Bodacious B. S. Bill: Signed by the Senate

I have held off on publishing this new information until the Final bill is signed, but there is no June newsletter without this update. So, this is the latest update to the UNSIGNED bill. This is excerpted from the Senate Version of the Bill, which is expected to go to the House on July 2. There may be more changes, but we are not expecting big ones.

The Congressional Budget Office projects that nearly 12 million people would end up uninsured if the Senate bill becomes law. This is somewhat deceptive because some of the changes below do not take effect for several years; nonetheless, between Medicaid and the ACA changes, the current bill will leave a lasting mark on our healthcare system. And that doesn't take into account what will happen if PAYGO kicks in and we get more sequestration. That is up to Congress.

Here are some of the changes in the Senate bill as recorded by the Kaiser Family Foundation. There may be more changes in the House, so stay tuned.

Medicaid Changes

Medicaid possible changes include:

• Medicaid Expansion--Eliminates the federal incentive of 90% payment for Medicaid ACA expansion patients for non-elderly up to 138% of the federal poverty levels for states that newly adopt expansion. Effective date: January 1, 2026.

• Cost Sharing--Requires states to impose cost sharing of up to $35 per service on expansion adults with incomes 100-138% FPL; explicitly exempts primary care, mental health, and substance use disorder services from cost sharing, maintains existing exemptions of certain services from cost sharing, and limits cost sharing for prescription drugs to nominal amount. Maintains the 5% of family income cap on out-of-pocket costs. The Senate eliminated some rural federally qualified health centers, along with behavioral health services, from this provision. Effective date: October 1, 2028.

• Emergency Medicaid Coverage-- Limits federal matching payments for Emergency Medicaid for individuals who would otherwise be eligible for expansion coverage except for their immigration status to the state’s regular FMAP (Federal Medical Assistance Percentage). Effective Date: October 1, 2026.

• Work Requirements--Requires states to condition Medicaid eligibility for individuals ages 19-64 applying for coverage or enrolled through the ACA expansion group (or a waiver) on working or participating in qualifying activities for at least 80 hours per month. Effective Date: Not later than December 31, 2026, with exceptions listed below. Other provisions include:
  • Limits exemptions to parents with children ages 13 and under (instead of all parents). This is worse than the House Version.
  • Specifies that if a person is denied or disenrolled due to work requirements, they are also ineligible for subsidized Marketplace coverage.
  • Requires states to use data matching “where possible” to verify whether an individual meets the requirement or qualifies for an exemption (House bill only requires data matching “where possible” for verifying meeting work requirements).
  • Allows the Secretary to exempt states from compliance with the new requirements until no later than December 31, 2028, if the state is demonstrating a reasonable faith effort to comply and submits progress in compliance or other barriers to adherence with the requirement.

• Eligibility and Enrollment Final Rule — Requires states to conduct eligibility redeterminations at least every 6 months for Medicaid expansion adults. Effective Date: For renewals scheduled on or after December 31, 2026. Requires the Secretary to issue guidance within 180 days of enactment.

• Location Verification--Requires states to obtain enrollee address information using reliable data sources, including the National Change of Address Database and managed care entities.
  • Requires the Secretary to establish a system to share information with states for purposes of preventing individuals from being simultaneously enrolled in two states and requires states to submit monthly enrollee SSNs and other information to the system.
  • Requires states to review the "Master Death File" at least quarterly to determine if any enrolled individuals are deceased. What the what?
  • Effective Date: January 1, 2027, for states to obtain contact information; October 1, 2029, to establish a system to prevent enrollment in two states simultaneously; January 1, 2027, to review "Master Death File" (cue Twilight Zone music)

• Immigrant Eligibility--Restricts the definition of qualified immigrants for purposes of Medicaid or CHIP eligibility to LPRs (Lawfully Permanent Residents), certain Cuban and Haitian immigrants, citizens of the Freely Associated States (COFA migrants) lawfully residing in the US, and legally residing children and pregnant adults in states that cover them under the ICHIA (Immigrant Children's Improvement Act) option. Effective Date: October 1, 2026.

• Retroactive Coverage--• Limits retroactive coverage to one month before application for coverage for expansion enrollees and two months before application for coverage for traditional enrollees.Was 90 days--YIKES! Effective Date: January 1, 2027.

• Provider Taxes--The term "provider taxes" is somewhat deceiving, as these are taxes raised to fund the state portion of Medicaid funding. Prohibits states from establishing any new provider taxes or from increasing the rates of existing taxes. Reduces the safer harbor limit (6% or less of patient revenues) for states that have adopted the ACA expansion by 0.5% annually starting in fiscal year 2028 until the safe harbor limit reaches 3.5% in FY 2032. The new limit applies to taxes on all providers, except nursing facilities and intermediate care facilities. The new limit also applies to local government taxes in expansion states. Effective Date: Upon enactment, but states may have at most three fiscal years to transition existing arrangements that are no longer permissible.

• Disproportionate Share Hospitals--There was a delay in the DSH reductions in the original House Bill. This is not in the Senate bill.

• Medicaid Managed Care Fees — The House specified that Medicaid payments may not exceed the Medicare fee schedule. For grandfathered payments, reduce payments by 10 percentage points each year (starting January 1, 2028) until they reach the allowable Medicare-related payment limit (which is the same as the House limits). Specifies that in the absence of published Medicare payment rates, the limit is set at the Medicaid fee-for-service payment rate. Specifies that the grandfathering clause only applies to payments submitted prior to enactment of the bill for rural hospitals and prior to May 1, 2025 for all other providers. Effective Date: Upon Act Enactment.

