The OBBBA Snapshot Webinar: What’s Changing and Why It Matters

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Work Requirements for Medicaid Recipients

I’m Jonathan Wiik, Vice President of Health Industry Insights at FinThrive.

An overview of the HR One, One Big Beautiful Bill Act and its impact on health care.

This is a giant piece of legislation. I've read it. It’s nine hundred plus pages.

This is not going to be an exhaustive overview. It’ll be more of just what the impacts are that surround health care in general, specifically through a finance lens. And in my opinion, there are about four things that materially will have some impact in terms of enrollees and funding mechanisms for providers as we move forward with this piece of legislation that was recently enacted.

First and foremost, there are some provisions surrounding work requirements or this community engagement, which basically says if you are on Medicaid, you have to be engaged in your community and work a certain number of hours a week. We’ll get into the details of that in a minute.

There’s another provision that surrounds FMAP, or this federal matching in terms of whether or not you’re an expanded state. There’s a bonus that was out there for that and then also some rules surrounding immigration.

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Eligibility Provisions and ACA Rollbacks

It rolls back some eligibility provisions surrounding ACA and other things, narrows the scope of eligibility as well, and some of these entitlement plans as we move forward. And then finally, and I think probably the most contentious issue that you heard probably the most about really is the funding mechanisms that help states operate Medicaid surrounding provider taxes in these state-directed payments. Those have been reformed pretty dramatically within this law, and we'll talk through that here in a minute.

Macro impacts that are coming out of OBA really reduce Medicaid spending by over a trillion dollars. This number comes from the Congressional Budget Office. They score all pieces of legislation before they’re voted upon in Congress. The House and Senate looked at these things, and the latest version is the Senate bill that went through.

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Impact of Funding Mechanisms on Medicaid

President Trump signed that into law on July Fourth. That had, you know, these calculations within it, which we'll get into some level of detail here in just a second. The other piece showed about ten point eight million or about eleven million folks losing coverage from Medicaid or the ACA plans because of the regulation within this law. That’s about one in ten of the beneficiaries as you’re looking at it, and a lot of folks don’t know the level of that magnitude, but that’s important to think about as you’re looking at these rules.

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Uncompensated Care and Hospital Implications

This, of course, will result in hospitals seeing an increase in their uncompensated care. Uncompensated care really is a combination of your bad debt and charity. When folks come off of a funding mechanism, they typically may or may not know that. And they, as a patient, will present to the hospital as self-pay or an uninsured patient.

And those types of things are decisions that the hospital has to make, especially for elective services and payments and collections. There’s a ton of rules surrounding that, surrounding 501(r) and understanding extraordinary collection actions and all of that. And I’ve got a ton of those resources if you need to see them as well, but that’s going to increase fundamentally as part of this law going into action.

State budgets are also going to be impacted, and I would argue primarily with some of those provider taxes and state-directed payment provisions.

The fee schedules kind of took a haircut, and then the provider taxes that have been established have been frozen. We'll walk through that. States, of course, can't operate as a deficit like the federal government has. They have to make those up year to year, and you will see, I think, a lot of activity at the state level concerning how they’re going to make ends meet given these reforms that have come through under OBA.

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Cash Flow Pressures on Hospitals

This will, of course, also push forward some pressure for cash flow and will certainly degrade a hospital's ability to serve the uninsured.

Let's walk through one layer deeper just with each of these provisions. Let's talk about the work requirements first.

As I mentioned, it requires states to establish a requirement for Medicaid recipients that meet criteria that they participate in work-related activities for at least eighty hours a month. This is that community engagement provision. That’s projected by the CBO to have an impact over the next decade of four point eight million Medicaid recipients being disenrolled from the plan.

That’s the lion’s share of the disenrollment of that ten point eight million that I talked about earlier. Eligibility is getting reduced from annually to every six months, so twice a year. Additionally, there’s also this ninety-day retro eligibility that occurs at the hospital level. When a patient presents, you can back bill up to ninety days for care there and have Medicaid help pay for that.

But that’s going down to thirty days. The impact mainly is on that eligibility check. That’s just checking more often. That’s just shy of one point seven million, about seven hundred thousand Medicaid beneficiaries are going to not have benefits just due to the frequency of checks.

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Provider Tax Debates and Implications

The provider tax is one of probably the biggest pieces of debate that came as this bill was making its way through Congress and ultimately became law. They’re freezing it immediately. We'll talk through timetables here in a minute. They’ve set this six percent safe harbor cap.

