Medicare and Medicaid Cuts in the One Big Beautiful Bill

The Medicare and Medicaid cuts in the One Big Beautiful Bill add up to the largest reduction in federal Medicaid spending in the program’s history: roughly $911 billion less in federal Medicaid funding over ten years, and an estimated 10.3 million fewer people enrolled in Medicaid by 2034, according to Congressional Budget Office scoring.¹ Signed by President Trump on July 4, 2025 as Public Law 119-21, the law reaches Medicare as well, freezes rules that would have expanded low-income assistance, and narrows who among lawfully present immigrants qualifies for either program. Combined with the expiration of enhanced Affordable Care Act premium tax credits at the end of 2025, CBO projects 16 million more Americans will be uninsured by 2034.²

Here is what is actually changing, who it affects, and when.

Medicaid Work Requirements Take Effect in 2027

The single largest change is a new work requirement. Non-pregnant adults ages 19 to 64 who are eligible through the ACA Medicaid expansion or certain waiver programs, and who are not enrolled in Medicare, will have to document at least 80 hours a month of qualifying activity to keep their coverage. Qualifying activity includes employment, community service, education, or participation in a work program. Earning at least $580 a month, which is 80 hours at the 2026 federal minimum wage, also counts.³

Several groups are exempt: pregnant and postpartum individuals, people who are medically frail, individuals with disabilities, American Indians and Alaska Natives, veterans with a total disability rating, and parents or caretakers of children age 13 or younger.³ States can also grant short-term hardship exceptions in high-unemployment counties or disaster areas.

States must implement the requirement no later than January 1, 2027. CMS issued the interim final rule on June 1, 2026, with a comment period that closed July 31, 2026.⁴ Nebraska has announced early enforcement effective May 1, 2026.⁵

CBO attributes $326 billion in federal savings over ten years to this provision alone, the largest single Medicaid change in the law.¹ Urban Institute researchers project that work requirements will cause between 3 million and 7 million people to lose Medicaid coverage by 2028.⁶ Georgia’s earlier “Pathways” program cost $86 million to administer while enrolling far fewer people than projected.⁷

Eligibility Redeterminations Move From Yearly to Every Six Months

For adults enrolled through Medicaid expansion, states used to have to check eligibility once every 12 months. Under the new law, that check runs every six months, for renewals scheduled on or after January 1, 2027.⁸

CMS guidance issued March 6, 2026 gives states two paths: keep the current renewal calendar and move enrollees to six-month cycles as their next renewal comes up, or accelerate by rescheduling renewals in early 2027. CMS itself described the first as “most administratively feasible” and warned that the accelerated path would create “significant operational and administrative complexities.”⁹

The concrete risk is procedural: people who remain eligible but miss paperwork deadlines get dropped. CBO scores this provision at $63 billion over ten years,¹ and Urban Institute researchers estimate more frequent redeterminations alone will cause 2 million to 3.1 million people to lose coverage by 2028, largely through procedural disenrollment.⁶

States Lose Tools to Replace Federal Dollars

States have long used taxes on hospitals, nursing facilities, and managed care organizations to generate revenue that draws down federal matching funds. As of July 4, 2025, states are prohibited from creating new provider taxes or increasing existing ones.¹⁰ For expansion states, the “safe harbor” threshold on provider taxes phases down from 6 percent to 3.5 percent by 2032.

A separate CMS final rule from February 2026 tightens restrictions on provider tax waivers. Seven states, California, Illinois, Massachusetts, Michigan, New York, Ohio, and West Virginia, hold waivers that must be restructured under staggered deadlines running from January 2027 through September 2028.¹¹ California’s managed care organization tax generates roughly $7.5 billion a year and New York’s about $3.7 billion; failure to restructure risks the loss of federal matching funds.¹²

CBO attributes $191 billion in ten-year savings to the provider tax moratorium and another $149 billion to new caps on state-directed payments to hospitals and nursing facilities.¹ Because nearly every state is required to balance its budget and cannot easily raise replacement revenue, several are already trimming benefits: four states dropped Medicaid coverage for GLP-1 obesity drugs in late 2025, and others are cutting optional dental care and home-based services.⁵

Lawfully Present Immigrants Lose Access to Medicaid, Medicare, and Marketplace Subsidies

Effective October 1, 2026, Medicaid eligibility ends for refugees, asylees, parolees, and other humanitarian entrants. Eligibility narrows to lawful permanent residents, Cuban and Haitian entrants, and citizens of nations under the Compact of Free Association.¹³¹⁴

Beginning in January 2027, the same restrictions apply to Medicare. About 100,000 lawfully present immigrants, including Temporary Protected Status holders, refugees, asylees, and trafficking survivors, will lose Medicare coverage even if they paid into the program through payroll taxes.¹⁵ The same eligibility limits extend to ACA marketplace premium tax credits, cutting off subsidized private coverage as a fallback.¹⁶

The law also lowers the federal matching rate for emergency Medicaid services provided to undocumented immigrants in expansion states from the 90 percent expansion rate down to the state’s base rate, roughly 50 percent in most states.¹⁷

