Trump signs massive budget bill into law

In May, the House passed its initial version of the budget bill in a 215-214 vote. The bill extends tax cuts that were initially enacted during Trump's first administration and increases funding for defense and border security. The bill also includes several healthcare-related provisions, including new Medicaid work requirements and a ban on new or increased provider taxes.

On July 1, the Senate passed its version of the bill in a 51-50 vote, with Vice President J.D. Vance breaking the tie. The Senate bill included additional cuts to Medicaid and further increased the debt limit.

The bill was then sent back to the House, which passed it in a 218-214 vote on July 3 after working all night to get the necessary votes. All but two Republicans, Reps. Thomas Massie (R-Ky.) and Brian Fitzpatrick (R-Pa.) voted for the bill.

On July 4, President Donald Trump signed the budget bill into law, saying that it is the "largest spending cut, and yet, you won't even notice it."

"I can say very proudly that our country is more proud right now than it has been in many, many years," Trump said. "The last two weeks, there's never been anything like it, as far as winning, winning, winning."

 How the new bill impacts healthcare

According to a KFF estimate, the law would cut spending on federal healthcare programs by $1 trillion, including at least $940 billion in Medicaid cuts. In a separate analysis, the Congressional Budget Office projected that the law would lead to almost 12 million people becoming uninsured by 2034.

Some of the specific healthcare-related provisions in the new law include:

Medicaid

The law implements new work requirements for adults ages 19 to 64 who do not have disabilities or dependents, with beneficiaries having to document at least 80 hours a month of work or other qualifying activities. HHS will be required to issue guidance on the requirements by the end of year, and the requirements would go into effect no later than the end of 2026.

The law also requires eligibility redeterminations every six months for adults who are covered under the Affordable Care Act (ACA) Medicaid expansions and mandates cost-sharing up to $35 per service for Medicaid expansion enrollees who have incomes above the federal poverty level.

The law bans Medicaid payments for healthcare provided to most lawfully present migrants, as well as emergency health services provided to most migrants in Medicaid expansion states. Healthcare providers that offer abortion services will also not be able to receive Medicaid payments.

The law also bans new state provider taxes and will reduce existing taxes from 6% of a provider's net patient revenue to 3.5% over several years. States use provider taxes to finance their portion of Medicaid funding.

Medicare

The law increases Medicare physician reimbursements by 2.5% in 2026. However, it does not include a House proposal that would tie future payment updates to the Medicare Economic Index.

The law also triggers Medicare cuts from the Statutory Pay-As-You-Go Act of 2010 that could potentially lead to reductions in provider reimbursements. The law also allows $16 billion in cuts to Medicare disproportionate share hospital payments for three years to go through.

The law blocks a rule that eased eligibility and enrollment in Medicare Savings Programs for people enrolled in both Medicare and Medicaid. It also restricts most immigrants, including those who have received asylum, from receiving Medicare benefits. 

Other

Due to concerns about deeper Medicaid cuts, the final version of the bill was updated to include a rural health fund, which will provide rural hospitals and community health centers with $50 billion over five years.

The final bill also removed several House provisions that would have made it easier to use health savings accounts (HSAs) to pay for things like gym memberships. Instead, the bill expanded eligibility for HSAs and allowed funds to be used to pay for direct primary care arrangements.

The law also placed a moratorium on a Biden-era regulation that set minimum staffing requirements for nursing homes.  

Commentary

Several healthcare industry groups have spoken out against the law, heavily criticizing the funding cuts and their potential impact on patients.

"It cannot be overstated — the health cuts passed by Congress … represent the largest cuts to care our country has ever seen," said Chip Kahn, president and CEO of the Federation of American Hospitals. "Americans will feel the reverberations of this legislation in communities across the nation — whether directly due to a loss of coverage, the increase of their costs, or as doctors and hospitals scramble to sustain services and keep their doors open."

"No matter how often repeated, the magnitude of these reductions — and the number of individuals who will lose health coverage — cannot be simply dismissed as waste, fraud and abuse," said Rick Pollack, president and CEO of the American Hospital Association.

Bobby Mukkamala, president of the American Medical Association, said the budget bill "moves us in the wrong direction" and "will make it harder to access care and make patients sicker."

"It will make it more likely that acute, treatable illnesses will turn into life-threatening or costly chronic conditions," Mukkamala added. "That is disappointing, maddening and unacceptable."

Health insurance groups also called for Congress to extend enhanced ACA subsidies, especially since millions of Americans are expected to face coverage disruptions due to the law.

"Congress must turn its attention to extending the enhanced premium tax credits, which are set to expire at the end of the year," said David Merritt, SVP of external affairs at the Blue Cross Blue Shield Association. "Without action, millions more will lose coverage and those that continue to purchase insurance through the Marketplace will feel a significant spike in their premiums."

Several state leaders, particularly Democratic governors, have also expressed concerns about how they will cover new shortfalls in federal funding, particularly for healthcare, food assistance, and other programs.

"What's happening in Washington, D.C. is undermining everything we've been working on," said Kansas Gov. Laura Kelly (D).

Separately, Arizona Gov. Katie Hobbs (D) said that even the state's $1.6 billion emergency fund would not be enough to make up for the reduction in federal funds. "[E]ven if we cut every single thing in the state, we don't have the money to backfill all these cuts," Hobbs said.

According to Carl Davis, research director at the Institute on Taxation and Economic Policy, states likely have three options to deal with changes due to the new law.

"They can scale back their investments in health and food assistance that are directly affected by the federal legislation," Davis said. "They could shuffle money around to preserve health insurance — 'Hey, we don't want 600,000 North Carolinians to lose health insurance, but we're going to take money away from education to do it.' Or we can see tax increases."

In some states, "a mix of all three" will likely be used, Davis said.