Breaking Down the Latest Medicaid Policy Proposals: What You Need to Know

Post Written by Kyle Hill, Senior Advisor

On May 22, 2025, the U.S. House of Representatives passed the budget reconciliation bill needed to advance health policy proposals that focus on Medicaid. 

Congress continues to debate sweeping changes to Medicaid that could significantly alter the landscape for states, providers, and beneficiaries. The House of Representatives passed a major milestone today in making their proposals law. In a largely party line vote, 215-214, with one Member voting Present, the House of Representatives passed their budget reconciliation package to extend President Trump’s 2017 tax policies and increase border security spending. 

The reconciliation process is a legislative tool used to circumvent the 60-vote threshold needed to avoid a filibuster. In recent history, the reconciliation process has been used by both parties to pass partisan legislation. To pay for their policy agenda, the Republican reconciliation package proposes a suite of policy shifts, some long-expected, others newly introduced, that health care leaders should begin analyzing now. From work requirements to changes in retroactive eligibility, this legislation has wide-ranging implications for how Medicaid is administered and who it serves.

Here’s a high-level breakdown of the key provisions and what they could mean for Medicaid programs across the country:

Work Requirements: Community Engagement Mandate for Certain Adults

The bill would require states to implement community engagement requirements for able-bodied adults without dependents. Beneficiaries in this group would need to:

• Work at least 80 hours per month,

• Participate in job training or education for 80 hours,

• Complete community service for the same duration,

• Or engage in a combination of these activities.

Exemptions include pregnant individuals, those under 19 or over 64, foster youth under 26, Tribal members, and individuals who are medically frail. Caregivers, recently incarcerated individuals (within 90 days of release), and those complying with SNAP or TANF work rules are also exempt. States could issue temporary waivers during natural disasters or in areas of high unemployment.

To comply, states must verify beneficiaries’ engagement during the month before enrollment and again before redetermination.
Implication: States will need to develop or enhance administrative capacity to monitor work and engagement activity, while ensuring exemptions are appropriately applied and documented. Under the bill passed by the House of Representatives these requirements will kick in at the end of 2026.

Provider Tax Restrictions

The legislation would freeze provider tax rates at current levels and prohibit states from enacting new ones.

Implication: States that rely on provider taxes to finance Medicaid will need to explore alternative revenue strategies to meet raising Medicaid costs.

Medicaid Expansion Population: More Frequent Redeterminations and Cost-Sharing

Under the proposed changes:

• Eligibility redeterminations for expansion adults would occur every six months (currently required annually).

• Expansion adults with incomes above 100% of the federal poverty level would be required to pay cost-sharing, though exemptions would apply to primary care, prenatal care, pediatric services, and emergency room visits deemed appropriate.

Implication: Increased administrative churn and the introduction of cost-sharing may reduce enrollment among expansion populations, particularly those with fluctuating income.

Federal Match (FMAP): No Cuts, But Sunset of Enhanced Match

The good news: There are no across-the-board FMAP cuts in the bill. However, it sunsets the enhanced ACA match for Medicaid expansion. States already receiving the enhanced match would be grandfathered in.

Implication: This provision maintains current FMAP rates but ends expansion incentives for new states, likely halting any more states from expanding coverage. 

Immigrant Coverage Restrictions

Federal Medicaid funding would be limited to individuals with verified citizenship, nationality, or immigration status. The current 90-day grace period to verify documentation would be eliminated. States using Medicaid systems to cover undocumented individuals would face a 10% FMAP reduction.

Implication: States with broader immigrant access policies may need to reassess their Medicaid financing strategies or risk losing federal support.

Retroactive Coverage Narrowed

Retroactive eligibility would be reduced from three months to one, limiting the window for individuals to have medical expenses covered before their application date.

Implication: Providers may see an increase in uncompensated care, especially for populations with irregular Medicaid enrollment patterns.

Transgender Care and Planned Parenthood Restrictions

The bill would prohibit federal Medicaid funding for transgender care. It would also exclude Planned Parenthood from Medicaid reimbursement.

Implication: These policies could reduce access to care for specific populations and are expected to prompt litigation.

Demonstration Projects: Budget Neutrality Required

All new Medicaid demonstrations under Section 1115 would be required to be budget neutral.

Implication: States pursuing innovation through Medicaid waivers will need to ensure rigorous cost modeling and fiscal discipline.

Combatting Waste, Fraud, and Abuse

New requirements would mandate that states:

• Conduct monthly checks to identify providers terminated by other states or HHS and subsequently remove them as a Medicaid provider,

• Use Social Security’s Death Master File quarterly to remove deceased enrollees,

• Regularly verify beneficiary addresses, and

• Implement systems to prevent duplicate enrollment across states.

Implication: These changes aim to strengthen program integrity but may require system upgrades and inter-agency coordination.

Basic Health Plan

The reconciliation package will prohibit lawful immigrants from accessing a Basic Health Plan which was permitted under the Affordable Care Act and states like New York have implemented.  This will force these enrollees to migrate to regular Medicaid but many would not be eligible for federal matching funds.

Implication: This will result in significant revenue losses for New York’s Essential Plan and force New York to pick up the full costs of many more Medicaid enrollees. Providers will also be impacted as the reimbursements for services under the Essential Plan generally pays more than Medicaid’s.  

Other Health Policy Provisions

• Disproportionate Share Hospital (DSH) cuts would be delayed to 2029, giving hospitals temporary relief.

• The Physician Fee Schedule (PFS) would move to a single conversion factor tied to medical inflation, replacing the current split model which benefits providers participating in advanced alternative payment models.

Final Thoughts

While not all proposals will survive the legislative process, this bill offers a strong signal of congressional priorities for Medicaid reform. States and managed care organizations should begin considering the operational, fiscal, and policy implications of these changes now, particularly around workforce, systems, and eligibility administration.

Next, the legislation heads to the Senate where significant changes are anticipated. Congressional watchers expect the final legislation to be passed sometime this summer. 

Worried about how the proposed changes to Medicaid will affect your services and offerings? Reach out to us–we have a deep bench of Medicaid experts here to help you achieve your goals, including the nation’s longest-serving Medicaid Director, Jason Helgerson. 

About the Authors:  Kyle Hill is a Senior Advisor and a nationally recognized expert in health care policy with more than a decade of experience advising senior members of the U.S. House of Representatives.