One Big Beautiful Bill considers historical Medicaid cuts, work requirements

The Senate’s version of the One Big Beautiful Bill Act (OBBBA) has cleared a significant hurdle, but not without substantial changes that are sending concerns through the health care industry. While initial fears of sweeping Medicare cuts appear to have been averted, the bill’s impact on Medicaid funding and eligibility requirements poses considerable challenges for providers and patients alike.

A key focus for industry watchers is the bill’s stance on provider taxes. While not eliminated entirely as some feared, the Senate version of the bill takes a stricter approach than its House counterpart, reducing the maximum allowable provider tax rate that states can offer to 3.5% by 2034, slashing it from the current rate of 6%. States use the revenue generated from provider states to fund Medicaid payment rates to hospitals. This reduction, while preserving a funding mechanism, could still squeeze state budgets and, by extension, provider reimbursement.

More significantly, the Senate’s OBBBA proposes a total of $864 billion in Medicaid cuts over the next 10 years. These historic rate cuts are coupled with a stringent approach to Medicaid work requirements. The Senate bill now mandates work requirements for individuals with dependents over the age of 15, a broader scope than previously anticipated in the House version.

The takeaway

Hospitals and health care services may be challenged by the potential policy changes around the new Medicaid work requirements; these changes could lead to 7.8 million people becoming uninsured over the next decade. Given that more than 70 million people rely on Medicaid, such a substantial loss of coverage raises potential concerns about affordability and access to health care across the nation. Health care providers should anticipate these changes and use predictive technologies to model their financial exposure due to potential changes in reimbursements.

Learn more about what’s happening in health care in our industry outlook.