On Monday July 21, 2025, the American Hospital Association provided a Legislative Advisory, providing key highlights of the One Big Beautiful Bill (OBBBA).
President Trump July 4 signed into law the OBBBA; Public Law No. 119-21, a sweeping package that enacts many of the administration’s legislative priorities on taxes, border security and energy. The bill includes significant policy changes to Medicaid and the Health Insurance Marketplaces.
According to the Congressional Budget Office (CBO) score of the bill, the OBBBA will lead to more than $1 trillion in Medicaid and Marketplace cuts and will increase the number of people without health insurance by 10 million in 2034. A significant portion of the savings will result from new limits on the use of Medicaid provider taxes and state-directed payments (SDPs), which have historically allowed hospitals to bridge the chronic underpayments for the care they deliver to Medicaid enrollees. The CBO estimates that the policy changes related to SDPs and provider taxes will save more than $340 billion and result in direct decreases in provider payments.
Key Highlights
Among other provisions, the OBBBA:
- Restricts the ability of states to increase Medicaid provider taxes and phases the existing provider tax cap for expansion states down to 3.5% in FY 2032.
- Lowers the upper payment limit for SDPs to 100% of the total published Medicare rate for expansion states and 110% of the total published Medicare rate in non-expansion states; for grandfathered SDPs, beginning CY 2028, reduces payment rates by 10 percentage points annually until the specified upper payment limit is achieved.
- Increases the frequency of eligibility redeterminations to every six months for Medicaid expansion enrollees beginning CY 2027.
- Requires states to establish work requirements for Medicaid expansion enrollees.
- Establishes a $50 billion rural health transformation program for rural providers that allocates funds to states with an approved application from FYs 2026 through 2030.
- Restricts eligibility for certain non-citizens under Medicaid, Medicare and the Health Insurance Marketplaces.
- Establishes graduate and professional annual and aggregate loan limits for students, including medical students, beginning July 1, 2026.
To take a closer look at the full AHA Legislative Advisory, click here (available to AHA Members only)