And then in a couple of years, they're going to look at all hospitals and states that have this provider tax and look at anybody that's above that line, and they will slowly, by a half a percent a year, get them down to three and a half percent. Forty-five states right now have some sort of provider tax in place.

This is a pretty big deal, and you’ll see a lot more operations and, I would argue, kind of opinions surrounding how that’s going to be calculated. That shortfall in funding is really going to impact, you know, a large tranche as well of enrollees at two million.

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State Directed Payments and Budget Neutrality

State-directed payments are a little bit more complicated, but under the Medicaid Eleven Fifteen waivers, there’s a rule that says you can, you know, look at what the federal government has said the Medicaid benefits and program elements should be, and you could augment those with federal approval. Some of that augmentation surrounds the fee schedule, and some states have established a fee schedule or state-directed payment that is higher than others or have negotiated certain types of carve-outs and those types of things. The government has said that payments can’t exceed the spending that a non-waiver state would have and that there’s some budget neutrality surrounding that.

Those are really set at one hundred percent for expanded states and one hundred and ten percent for non-expanded states. And they’ve said that’s the cap. You can’t have any state-directed payments that are above that. That budget shortfall is also a very large tranche of two point nine million, just because that’s another funding mechanism that’s going to get a haircut out of OBA.

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FMAP Reductions and Their Consequences

And then finally, the FMAP reductions, which there was a lot of talk about when it first was being promulgated, and we saw some of these things come out early in the year in terms of just ideas. Those have been rolled back pretty significantly, but they did keep two provisions. One, the emergency Medicaid provision, which pays for Medicaid in emergency situations, is not allowed for immigrants as of OBA. And then secondarily, they removed this incentive bonus.

I like to call it where you got five percent more in your FMAP if you were an expansion state or expanding. And it’s not going to take it away if you’ve got it, but if you’re thinking about expanding as a state, that incentive is now removed. And most of the analysts out there feel that's going to deter most from doing it because there just isn’t a lot of financial sense, at least in the government’s mind, in doing that now. That provision has about a one point four million, per the CBO, impact in terms of the enrollees as well.

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Financial Impact of Enrollment Changes

As you’re walking through the other provisions here, this comes from Kaiser Family Foundation. These are the dollars. I just talked about the enrollment. And again, work requirements there in the upper right corner, three hundred twenty-six billion. The provisions in the ACA that, let's say, as an expanded Medicaid, have those work provisions or community engagement will be there. That’s certainly going to impact that.

The tightening of those eligibility rules is the next big change. That’s different from the eligibility redeterminations.

But basically, saying if you’re going to be on Medicaid or these ACA plans, you have to meet certain criteria to do that. That’s another large one. State-directed payments are there as the third largest category. And some others are in there with various different provisions, and then provider taxes, as we mentioned, make up another almost two hundred billion dollars. Finally, those eligibility redeterminations, where checking biannually or twice a year, are at sixty-three billion.

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State-Level Funding Analysis

Kaiser Family Foundation has also conducted some pretty large analysis surrounding the impact of those cuts from a fiduciary standpoint at the state level. As you can see in this color-coded graph, these colors that are black are showing a greater than thirteen percent decrease in funding. These were states that typically expanded Medicaid and have a large proportion of Medicaid within their population. They also have a large charity or uncompensated care pool as well.

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Regional Variations in Medicaid Expansion

My home state of Colorado is there in the middle, and we were one of the first eight expansion states to come out. West Coast states, obviously Oregon, Washington, and California, have some large expansions as well. New England, up there in the upper right corner, also expanded Medicaid. Interestingly, Florida and some of the southern states who may not have expanded Medicaid do not have that much exposure.

They certainly still have some exposure, but not to the magnitude of these other expanded states because they haven't allowed as many people on that plan and haven't incurred the financial outlay that the expanded states have. But it’s still there nonetheless. You can see the magnitude and how it varies. Across a lot of these states, there’s a six to seven percent difference, at least in this graph. It could be more than that in states where the cuts are less than seven percent, but it’s interesting to see the magnitude across the states.

The uninsured rate is something that’s certainly going to be talked about, I think, over the next few months and probably next year as well.

