What does the reconciliation package (aka One Big Beautiful Bil Act) do to Medicaid?

The reconciliation package makes several targeted changes to the Medicaid expansion provisions in the Affordable Care Act (ACA). Under the ACA, states can choose to expand coverage to non-elderly adults with incomes up to 138% of the federal poverty level. Currently, 41 states and DC have implemented Medicaid expansion, with the federal government covering 90% of the costs for this population. In 2021, Congress passed a financial incentive for states that have not yet adopted Medicaid expansion, but the reconciliation package would eliminate this temporary incentive for states that newly adopt expansion, effective January 1, 2026.

The legislation also requires states to impose work requirements of at least 80 hours per month for individuals ages 19-64, with certain exceptions, who are applying for or enrolled through the ACA expansion. In addition, states will be required to conduct eligibility redeterminations at least every six months, which is faster than more states typically do now. These requirements must be implemented and tracked by states by January 1, 2027.

One of the most significant provisions in the bill concerns provider taxes. States are currently allowed to finance their share of Medicaid spending through various sources, including health care-related taxes, as long as those taxes comply with federal rules. The new changes will prohibit states from creating new provider taxes or increasing rates on existing ones and will also affect the safe harbor threshold for states that expanded Medicaid under the ACA.

Currently, provider taxes are considered compliant with the “hold harmless” rule if the tax revenue is 6% or less of a provider’s net patient revenue. The “hold harmless” rule means that states cannot structure provider taxes in a way that guarantees providers will get back what they pay in taxes through increased Medicaid payments. Under the new policy, starting in fiscal year 2028, this safe harbor limit will be reduced by 0.5% each year for these states. By fiscal year 2032, the safe harbor limit will be set at 3.5%. This means that states that expanded Medicaid will have significantly less flexibility to use provider taxes to fund their share of Medicaid costs.

These changes could result in increased financial pressure on states, potentially leading to reduced Medicaid payments, tighter operating margins, service reductions, or increased costs for providers and health systems. We are closely monitoring these developments and will provide more information in the coming months on the timeline and implications for health care delivery.

Other Legislative Updates

Our outreach over the past month has led to a notable jump in the number of cosponsors on the Conrad 30 reauthorization bill. Since the beginning of June, we have seen 17 House offices join the bill as a result of our outreach and are looking to add more in the coming weeks. We will also be leveraging our national footprint to target new members, educating them on the importance of strengthening the pipeline of physicians to confront health workforce shortages.

Later this month, we anticipate the Healthcare Workforce Resilience Act (HWRA) will be re-introduced in the Senate. HWRA would recapture up to 40,000 previously authorized but unused visas, allocating 25,000 for nurses and 15,000 for physicians. These visas would not be subject to per-country caps and would be issued based on priority date. This bill aims to help address nursing shortages across the country and assist doctors who are already practicing in the U.S. but have been affected by the green card backlog for over a decade. Stay tuned for more information as we work with other stakeholders to ensure a strong rollout of this legislation.

Closing Word

At the end of the month, Congress will go on its month long summer recess. This is a great time to catch up with congressional staff and outline priority issues heading into the fall. We are working with offices on novel approaches to increase recruitment of physicians in rural communities, and also engaging at the state level to encourage states to buy into their role in recruiting physicians to communities across their states. Stay tuned for more exciting developments and reach out with any questions.