OBBBA reshapes Medicaid and health care provider landscape, curtailing $1 trillion in funding
The One Big Beautiful Bill Act (OBBBA) could significantly alter the U.S. health care operating environment introducing tighter fiscal controls and regulatory shifts for health care providers, resulting in likely 11 million fewer individuals covered by Medicaid and curtailing spending by approximately $1 trillion by 2034.
The legislation, signed into law on July 4, emphasizes cost containment and fraud reduction across federal health programs like Medicaid and Medicare, while also directing targeted investments into rural health infrastructure and telehealth.
Health care providers should prepare for stricter eligibility requirements, increased administrative oversight and changes to payment models.
Four key health care provisions include:
- Medicaid work requirements: The OBBBA mandates Medicaid recipients aged 19 to 64 to work or participate in qualifying activities 80 hours per month. Parents with children 13 and under are exempt. This marks a significant shift in policy, as no national work requirement for Medicaid exists.
- Telehealth support: The bill permanently extends safe harbor rules, allowing for the absence of a deductible for telehealth services. This permanent change removes a key regulatory barrier, encouraging broader adoption and integration of telehealth services, benefiting virtual care providers, and could expand patient access by providing regulatory certainty for long-term investment in virtual care infrastructure.
- Rural health investment: $50 billion is allocated for direct, no-match required investments in rural health infrastructure, staff recruitment and technology. This funding seeks to improve the long-term financial sustainability of margin-compressed rural health care providers.
- Provider taxes: As previously discussed, provider taxes, which are used to fund certain state Medicaid payments, will reduce to 3.5% by 2032, down from 6% currently.
The takeaway
The health care landscape will demand greater efficiency, robust eligibility verification and a strategic focus on areas receiving federal support. While the majority of the provisions do not take effect immediately, health care providers must act swiftly to prepare for the changes in the coming years.
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