President Donald Trump signed the “One Big Beautiful Bill Act” (OBBBA) into law on July 4th. The bill includes significant policy changes to Medicaid and the Health Insurance Marketplaces, among other programs like the Supplemental Nutrition Assistance Program (SNAP). The OBBBA:
Freezes existing provider taxes imposed by a state or local government and prohibits new provider taxes.
For Medicaid expansion states beginning Oct. 2027, the existing tax will be reduced by 0.5% annually until it reaches 3.5% in 2032.
For non-expansion states, provider tax rates are frozen.
Caps state-directed payments at 100% of Medicare in expansion states and 110% of Medicare in non-expansion states. Certain state programs can be grandfathered at a higher rate until January 2028.
Beginning in January 2028, reduces all grandfathered state-directed payments by 10% annually until 100% of Medicare rate is reached for expansion states and 110% of Medicare rate is reached for non-expansion states.
Creates the Rural Health Transformation Fund, a $50 billion rural stabilization fund for states that apply before the end of the year. While helpful, this fund will be distributed among the 50 states and states will have the flexibility of deciding how the funds are used. The funds can go to rural hospitals, FQCHs, rural health clinics, or even used to fund increased access to opioid use treatment and test new alternative payment models. States have a tight deadline to apply for the funds – December 31, 2025.
Adopts work and community engagement requirements for Medicaid beneficiaries beginning Dec. 31, 2026. Individuals must work or engage in qualifying activities (e.g., community service, educational programs, job training) for no less than 80 hours per month. Certain individuals, like pregnant women and individuals with disabilities are exempted from the requirements.
Modifies cost-sharing requirements for Medicaid expansion enrollees to require some pay
Up to $35 in cost sharing per service with exclusions. Cost sharing for non-emergency services provided in a hospital emergency department may exceed $35, effective October 1, 2028.
Repeals the 5% enhanced Federal Medical Assistance Percentage (FMAP) funds for states that have not yet expanded Medicaid, effective January 2026.
Requires states to redetermine Medicaid expansion eligibility every six months beginning January 2027.
Many of the policies finalized in the OBBBA are scheduled to take place in future years, which means that some of the impacts won’t be seen right away. For a timeline of key Medicaid policies being implemented, click here.
