Preparing for One Big Beautiful Disaster

On July 4th, 2025, Donald Trump signed the One Big Beautiful Bill Act (OBBBA) into law (H.R. 1 – One Big Beautiful Bill Act), a law that is projected to have significant negative impacts on the American healthcare system, healthcare infrastructure, and patients across the United States. While the White House and congressional Republicans are touting OBBBA as a significant success for the average American, virtually every credible analysis, including those by the Congressional Budget Office (CBO), indicates that it will have devastating long-term impacts on public health.

Photo Source: CNN/Olivier Douliery/Pool/Getty Images

Most of the key provisions of OBBBA that are likely to impact patients are administrative in nature, focusing on making it more difficult for Americans with lower incomes to gain access to healthcare coverage through state Medicaid programs and the federal Medicare program. One such provision includes increasing work requirements and requiring patients to regularly document and prove their compliance (Sec. 71119).

Administrative burdens have long been favorites of Republicans who insist (wholly without supporting credible evidence) that social assistance program recipients are engaged in rampant fraud and abuse against state Medicaid programs. Under the pretense of ending patient-based Medicaid fraud, Arkansas became the first state in the U.S. to implement state-level work requirements (for non-exempt classes) in 2018, requiring enrollees to prove that they were working at least 80 hours per month (Sommers et al., 2020).

This experiment was granted by the first Trump Administration through a Section 1115 demonstration waiver and was implemented between June 2018 and March 2019. During that time, more than 18,000 patients lost coverage (roughly 1 out of every 4 recipients who were subject to the work requirement), primarily due to failure to regularly report work status or document eligibility for an exemption (Hinton & Rudowitz, 2025).

Moreover, the impacts of these work and reporting requirements resulted in a significant increase in the percentage of Arkansan adults aged 30-49 who were uninsured, climbing from 10.5% of adults in 2016 (before work requirement implementation) to 14.6% in 2018. After a federal court halted the work requirements (Gresham V. Azar, No. 19-5094 (D.C. Cir. 2020), 2020), that number decreased slightly to 12.5% in 2019 (Sommers et al., 2020).

Work requirements, along with the increased frequency of eligibility checks, reenrollment, and compliance reporting, are tools fundamentally designed to artificially decrease the number of otherwise eligible recipients enrolled in social safety net programs like Medicaid, the Supplemental Nutrition Assistance Program, Social Security Disability Insurance, and other programs that Republicans label as “wasteful spending” and designate these programs as the ever-popular boogeyman of profit-driven society: “Socialism.” Rather than ensure that federal dollars are spent wisely, these types of administrative burdens and compliance checks end up costing both states and the federal government more money than they ever save.

For example, Arkansas’ experiment ultimately increased to $26.1 million in administrative expenses related to monitoring and enforcing work requirements, without a corresponding increase in employment (Roberts, 2023). In Georgia, which is performing its own misguided experiment with work requirements, the first year of work requirements resulted in $40 million in state and federal tax dollars, of which 80% went toward administrative and consulting fees rather than paying for Medical care (Rayasam & Whitehead, 2024).

In addition to administrative burdens, Sec. 71120 institutes mandatory cost-sharing provisions for some Medicaid recipients who became eligible through the Medicaid Expansion under the Affordable Care Act (ACA). This would require states to “impose” (per the language in the statute) a cost-sharing amounting to up to $35 per item or service. This provision would also allow healthcare to deny services, care, and treatment to patients if they are unable to pay their share of the costs.

The negative impacts of OBBBA are predicted to be both widespread and cut across multiple stakeholder groups, including patients, providers, employers, and state and federal finances. In a nation with an already crumbling public health infrastructure, OBBBA’s healthcare-related provisions would decrease federal Medicaid spending by $698 billion between 2026 and 2034 (Basu et al., 2025), which imperils over 100 rural hospitals and potentially thousands of private practices.

Research published in JAMA Health Forum found the following projected impacts by 2034:

• Reduce federal Medicaid spending by $698 billion from 2026 to 2034

• Decrease enrollment by 10.3 million by 2034

• Increase the number of uninsured Americans by 7.6 million

• Estimated number of excess deaths per year: 1,484 (12.68 per 100,000 coverage loss)

• Estimated number of preventable hospitalizations per year: 94,802 (810.27 per 100,000 coverage loss)

• Estimated number of people who will delay care due to cost per year: 1.6 million

• Estimated number of people who will stop adhering to their medication regimen per year: 1.9 million

• Estimated number of jobs lost per year: 302,000

• Estimated reduction in GDP per year: $153.3 billion (1,156.41 per 100,000 coverage lost)

• Estimated reduction in tax revenues per year: $11.1 billion

• Estimated increase in medical debt per year: $7.6 billion

• Number of rural hospitals at high risk of closure: 101

• Annual FQHC Revenue Reduction: 18.7% (Basu et al., 2025)

Ultimately, the OBBBA is predicted to be an unmitigated disaster for local and state economies, public health, and patients. Below is a list of provisions related to healthcare in the OBBBA, along with their implementation dates. This information is sourced from Parikh & Mutanuka, 2025, unless otherwise noted.