Medicare: A Savings Program Freeze and a Looming PAYGO Trigger

1.3 Million Dual-Eligibles Lose Supplemental Help

Medicare Savings Programs help lower-income Medicare enrollees pay premiums and out-of-pocket costs. The Biden administration had finalized two rules to streamline enrollment, including automatic enrollment for Supplemental Security Income recipients. The new law prohibits both rules from taking effect until October 1, 2034.¹⁸

CBO estimates the nine-year freeze will save the federal government more than $66 billion and reduce the number of dual-eligible beneficiaries, people enrolled in both Medicare and Medicaid, by 1.3 million through 2034.¹⁹ Those 1.3 million people keep Medicare itself but lose the supplemental help Medicaid provides: assistance with the Medicare Part B premium ($185 a month in 2025), long-term care services, dental care, non-emergency transportation, and automatic enrollment in the Part D Low-Income Subsidy for prescription drugs.²⁰

Physician Payments and $490 Billion in Potential PAYGO Cuts

The law provides a one-year 2.5 percent Medicare physician payment update for 2026, with no permanent inflation-linked fix.²¹ Beyond that, CBO projects the overall law will trigger $490 billion in automatic Medicare spending reductions between 2027 and 2034 under the Statutory Pay-As-You-Go Act of 2010, unless Congress waives them.⁷ PAYGO caps annual Medicare benefit reductions at 4 percent.²² Congress has deferred PAYGO triggers in the past, but as of mid-2026 no waiver has been enacted for the reductions scheduled to begin in 2027.

Marketplace and CHIP Changes Close Off the Usual Backup Plans

People pushed off Medicaid have historically turned to ACA marketplace plans. That path is narrowing at the same time.

Enhanced premium tax credits that capped marketplace premiums at 8.5 percent of household income expired at the end of 2025 and were not extended. CBO projects that expiration alone will leave 4.2 million more people uninsured, with out-of-pocket premiums rising by more than 75 percent on average.²

The law also imposes new pre-enrollment verification for anyone receiving premium tax credits, effectively ending the automatic re-enrollment that helped roughly 11 million people keep coverage for 2025.²¹ It removes caps that protected low-income enrollees from having to repay excess tax credits after income changes, and ends the continuous Special Enrollment Period for people with incomes below 150 percent of the federal poverty line.¹⁶ The combined effect falls hardest in non-expansion states like Texas and Florida, where marketplace plans are the primary subsidized option for lower-income adults.

For children, the law imposes a ten-year moratorium on a CMS rule that had modernized CHIP eligibility and enrollment. The freeze potentially allows states to reinstate enrollment waiting periods, re-enrollment lockouts for missed premiums, and dollar limits on benefits.²³ A drafting issue also puts coverage for lawfully residing children in “separate CHIP” programs at risk in 17 states, with six additional states facing threats to pregnancy coverage for lawfully residing individuals.

The $50 Billion Rural Health Transformation Fund

The law appropriates $50 billion over five years (2026 through 2030) for a Rural Health Transformation Program, distributing $10 billion annually through cooperative agreements with states.²⁴ Half the funding is split equally among the 50 states; the other half is allocated by rural population, density of rural health facilities, and other factors. States must spend across at least three approved categories such as chronic disease management, technology and cybersecurity upgrades, and rural workforce recruitment.

Whether the fund offsets the underlying Medicaid losses is contested. The Trump administration capped spending on direct patient care, including payments to rural hospitals, at no more than 15 percent, and federal law prohibits using the money to replace lost Medicaid reimbursements.²⁵ Texas received $281 million in 2026 while facing a projected $4 billion decline in federal Medicaid spending over the coming decade. Pennsylvania expects roughly $1 billion over five years against a $20 billion Medicaid shortfall. Roughly 25 percent of rural residents are covered by Medicaid, and cuts are expected to drive service reductions and hospital closures.²⁶

Dates to Watch

End of 2025: Enhanced ACA premium tax credits expired.
May 1, 2026: Nebraska begins early enforcement of Medicaid work requirements.⁵
October 1, 2026: Narrower immigrant eligibility takes effect for Medicaid.¹³
January 1, 2027: Deadline for states to implement work requirements; six-month redeterminations begin; same immigrant eligibility rules apply to Medicare; earliest provider tax waiver compliance deadlines hit New York and California.
2027 through 2034: Window in which projected PAYGO Medicare reductions of $490 billion would apply absent congressional action.⁷
2032: Provider tax “safe harbor” threshold for expansion states fully phased down to 3.5 percent.
October 1, 2034: Medicare Savings Program streamlining rules and 2024 nursing home minimum staffing rule are allowed to take effect.¹⁹

If you have Medicaid through the ACA expansion, expect state notices about work reporting and more frequent renewals starting in 2026, with the hard deadline landing January 1, 2027. If you are a lawfully present immigrant with Medicaid or Medicare, check with your state agency about how the October 2026 and January 2027 changes apply to your specific status. If you rely on a Medicare Savings Program or expected to be automatically enrolled through Supplemental Security Income, the streamlined enrollment you may have been counting on is on hold until 2034.

1
KFF. Allocating CBOs Estimates of Federal Medicaid Spending Reductions Across the States
2
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3
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15
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19
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25
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U.S. News and World Report. How Medicaid, SNAP Cuts Could Hurt Economy, Strain State Budgets