On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law. While headlines focused on the bill’s sweeping tax changes and debt ceiling increase, a quieter but far-reaching impact is now coming into focus: considerable cuts to Medicaid.
For healthcare providers, hospital systems, and revenue cycle teams, these changes aren’t just policy, they signal real operational adaptations. Here’s what’s inside the law and what it could mean for healthcare delivery across the U.S.
A Trillion-Dollar Reduction in Medicaid Spending
The Congressional Budget Office (CBO) estimates the OBBBA reduces federal Medicaid and CHIP spending by over $1 trillion through 2034. This could result in over 11 million people losing coverage, with the uninsured rate reversing years of progress since the Affordable Care Act (ACA).
States will face the difficult choice of either increasing their own spending to offset federal losses or cutting benefits and provider payments.
Key Medicaid Policy Changes in the Bill
1. New Work Requirements
Starting in 2027, Medicaid recipients in most expansion states will need to document 80 hours per month of ork, job training, or community service. Those who fail to meet reporting deadlines, even if eligible, risk losing coverage.
2. Cuts to Provider Tax Support
The bill restricts states’ ability to use provider taxes to supplement Medicaid funding. These taxes have long helped states increase payments to hospitals and nursing homes. Without them, rural and safety-net providers may face tighter margins.
3. Cost-Sharing and Copayments
For the first time, states can require Medicaid recipients to pay up to $35 out-of-pocket for non-emergency services. Exemptions apply to services such as primary care, mental health, and substance use treatment.
4. Reductions in ACA Subsidies and Reenrollment Access
The OBBBA allows enhanced ACA premium subsidies to expire in late 2025, leading to expected premium hikes of up to 75%. It also shortens open enrollment and ends automatic reenrollment for marketplace plans, adding new steps.
Who’s Most Affected?
- Low-income adults without children, especially in Medicaid expansion states
- People with disabilities not receiving formal SSI/SSDI
- Immigrants with lawful presence, who will lose ACA subsidies or Medicaid access
- Rural populations, where hospital closures could increase care deserts
- Older adults, some of whom will lose dual Medicaid-Medicare cost-sharing support
What It Means for Healthcare Providers
The downstream effects of these cuts may create challenges for health systems’ revenue cycle management. Revenue cycle teams should prepare for higher denial rates, reduced Medicaid reimbursements, and greater reliance on charity care programs.
Policy Impact Moving Forward
Many provisions of the OBBBA phase in over the next few years, giving time for states or future Congresses to intervene.
Healthcare leaders should begin evaluating the operational and financial risks now—and engage in policy discussions that will shape how these changes unfold.