• Medicaid:

  • Work Requirements (Sec. 71119, effective January 1st, 2027)

    • State Medicaid agencies will be required to condition Medicaid eligibility for certain adult beneficiaries on compliance with a new federal “community engagement requirement.” Under the law, individuals must work, participate in job training or community service, or attend school for at least 80 hours per month. Alternatively, those who earn at least the monthly equivalent of 80 hours at minimum wage may also qualify.

    • Some groups are automatically exempt, including individuals under age 19, pregnant women, people who are medically frail, or those caring for a dependent.

      • States may also approve short-term hardship exceptions in cases such as hospitalization, family crisis, or displacement due to a natural disaster.  

    • States must check whether individuals are meeting the requirement during routine eligibility reviews.

      • While states can seek temporary implementation exemptions during the rollout period, those flexibilities must end by the close of 2028.

      • These rules are expected to increase the number of individuals who lose Medicaid coverage, not necessarily because they don’t meet the criteria, but because they face barriers to documenting compliance.

      • Previous state-level efforts along similar lines have shown that paperwork requirements alone can cause large numbers of eligible individuals to be disenrolled (Parikh & Mutanuka, 2025). 

  • Re-Enrollment and Eligibility Redetermination Restrictions (Sec. 71107, effective January 1, 2027):

    • Blocks implementation of CMS rules meant to make it easier for people to stay enrolled through automated renewals, standardized forms, and streamlined eligibility checks. Those changes are now paused until at least 2034.

    • State Medicaid agencies will soon be required to verify eligibility for certain Medicaid users twice per year instead of once. The law provides that “a State shall conduct a redetermination of eligibility every 6 months” for individuals covered under the adult expansion group or certain demonstration programs. The law directs the Department of Health and Human Services (HHS) to issue guidance to assist with this requirement, and $75 million is allocated to support state system changes.

    • The law also rolls back tools designed to facilitate smoother renewals, including pre-populated forms, automatic processing, and longer renewal intervals. Without these tools, beneficiaries—particularly those with unstable housing or limited access to documentation—may experience disruptions in coverage despite ongoing eligibility.

    • States are further directed to use “available sources of information, including data matching” to verify eligibility criteria like income and residency. If inconsistencies are found, state Medicaid agencies must contact the individual by mail, phone, or electronic communication and provide them with at least 10 days to respond. Importantly, state Medicaid agencies may delegate or contract with third parties for imposing these new mandates (Parikh & Mutanuka, 2025).

  • Cost Sharing Required (Sec. 71120, to begin in 2027 for Expansion Populations):

    • Historically, Medicaid enrollees had little or no cost-sharing obligations. The new law establishes cost-sharing obligations for certain Medicaid expansion enrollees, allowing states to charge up to $35 per item or service. The HHS Office of the Inspector General (HHS-OIG) has historically expressed longstanding and consistent concerns regarding routine waivers of enrollees’ cost-sharing amounts.

    • Accordingly, the new law will require healthcare providers to revamp their financial assistance policies and ensure that cost-sharing waivers for Medicaid beneficiaries are not routine, not advertised, and made on the basis of a good-faith, individualized assessment of financial need (Parikh & Mutanuka, 2025).

  • Provider Taxes and Medicaid Financing Restrictions (Sec. 71115, Effective In Phases Starting Fy 2026):

    • The bill narrows the type of healthcare-related taxes states may impose to generate matching Medicaid funds. Prior to the bill’s passage, states were permitted to finance the non-federal share of Medicaid spending through multiple sources, including state general funds, healthcare-related taxes (or provider taxes), and local government funds. The law adds new definitions for “Medicaid taxable unit” and “non-Medicaid taxable unit.” It prohibits redistributive tax structures that vary tax rates based on the volume or percentage of Medicaid-related businesses. Under the new law, a tax is not considered generally redistributive (and thus not permissible for federal matching purposes) if it imposes a lower tax rate on entities with a lower volume or percentage of Medicaid taxable units, or if it imposes a higher tax rate on Medicaid taxable units compared to non-Medicaid taxable units within the same class of taxpayers.