This graph here on the left comes from the CBO as well, and it was showing, running in the teens in the late nineties and into the two-thousands. Then, when President Obama came in and the ACA was released, it cut it in half essentially, down to about ten percent. There are projections that the uninsured rate is going to climb rather quickly, as the provisions of OBA go into place and return to those pre-ACA rates. The ACA was never really designed to fund care; it was really designed to get care.

This uninsured rate is going to be, I think, one of the first things we start tracking very closely because folks on Medicaid are typically on fixed incomes and don’t have a way of finding other coverage. They’re going to ultimately end up being self-pay and falling into those bad debt and charity pools, as I mentioned, in an uncompensated care pool.

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Annual Projections of Uninsured Rates

Kaiser Family had a four percent range here across the states. I wanted to show you this. I think they’re calculating it on an annual basis. If I had to infer, it’s showing it each year to get to that twelve to twenty percent range that we’re seeing there on the left.

However, you can see those magnitudes are very similar to the cuts that we saw. Although Florida was one of those states on the other end, it may not lose as much in dollars, but enrollment increases within this context could cause other challenges. It’s a little like robbing Peter to pay Paul as disenrollment or raw dollars being cut will continue to create these cycles.

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Timeline of Key Provisions

This timeline will come to you as well. We’ve placed the provisions I’ve been talking about into this timetable. I really like this layout, and we’ve included constituents on the top in terms of the populations impacted by the providers and health systems.

I would argue they’re probably mainly pronounced in safety-net and rural areas, which is where the largest magnitude of impact will occur. It will certainly happen to large hospitals and health systems as well, to some degree. However, those systems are more resilient in terms of their cash and nimbleness, for lack of a better word, to operationally pivot when these types of things happen.

Patient consumers and then cross-sector shifts across multiple areas are listed as well within those symbols. On July Fourth, when President Trump signed this, state-directed payments and provider taxes were both frozen and capped. We’ve discussed this extensively. That will absolutely result in administrative complexity regarding understanding the scope and magnitude of the changes and addressing long-term funding shortfalls.

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Future Rulemaking and Monitoring

About six months down the road, starting in the new year, we will see the FMAP expansion bonus disappear. This incentive for states to expand Medicaid will be removed as of the new year. By June of next year, we’ll start to see rulemaking and promulgations surrounding this Medicaid work requirement under section 7119.

I’ve included the sections here as well if you want to go to Congress.gov and pull them up. You can read the rules exactly, along with their narrative text if you have some free time. These rules are likely going to be fascinating, particularly how work-related compliance (e.g., pay stubs, W-2s, volunteer work) is monitored. The various definitions outlined in state legislation are going to become central discussions.

Additionally, hospitals and healthcare providers will need to evaluate how they verify this information. Will they take patients presenting Medicaid cards at face value, or will further processes need to be in place? Those are areas where more dialogue surrounding the administrative burden is likely to arise, and the relevant rules will probably go into effect about 18 months from now on January 1, 2027.

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Medicaid Eligibility Redetermination Process

And who’s checking how often? Those types of things are all going to be coming out of the Department of Health and Human Services, with RK junior overseeing and understanding what that looks like as they're rolled out. We’ll probably see some definite dialogue surrounding those points over the next year, as they finalize those rules. Then, those rules will go into effect about eighteen months from now, on January 1, 2027.

Medicaid eligibility redeterminations will be required every six months under section seventy-one thousand one hundred seven, which takes effect on December 31 of next year.

This means eligibility will now be checked twice a year. Obviously, more frequent checks will create additional administrative burdens, which will impact continuity of care. It’s expected that checking more often will result in more disenrollment, as life events happen. Employees change jobs, may switch to another plan, or come into income from other sources.

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Impact on Continuity of Care

It could work both ways, too. Some individuals may become more eligible under updated rules. However, the way the CBO has projected this, there’s likely to be a significant impact, primarily in the form of disenrollments. Continuity of care could become a widespread concern, especially when patients experience these disruptions while hospitalized or receiving ongoing treatment.

Usually, provisions cover care that is already being provided, but this is an area to closely monitor. You should also keep an eye on these developments as they progress.

Then, there’s Medicare eligibility tightening. This focuses on narrowing the group that qualifies for Medicare and similar programs under new eligibility rules. It’s notable that certain Medicare provisions are included in this law as well. We’ll need to review these carefully to fully understand what’s required, especially concerning dual enrollment scenarios.

