One Big Beautiful Budget Bill Update

I do not know how a Bill can be beautiful when it removes healthcare from a significant number of people, but if you make a huge amount of money, your taxes will decrease, and that's beautiful for you. That's the bad news; in the good news department, there is a proposal for a mini-doc fix. Keep in mind that this is all in flux at the moment--right now, there are not enough votes to pass it. So, none of what we describe below is final or official.

 

Medicaid & Medicare Provisions in Draft

The bill, in its current form, would eliminate health coverage and leave at least 8.6 million people uninsured, as it cuts at least $715 billion in healthcare spending, mostly from Medicaid, according to initial estimates by the Congressional Budget Office. The amount that the current Bill would cost MAY trigger MEDICARE sequestration. It could extend sequestration, which is usually what happens. This is because Congress is bound by the statutory Pay-As-You-Go (“PAYGO”) Act, which requires any spending to be offset by automatic cuts.

 

Among other harmful proposals, the bill would cut the federal matching rate for the Affordable Care Act’s (ACA) Medicaid expansion in the 14 states plus the District of Columbia that created and funded health programs to cover beneficiaries without a documented immigration status. This policy, if adopted, would substantially cut federal support for Medicaid expansion and encroach on state authority. (See this table for federal funding impacts on these states.)

 

The aforementioned 14 states and D.C. use their state funds to cover some individuals who aren’t eligible for Medicaid due to their immigration status in programs that provide comprehensive coverage but aren't part of the federal Medicaid program and receive no federal funding. The federal government now covers 90 percent of the costs for Medicaid enrollees who gained coverage through the expansion. The House Republican legislation would sanction states that cover people who are undocumented with state-only funds by cutting their Medicaid expansion match rates from 90 to 80 percent. The reduction would begin October 1, 2027 (was 2029, but this is a compromise with budget hard-liners). Federal funding to the Medicaid expansion group — the vast majority of whom are U.S. citizens — would be cut substantially in the affected states unless the state ends the state-funded coverage of immigrants.

 

The bill would require individuals aged 18 to 64 who are without dependents or disabilities to work at least 80 hours per month in order to maintain coverage. They would need to document twice a year that they’re working. They could also maintain coverage if they perform community service or are enrolled in educational programs. This provision, if in the final bill, After a flurry of last-minute negotiations, the date for those work requirements is now set to go into effect "not later than December 31, 2026," after early plans had been for a 2029 beginning of these requirements.

 

The current draft would cut $76 billion in funds to these states from 2028 to 2034, doubling the expansion group costs that each state would be required to fund to maintain their current programs. Facing these large funding cuts, states could respond by dropping their state-funded programs that cover undocumented people, or by cutting enrollment, benefits, or provider payments for Medicaid enrollees.

 

Other notable cuts to Medicaid include the following over the next couple of years, starting in 2026:

• Eliminates the temporary incentive for states that newly adopt expansion
• Eliminates enrollment fees or premiums for expansion adults.
• Requires states to impose cost sharing of up to $35 per service on expansion adults with incomes 100-138% FPL (Federal Poverty Limit); maintains existing exemptions of certain services from cost sharing and limits cost sharing for prescription drugs to nominal amounts.
• Maintains the 5% of family income cap on out-of-pocket costs.
• Requires states to condition Medicaid eligibility for individuals ages 19-64 applying for coverage or enrolled through the ACA expansion group on working or participating in qualifying activities for at least 80 hours per month. But the Bill mandates that states exempt certain adults from the requirements. These provisions cannot be waived, including under Section 1115 authority.
• Requires states to verify that individuals applying for coverage meet requirements for one or more consecutive months preceding the month of application and that individuals who are enrolled meet requirements for one or more months between the most recent eligibility redetermination (at least twice per year).
• Requires states to review the ever-grim Master Death File at least quarterly to determine if any enrolled individuals are deceased. What is the Master Death File, and where is it located?
• Limits retroactive ("Retro") coverage to one month before application for coverage. Currently, it is 90 days.
• Delays the Disproportionate Care Hospital ("DSH") reductions of $8 billion per year through September 30, 2028. That's a good thing.
• Prohibits Medicaid funds from being 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 exception, and receive $1,000,000 or more in payments from Medicaid; this would affect Planned Parenthood and other Medicaid essential community providers. Effective Date: upon enactment for 10 years. The Trump Administration's War on Women continues, and this will be the end of family planning for some women.
• Prohibits federal matching funds for “gender transition procedures,” defined to include puberty blockers, hormone treatment, and surgery, for persons under age 18 enrolled in Medicaid and CHIP. Also prohibits “coverage of gender transition procedures” as an essential health benefit (EHB) for expanded adult coverage. Effective date: Upon enactment
• Requires all retail pharmacies and certain non-retail pharmacies to complete the NADAC survey and imposes penalties for non-completion--a real burden on struggling pharmacies. Additionally, it requires the Secretary of Health and Human Services to make publicly available data from the NADAC survey on prescription drug costs and pricing.
• Establishes requirements for PBM payments to pharmacies, including that they be no less than what FFS payments would be. Prohibits spread pricing and requires that payments to pharmacy benefit managers (PBMs) and similar entities reflect the pharmacies’ costs and an administrative fee that is fair market value.

 

For a comprehensive list of Medicaid provisions, refer to this helpful chart.

 

ACA Changes

One thing that blows my mind is that everybody's talking about Medicaid, but there is a lot in the current bill that effectively dismantles parts of Obamacare. Here are a few 'highlights' that you may not have heard about:

• End OEP (Open Enrollment) a month earlier, on December 15--you see what they are trying to do here, right?
• Eliminates the year-round enrollment opportunity for people with incomes up to 150% of the poverty level.
• Discontinues the practice of automatically reenrolling individuals eligible for Cost Sharing Reductions CSRs who were in a bronze level plan into a silver plan to receive CSRs. Requires enrollees with a zero-dollar premium (after tax credits) who are automatically reenrolled in Marketplace coverage to proactively verify their ongoing eligibility for a fully subsidized plan or face a $5 monthly charge (reduction in their tax credits) until they actively confirm their eligibility. Note that a different provision (pre-enrollment verification, described above) effectively ends auto-reenrollment altogether, regardless of metal level — this would likely decrease enrollment.

 

More changes impact the ACA. Here is another cool chart where you can track them.

 

The Doc Fix

The AMA wrote in strong support of section 44304 of the committee’s recommendations, which “provides the first Medicare physician payment update that is permanently built into baseline Medicare rates since the passage of the Medicare and CHIP Reauthorization Act (MACRA) in 2015.” Such a change was recommended by the Medicare Payment Advisory Commission (MedPAC) and would link Medicare physician payments to the Medicare Economic Index (MEI), like in the rate changes for Medicare inpatients and hospital outpatients. The proposed update for only 2026 is 75% of MEI, which would be significantly higher than any of the annual physician payment updates in MACRA.

 

It is the AMA’s understanding that this provision would represent an investment of about $8.9 billion in the Medicare physician payment system over a 10-year budget window. In addition, the bill eliminates the dual conversion factor update of 0.25% for most physicians and 0.75% for alternative payment model participants, and replaces it with a single conversion factor update for 2027 and beyond, at 10% of the Medicare Economic Index (MEI)--notice what they did between 2026 and 2027.

 

Decades of declining Medicare physician payments have coincided with a significant decline in the sustainability of independent physician practices. While 61% of physicians were practice owners in 2001, by 2016, less than half had ownership stakes in their practices. Since 2018, physician employees have outnumbered physician practice owners, according to the AMA.