org/tracking-the-health-savings-accounts-provisions-in-the-2025-budget-bill/ 

The Hill article: https://thehill.com/policy/healthcare/5384707-how-trumps-megabill-will-impact-health-care/ 

#budgetreconciliation #trump #congress #spending #coverage #medicare #medicaid #exchanges #aca #obamacare #uninsured

— Marc S. Ryan