Budget-neutral Medicaid waivers are another topic included here, which ties closely to state-directed payments. This involves understanding whether Medicaid programs in particular states—with their waivers or adjustments—end up costing more than similar programs without waivers.

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Legal Considerations and Compliance

There will definitely be scrutiny from an audit and oversight perspective regarding these changes. Here’s a disclaimer as well, so you understand my limitations. I’m not an attorney. I’m an expert in my field, but this content is educational and should not replace legal consultation. Make sure your risk management teams and legal counsel evaluate how laws like this apply to your organization.

We aim to provide useful information here about the timing and central focus areas of these changes. I encourage organizations to seek additional feedback and input through trusted advisors.

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Significance of the HR One Bill

I would argue that HR One is a landmark law for Medicaid and the ACA. It’s probably the most substantial action we’ve seen since legislative movements tied to public health emergencies like COVID, along with the introduction of the Affordable Care Act (ACA) and Obamacare.

It’s important to tell your story and know your numbers. Representation in Washington from providers, particularly hospitals, is recognized but not necessarily prioritized. This needs to change. The numbers we’ve discussed show just how significant the impacts are likely to be.

For instance, rural hospitals may face questions about their capacity to continue offering OB and mom-baby unit services, particularly when high Medicaid populations are affected. Will urgent care centers remain open?

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Impact on Community Health Services

Physician clinics and FQHCs also come to mind. They commonly serve populations with a high reliance on Medicaid. Significant cuts in insurance coverage likely mean more patients without coverage or with reduced access to preventative healthcare.

This kind of domino effect leads to numerous long-term problems for communities. People become sicker and require more expensive interventions, leading to worsening outcomes. A consistent narrative focusing on these stories is key.

Another recommendation is to run scenarios. Evaluate the potential financial impacts under worsening scenarios. What happens to your OB units or emergency departments if uncompensated care increases by ten percent? What will it mean for continuity of care if a large proportion of patients exit Medicaid?

Even though some of these major provisions won’t kick in for a little while, I think preparing now is essential.

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Optimizing Revenue Cycle Management

This brings us to point three, which is probably my favorite. Anything you can do now to optimize systems and insulate your revenue streams will position your organization better for future challenges. Hospitals in rural areas or lower-resourced environments may feel more constrained, but there are automation, analytics, and software tools that can help you make progress.

At FinThrive, we’re proud to offer tools and services that optimize revenue cycle operations. From denial management to improving cash flow resilience, there are tangible steps to ready your organization for the adjustments ahead under OBA. Automation or AI-based solutions could be game-changers in offsetting labor costs and ensuring accuracy across your workflows.

One CFO I spoke to described it succinctly when he said, “The Medicaid forecast is calling for rain, and I have my umbrella ready.”

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Leveraging State Associations for Advocacy

Part of your “umbrella strategy” should include engaging with state associations. These associations are excellent resources, and many of you may already be affiliated or having regular discussions with them.

Now might be the time to increase your engagement. Consider whether there are ways they could assist you further, even if you’re not currently a member. State-level associations communicate across all fifty states, and they often exchange best practices on navigating legislative and administrative changes.

They are also on the front lines of advocacy at both the federal and state levels. Sharing clear information about impacts within your context can help them fight effectively for policy adjustments. Interfacing with the right individuals at your organization, whether it’s your CFO, PR lead, or managed care team, helps streamline those efforts.

Political advocacy also plays a role here. For example, when I worked at a hospital, supporting the PAC (political action committee) provided platforms to raise awareness for key issues. Although specific rules may limit how organizations can engage, building proactive measures enhances your position to address challenges rather than simply react to policy mandates.

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Engaging with Legislators for Sustainable Healthcare

Helping our legislators understand the details of these provisions with as much granularity as possible could help offset some of these cuts and ensure your organization remains sustainable from a profitability perspective. The goal is to highlight the ripple effects these legislative changes will have on providers, patients, and communities.

My resources are here to support you. Again, I’m Jonathan Wiik, Vice President of Health Insights at FinThrive.

This is my personal contact information. My email and phone number are available for any questions you may have. Feel free to reach out.

We will also continue to provide more resources, including timelines, blogs, and best practices, in the coming months and years as we navigate OBA together.

Thank you so much for spending time listening to this. Please don’t hesitate to reach out if you have additional questions.

Have a great rest of your weekend. Be well. Thank you so much.