On July 4, 2025, President Trump signed into law the legislation commonly referred to as the “One Big Beautiful Bill Act” (OBBBA), which includes significant changes to Medicaid, Medicare, and Affordable Care Act (ACA) premium tax credits. These changes were included as offsets to the various federal tax cuts and other spending in the OBBBA. This alert provides a summary of Subtitle B-Health of the OBBBA, which contains the healthcare-related provisions of the new tax law.
Chapter 1 – Medicaid
- Suspends the implementation of the Medicare Savings Program (MSP) eligibility, Medicaid and CHIP eligibility and enrollment, and nursing home staffing rules until September 30, 2034.
- Requires the Department of Health and Human Services to create a system to prevent individuals from being enrolled in Medicaid in multiple states, and requires states to submit social security numbers to such a system to reduce duplicate enrollments.
- Requires states to perform quarterly deceased status checks and remove deceased individuals and providers from enrollment.
- Authorizes payment reductions from future Medicaid disbursements to states for erroneous excess payments.
- Requires automated eligibility redeterminations every six months for Medicaid recipients.
- Increases the home equity limit for determining long-term care eligibility.
- Limits Medicaid eligibility for certain non-citizens and non-lawful permanent residents.
- Various provisions directing states to curb Medicaid expansion-related costs and prohibiting federal funding for specified family planning and abortion service providers, which are intended to prevent “wasteful spending”s.
- Limits provider taxes and state-directed payments that can manipulate federal matching funds (intended to stop “abusive financing practices”).
- Various provisions requiring states to implement community engagement (work) requirements as a condition of eligibility for able-bodied adults between 19 and 64 years old. Eligible individuals must complete 80 hours of work or an equivalent qualifying activity in the month(s) preceding initial eligibility determinations and between redeterminations.
- Expands coverage for home or community-based services.
Chapter 2 – Medicare
- Restricts eligibility for Medicare to prevent coverage for individuals who do not meet lawful presence and residency requirements.
- Impacts certain services for seniors.
Chapter 3 – Health tax provisions relative to ACA
- Limits the Premium Tax Credit (PTC) to certain lawfully present individuals.
- Requires verification of eligibility for PTC and prohibits income-based special enrollment periods.
- Removes the cap on the IRS’s ability to recapture improper advance PTC payments during tax reconciliation.
- Permanently establishes that lack of a deductible for telehealth and remote care will not prohibit a plan from being treated as a high-deductible plan.
- Allows individuals to use Health Savings Accounts (HSAs) with bronze or catastrophic plans.
- Allows Direct Primary Care arrangements to be an allowable expense covered by HSAs.
Chapter 4 – Protecting rural hospitals and providers
- Allocates $50 billion over five years to states to support rural providers.
The various provisions restricting Medicaid and Medicare eligibility and state provider taxes are likely to negatively impact state revenues and may require states to pursue alternative revenue sources.
Please see our other alerts for a general overview of the OBBBA’s provisions and its impacts on manufacturing, education and nonprofits, energy, and state and local tax.
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