• Erroneous Medicaid Payments--Federal law directs CMS to recoup federal funds for erroneous payments made for ineligible individuals and overpayments for eligible individuals if the state’s eligibility “error rate” exceeds 3 percent. CMS may waive the recoupment if the Medicaid agency has taken steps to demonstrate a “good faith” effort to get below the 3 percent allowable threshold. The Senate added the definition of improper payments to include payments where insufficient information is available to confirm eligibility. Effective Date: beginning FY 2030.

• Medicaid Home Equity for Eligibility--Reduces the maximum home equity limits to $1,000,000 regardless of inflation. Allows states to apply different requirements for homes that are located on farms. Effective Date: January 1, 2028.

• Home and Community-Based Services (HCBS)---Allows states to establish 1915(c) HCBS waivers for people who do not need an institutional level of careIncludes requirements for states’ waiver submissions that include a demonstration that the new waiver will not increase the average amount of time that people who need an institutional level of care will wait for services. Effective Date: New waivers may not be approved until July 1, 2028.

• Rural Health Funding---Establishes a rural health transformation program that will provide $50 billion in grants to states between fiscal years 2026 and 2030, to be used for payments to rural health care providers and other purposes. Distributes 50% of payments equally across states with approved applications; CMS will distribute the remaining funds to at least 1/4 of states with an approved application based in part on states’ rural populations that live in metropolitan statistical areas, the percent of rural health facilities nationwide that are located in a state, and the situation of hospitals that serve a disproportionate number of low-income patients with special needs. Uses of funds include promoting care interventions, paying for healthcare services, expanding the rural health workforce, and providing technical or operational assistance aimed at the system transformation. Effective Date: Upon enactment, but funding is first available in fiscal year 2026.

• Free Choice of Provider--Prohibits Medicaid funds to be paid to providers that are nonprofit organizations, essential community providers primarily engaged in family planning services or reproductive services, provide for abortions outside of the Hyde exceptions and received $800,000 or more in payments from Medicaid in 2024; this would affect Planned Parenthood and other Medicaid essential community provider. Effective Date: Upon Enactment and for one year thereafter.

• Medicaid Provider Screening Requirement--Requires states to conduct checks at enrollment, reenrollment, and on a monthly basis to determine whether HHS has terminated a provider or supplier from Medicare or another state has terminated a provider or supplier from participating in Medicaid or CHIP. Requires states to conduct quarterly checks (in addition to at provider enrollment or reenrollment) of the Social Security Administration’s Death Master File to determine whether providers enrolled in Medicaid are deceased. Effective Date: January 1, 2028.

Affordable Care Act

While there are fewer provisions than with Medicaid, some of these changes will likely result in more uninsured people.

• Special Enrollments--Bars any consumer who enrolls in a plan via a non-Qualified Life Event Special Enrollment Period from receiving either premium tax credits or CSRs (Cost Share Reductions). Effective Date: December 31, 2025.

• Verification of Eligibility for Tax Credits- Requires that household income, immigration status as an eligible alien, health coverage status, place of residence, family size, and any other information that the Secretary of Health and Human Services deems necessary be verified before coverage. Consumers can still enroll in a plan, but cannot receive premium tax credits or cost-sharing reductions (CSRs) until after they verify their eligibility. This provision effectively ends auto-renewals!!!! Verification requirements may be waived for individuals enrolling during Special Enrollment Periods, due to changes in family size. Effective date: taxable years beginning after December 31, 2027.

• Excess Premium Tax Credits--Requires that all premium tax credit recipients repay the full amount of any excess, no matter their income. Effective date: taxable years beginning after December 31, 2025.

• Lawfully Present Immigrant Eligibility--Limit eligibility for subsidized ACA Marketplace coverage to lawfully present immigrants who are lawful permanent residents (LPRs or “green card” holders), Compact of Free Association (COFA) migrants residing in the U.S., or certain immigrants from Cuba, eliminating eligibility for many lawfully present immigrants including refugees, asylees, and people with Temporary Protected Status beginning January 1, 2027. Eliminate subsidized Marketplace coverage eligibility for all legally present immigrants with incomes under 100% of the FPL (Federal Poverty Level) beginning January 1, 2026.

• Individual Market Bronze and Catastrophic Plans--Treats individual market bronze and catastrophic plans as an HDHP that can be paired with a health savings account. Effective date: January 1, 2026.

Medicare Provisions

The biggest question mark about Medicare is whether or not the bill will enact sequestration. Chances are it will, but Congress can waive sequestration as it did in 2017.

• Limiting Medicare Coverage of Certain Individuals--Restricts Medicare eligibility to U.S. citizens, green card holders, certain immigrants from Cuba, and people residing under the Compacts of Free Association. Eliminates Medicare eligibility for people not included in the above groups, such as those with temporary protected status and refugees and asylees. Terminates Medicare benefits no later than 18 months from enactment of the legislation for anyone who is currently receiving benefits, but no longer eligible under these changes.

• Doc Fix--Provides a temporary one-year increase of 2.5% to the Physician Fee Schedule conversion factor for all services furnished between January 1, 2026, and January 1, 2027. Big freaking whoop!

• Orphan Drugs--The Inflation Reduction Act requires the Secretary of Health and Human Services to negotiate prices with drug companies for certain drugs covered under Medicare. There are modifications to the orphan drug exemption.
  • Modifies the orphan drug exclusion to include drugs designated for one or more rare diseases or conditions, and where the only approved indication or indications are for one or more rare diseases or conditions.
  • The period during which drugs are on the market with only one or more orphan indications shall not count towards the 7- or 11-year time frame that determines eligibility for negotiation selection.
  • Effective Date: applies for drug price selection beginning in 2026 for negotiated prices available on or after January 1, 2028.

There may be further modifications in the House. We will keep you informed of these.