A New Era in Medicaid and Health Policy: Understanding the One Big Beautiful Bill Act

Post Written by Kyle Hill, Senior Advisor

On July 4, President Trump signed the One Big Beautiful Bill Act into law marking one of the most consequential shifts in Medicaid and federal health policy since passage of the Affordable Care Act. At Helgerson Solutions Group, we believe our clients deserve straightforward insights to help navigate complex changes. Here’s what the law means and how it could affect your operations and strategy.

Major Themes: Coverage Losses and Decreased Funding

This legislation significantly alters the structure and financing of Medicaid across the country. It imposes new requirements on beneficiaries and states, limits financing mechanisms for states, and curtails certain types of federal support for providers and vulnerable populations. While certain investments in rural health offer promise, the overall trend is toward tightening eligibility and increasing administrative burden. The Congressional Budget Office, the nonpartisan score keeper that advises Congress on how their policy proposals will impact spending, projects that 10.5 million Medicaid recipients will lose coverage resulting in spending reductions that add up to $1.02 trillion over the next 10 years. 

Key Provisions and Implementation Timelines

Tightening up Medicaid Eligibility and Generosity
The law includes a number of provisions impacting Medicaid enrollees that ultimately make it harder for eligible Americans to access and retain their Medicaid coverage and certain populations will have less coverage. 

States will be required to implement work or community engagement requirements for able-bodied adults without dependents. These individuals must report at least 80 hours per month of work, community service, education, or a training program. Several exemptions apply, including for those with disabilities, foster youth, and caregivers. This policy change accounts for the largest amount of coverage losses and savings of the health care related provisions of the law. Impacted enrollees will have to submit documentation that they have met the community engagement requirements at least once each year. The community engagement requirements will provide savings of almost $326 billion through 2034 almost entirely due to eligible Medicaid enrollees failing to complete the paperwork correctly. States must have their community engagement requirements operating no later than January 1, 2027. 

Other provisions that will result in eligible recipients losing coverage include the requirement that eligibility redeterminations for the Medicaid expansion population must be repeated every six months starting January 1, 2027.

In addition, beginning October 2028, cost-sharing will be required for Medicaid expansion adults with incomes above 100% of the federal poverty level. Exemptions include primary care, prenatal care, pediatric care, and emergency services.

Beginning in 2027, the retroactive coverage period will be reduced to one month for Medicaid expansion enrollees and two months for traditional Medicaid recipients. Currently, enrollees are granted up to three months of retroactive coverage.

New Requirements for States

The legislation relies heavily on states implementing a slew of new policy changes intended root out waste, fraud, and abuse in Medicaid but also puts limits on popular financing schemes used by nearly every state to pay for Medicaid. 

The Big Beautiful Bill Act amends the “safe harbor” limit on provider taxes which states use to finance Medicaid and meet their required contribution to the program for their FMAP. Beginning in FY 2026, the maximum allowable provider tax amount will be reduced by 0.5 percentage points until the new cap of 3.5% is reached. The House-passed version of the legislation would have frozen existing provider taxes in place. The legislation passed into law will force states to adjust their Medicaid financing plan to comply with the Big Beautiful Bill Act. 

The legislation also dictates how much states can pay providers. Beginning in 2028, states that expanded Medicaid will see a shift in allowable payment rates for Medicaid providers from commercial benchmarks to Medicare benchmarks. A phased reduction in payment limits will begin, moving to 100% of Medicare in expansion states and 110% in non-expansion states, with a 10% annual step-down.

States will be required to regularly check federal and state databases to identify and disenroll terminated providers and deceased beneficiaries. Monthly checks on terminated providers and quarterly checks on death records will be required. Beginning in 2030, the bill also modifies the federal error rate policy to limit waivers of repayment and includes undocumented immigrants in the count of ineligible expenditures for error rate calculations.

Immigrant Coverage Limitations
The bill eliminates the 90-day period during which individuals without verified immigration or citizenship status could receive Medicaid coverage and, beginning in 2027, it eliminates premium tax credit eligibility for certain lawful immigrants, which could significantly impact the state health insurance marketplaces and programs like the Essential Plan in New York.

Rural Health Investment

The most significant investments in health care in the One Big Beautiful Bill Act is the creation of a $50 billion rural health transformation fund. This investment will be distributed over five years, from 2026 to 2030. States must submit a rural health transformation plan to access funding, addressing access, workforce, technology, partnerships, and financial sustainability. States must apply by the end of 2025 and should begin developing their application as soon as possible.

Other Notable Provisions

Moratorium on Skilled Nursing Safe Staffing Standards
Federal enforcement of new safe staffing requirements for skilled nursing facilities is frozen. 

Restrictions on Planned Parenthood
The legislation bars federal funding to certain nonprofit reproductive health providers that provide abortion services. The provision was drafted in a way so that it would only impact Planned Parenthood and is only in effect for a year starting on the date of enactment.

Medicaid Demonstration Requirements
All new, amended, or renewed Medicaid demonstration waivers must be budget neutral.

What Didn’t Make It: Key Provisions Removed from the Final Bill

In the final bill, several provisions were removed from the reconciliation bill before final passage:

• Prohibition on Transgender Health Care:
  A proposal to prohibit federal funding for gender-affirming care under Medicaid was stripped from the final legislation. 

• Disproportionate Share Hospital (DSH) Cuts:
  The House-passed bill had proposed delaying scheduled DSH cuts to take effect in 2026 but was not included in the final legislation.

• Physician Fee Schedule Changes:
  A House provision would have eliminated the payment advantage under the Physician Fee Schedule (PFS) for providers participating in value-based care arrangements. The final legislation does not include this change, preserving the current incentives for Accountable Care Organizations (ACOs) and other advanced alternative payment models; a win for clinicians committed to delivery system reform.

What This Means for States, Plans, and Providers

The One Big Beautiful Bill Act initiates a fundamental realignment of Medicaid policy in the United States. States will face significant new administrative responsibilities beginning immediately. Providers, especially those serving rural, immigrant, and reproductive health populations, will need to reassess their funding and service delivery strategies. States should begin implementation planning now. Early modeling of financing changes, IT infrastructure needs, and eligibility operations will be critical to ensure continuity of care and fiscal solvency.

But, but, but…

While the final bill is passed, nothing is ever final in D.C. You may have noticed that the implementation dates mostly kick in starting 2027 or later which means all of this could change before it fully starts. In fact, I would argue it's likely to change significantly before implementation. The midterm elections will occur in November 2026 where the entire US House of Representatives and a third of the US Senate are up for re-election. As of now, it is widely expected that Democrats will win the House majority and use their power to force the Trump Administration to agree to roll back policies that generate the greatest coverage losses.

We are actively working with clients to assess the impact of this legislation and develop strategies for implementation, mitigation, and opportunity. Whether you are a Medicaid agency, health plan, safety net provider, or technology vendor, we can help you stay ahead of these seismic changes.

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.