    • In addition, the law lowers the “hold harmless” or safe harbor threshold for provider taxes over time, i.e., the threshold at which states can recoup taxes paid by providers through increased Medicaid payments, which payments are returned to providers through Medicaid reimbursements. The lower threshold reduces states’ flexibility to use these tax mechanisms for enhanced Medicaid funding to support state Medicaid agencies. The law sets new limits on the safe harbor threshold for existing hold harmless provider taxes in place in states that have expanded Medicaid, gradually lowering the threshold from 6 percent to 3.5 percent between fiscal years 2028 and 2034. The law precludes states that have not expanded Medicaid from increasing the provider tax rate beyond the current level. Nursing homes and intermediate care facilities in expansion states are exempt from the phase-down of the “hold harmless” threshold. In all states, beginning October 1, 2026, no safe harbor will be available for any new provider tax that does not exist on the provision’s enactment date. These changes are expected to impact provider tax models commonly used to bolster hospital and managed care rates, with potential significant impact on safety net hospitals (Parikh & Mutanuka, 2025).

  • Limits On Medicaid Managed Care and State-Directed Payments (Effective In Fy 2027, With Some Grandfathering For Existing Programs):

    • The law limits the ability of states to use directed payments to boost managed care provider rates. The law directs HHS to revise state-directed payment regulations to cap the total payment rate for inpatient hospital and nursing facility services at 100 percent of the specified total published Medicare payment rate for expansion states and 110 percent of the Medicare payment rate for non-expansion states. If no Medicare rate exists, the cap defaults to the Medicaid fee-for-service payment rate. Existing arrangements approved before enactment may continue temporarily but will be phased down. These limits may require states to revise or unwind supplemental payment structures and will likely lead to reduced reimbursement in states that had used managed care directed payments to address workforce shortages, rural access, or other policy objectives (Parikh & Mutanuka, 2025).

  • Additional Provisions:

    • Sunsets the FMAP bump. (Applies to Medicaid expansion occurring after January 1, 2026) Ends the enhanced Federal Medical Assistance Percentage (FMAP) for states that newly expand Medicaid after January 1, 2026, removing the financial incentive for late expansion.

    • Budget neutrality for waivers. (Applies to all new or renewed waivers submitted after January 1, 2026) Requires all Section 1115 demonstration projects to be budget-neutral and certified as such by the CMS actuary prior to approval.

    • Immigration restrictions. (Effective October 1, 2026) Limits Medicaid eligibility to US citizens, lawful permanent residents, and specific humanitarian groups, narrowing the pool of eligible non-citizens.

    • Error-related payment penalties. (Effective FY 2026) Reduces federal payments to states that have high levels of payment errors or improper Medicaid expenditures, creating a financial disincentive for noncompliance.

    • Moratorium on Biden rulemaking. (Effective FY 2026) The law issues moratoriums on CMS rulemaking promulgated under the Biden administration related to minimum staffing standards for long-term care facilities, and eligibility and enrollment in Medicare Savings Programs, Medicaid, the Children’s Health Insurance Program, and Basic Health Program.

      • OBBBA blocks the implementation of an existing regulation that makes it easier for eligible low-income Medicare beneficiaries to enroll in Medicare Savings Programs (MSPs) that lower Medicare premiums and out-of-pocket costs. MSPs make healthcare accessible for Medicare enrollees, who often live on very limited incomes and have few assets. Without enrolling in the programs, even modest medical bills can be unaffordable and basic access to care can slip out of reach. Blocking the regulation would prevent states from streamlining and automating enrollment into MSPs (Seeberger et al., 2025).

    • Prohibits funding for certain entities. (Effective upon enactment of the law) Prohibits federal payments, including Medicaid payments, to “prohibited entities” for a one-year period. Prohibited entities include tax-exempt entities and their affiliates that are essential community providers “primarily engaged in family planning services, reproductive health, and related medical care,” that provide abortions beyond cases of rape, incest, and life-endangering situations, and received at least $800,000 in Medicaid funding in 2023.

    • Rural health transformation grant program (applications due by the end of 2025; grants issued FY 2026–2030):

      • As Congress negotiated the extensive cuts contemplated in the legislation, lawmakers recognized the potential for financial distress and service disruption, particularly in rural communities. To help offset, at least temporarily, the impact of new eligibility restrictions, provider tax limitations, and payment caps, the law establishes a $50 billion Rural Health Transformation Grant Program over five years. This short-term initiative is designed to provide immediate support to rural hospitals and health centers, enabling them to invest in facility upgrades, workforce recruitment, digital infrastructure, and innovative care delivery models. By prioritizing rural health investment, lawmakers sought to mitigate the impact of broader Medicaid changes.

      • Eligible facilities include:

        • Critical access hospitals,

        • Rural emergency hospitals,

        • Low-volume hospitals,

        • Federally qualified health centers,

        • Community mental health centers, and

        • Opioid treatment programs in rural areas.

      • States must submit a transformation plan to access funding, identifying at least three areas of investment, such as chronic care, telehealth, or cybersecurity improvements. No state match is required. Applications are due by the end of 2025, with federal decisions to follow within six months.

      • The program allows states to use funds to “improve access to care and health outcomes” and “modernize or restructure delivery systems” in response to local needs. This includes the ability to consolidate or repurpose services in low-utilization areas (Parikh & Mutanuka, 2025).

      • Rural Health Transformation Plan Requirements:

        • In order to access this federal funding, each state must develop and submit plans and secure approval of a Rural Health Transformation Plan by the CMS administrator. The plan must specify how it will:

          • Improve access to hospitals and other healthcare providers furnished to rural residents

          • Improve healthcare outcomes for rural residents

          • Prioritize the use of new and emerging technologies, including artificial intelligence (AI), emphasizing prevention and chronic disease management

          • Foster local and regional strategic partnerships between rural hospitals and other providers to promote "measurable" quality improvement, increase financial stability, maximize economies of scale and share best practices

          • Enhance economic opportunity for and supply of clinicians via recruitment and training

          • Prioritize data- and technology-driven solutions that help rural hospitals and other rural providers furnish high-quality healthcare as close to home as possible

          • Outline strategies to manage long-term solvency of rural hospitals

          • Identify specific causes of stand-alone rural hospital closures or conversions

        • The CMS administrator must approve or deny all applications no later than Dec. 31, 2025. Every state is required to submit only one application for all five funded years (Hawke & Crossan, 2025).

      • State Funding Allotments and Qualification Conditions:

        • The RHTP funding will be distributed through a formula that allocates 50 percent ($25 billion) equally among approved states and 50 percent ($25 billion) based on rural population metrics, facility counts and any other factors the administrator deems appropriate. Therefore, for the first $25 billion, $5 billion per year will be divided between approved states, from 2026 through 2030. For the remaining $25 billion, the CMS administrator is allotted $5 billion per year that must be provided to at least one-fourth of the states based on the following criteria that the administrator must consider:

          • the percentage of the state population that is located in a rural census tract

          • the proportion of rural health facilities in the state relative to the number nationwide

          • the situation of "deemed disproportionate share" hospitals in the state

          • any other factors the administrator deems appropriate

      • The CMS administrator is also tasked with determining the terms and conditions of state allotments. States may not use more than 10 percent of their allotment for administrative expenses and must provide annual reports to the administrator. The law proscribes a number of "use of funds" of which at least three such uses for activities must be selected by the state as part of its plan. The administrator may add additional uses to the following statutorily identified activities:

        • Promoting evidence-based, measurable interventions to improve prevention and chronic disease management

        • Providing payments to healthcare providers for the provision of healthcare items and services, as specified by the administrator

        • Promoting consumer-facing, technology-driven solutions for prevention and managing chronic disease

        • Providing training and technical assistance for the development and adoption of technology-enabled solutions that improve care delivery in rural hospitals, including remote monitoring, robotics, AI, and other advanced technologies

        • Recruiting and retaining clinical workforce to rural areas, with commitments to serve rural communities for at least five years

        • Providing technical assistance, software, and hardware for information technology (it) advances designed to improve efficiency, enhance cybersecurity capability, or improve outcomes

        • Assisting rural communities to right-size their delivery systems by identifying needed preventative, ambulatory, "pre-hospital," emergency, acute inpatient care, outpatient care, and post-acute service lines

        • Supporting access to opioid, substance abuse, and mental health treatment

        • Developing projects that support innovative models of care that include value-based care arrangements and alternative payment models

        • Additional uses to promote sustainable access to high-quality rural health services, as determined by the administrator (Hawke & Crossan, 2025).

There is near universal agreement that the Trump-backed funding law will uphend the healthcare delivery system in the United States, but it remains to be seen just how bad the impact will be on patients, in general, and more specifically on health disparities.