House passes budget reconciliation bill that would dramatically affect healthcare coverage

June 10 update: The article was updated with news from the White House about Medicaid state-directed payments.

June 4 update: The article was updated with the Congressional Budget Office’s formal score of the legislation passed by the House.

A sweeping federal policy bill that includes major changes to Medicaid is halfway toward becoming law after narrow passage by House Republicans.

The 215-214 partisan vote May 22 sent the bill to the Senate, where some Republicans have talked about making potentially significant modifications, including by tempering some of the healthcare cuts. The overarching goals of the bill are to extend and expand current tax cuts while funding Republican priorities in areas such as defense, border security and energy policy.

“I think they’ll ultimately get a bill done in the House, but I think that’s then going to be substantially challenging in the Senate,” Larry Bucshon, MD, a seven-term House Republican before retiring last year, and currently a senior policy adviser and lobbyist with Holland & Knight, said last week.

He indicated that some of the anticipated pushback likely would stem from concerns about projections of the bill’s impact as estimated by the Congressional Budget Office (CBO). The CBO anticipates a 10-year increase in uninsured of 8.6 million from changes to Medicaid and the Affordable Care Act (ACA) as proposed by the House Energy and Commerce Committee. Other technical changes to ACA enrollment, as recommended by the House Ways and Means Committee, would increase the uninsured ranks by 2.1 million.

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June 4 update

The CBO released its final estimate of the budget reconciliation bill, projecting that it would add $2.42 trillion to the federal deficit over 10 years and increase the number of people without insurance by more than 11 million during that time frame.

Among the healthcare provisions, Medicaid and Affordable Care Act (ACA) spending cuts as drafted by the House Energy and Commerce Committee would total nearly $900 billion through 2034. Those provisions would add 9.1 million to the rolls of the uninsured over a decade. Of that group, 7.8 million would be attributable to the Medicaid changes.

ACA changes proposed by the House Ways and Means Committee would cause an additional 2.3 million people to be uninsured in 2034, for a total of 11.4 million as a result of the legislation.

The CBO previously projected that 4.2 million more people would lose coverage over 10 years if Congress allows the ACA premium tax credits to expire, and another 900,000 would be uninsured if CMS finalizes a proposed rule to ramp up program-integrity measures for ACA enrollment (the provisions in the rule would lead 1.8 million to lose insurance, but the CBO is splitting its projection of the impact between the rule and the budget reconciliation bill, which includes the same provisions).

Thus, the overall projected impact of proposed policies is a reduction in coverage totaling 16.5 million in 2034, relative to current policy.

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Here’s a look at what the current iteration of the bill would have in store for government-funded insurance programs.

Medicaid

Key changes in the bill include a work requirement for able-bodied Medicaid beneficiaries younger than 65 without children, along with stricter caps on state-directed supplemental payments to providers. Provider taxes that help fund those payments also would face new restrictions.

Preliminary estimates by the CBO suggest the House-passed cuts to projected Medicaid spending would save $625 billion but result in disenrollment for 10.3 million beneficiaries over a decade.

The state-directed payments could not exceed the Medicare rate in the 40 states (along with Washington, D.C.) that have expanded Medicaid. In non-expansion states, the limit would be 110% of the Medicare rate. Either number represents a significant decrease from current regulations that allow the payments to equal the commercial rate for a given service.

Clarification (added May 23): The cap on state-directed payments would apply to new payments, not those already in place.

Update (added June 10): President Donald Trump signed a June 6 executive order that directs HHS to put out regulations capping state-directed payments at the Medicare rate. It’s unclear from the language whether the cap would apply retroactively to current payments. In potentially related news, CMS on June 9 submitted a proposed rule on state-directed payments to the Office of Management and Budget. The language in the rule will be made public when the rule is published at a date to be determined.

Provider advocates say the changes to supplemental funding and taxes would intensify the challenge of finding the resources to treat patients. Those funding constraints, which the CBO estimates would save a combined $171.8 billion over 10 years, could be “a death knell to critical hospital services and entire communities’ access to care,” the Federation of American Hospitals (FAH) said in a written statement.  

In a change from a previous version of the bill, the first-ever national Medicaid work requirement would take effect for 2027 rather than 2029. State programs would have less time to incorporate systems that help ensure beneficiaries don’t fall through the cracks due to administrative obstacles.

Other provisions include a decade-long delay in implementation of Biden administration rules designed to streamline eligibility verification and enrollment processes in Medicare Savings Programs and Medicaid, for 10-year projected savings of $167 billion.

Members of the Medicaid expansion population would face cost-sharing requirements of up to $35 for some services, creating federal savings of $34.6 billion.

Affordable Care Act

The budget reconciliation bill also attempts to generate savings by tamping down ACA marketplace insurance enrollment, which reached a record 24.2 million this year.

One key change would occur simply by omission: The bill has no provision to maintain the enhanced subsidies that have been available to cover plan premiums for low-income enrollees since 2021 but are due to expire at year’s end. The Urban Institute, a left-leaning think tank, has estimated a net coverage loss of 4 million if the subsidies elapse. That number is not considered in the CBO’s projections, since the subsidies would cease to exist even without the budget reconciliation bill.

The legislation would codify a Trump administration proposed rule that was drafted to curb marketplace enrollment through what are described as program-integrity measures (among them, a shorter open-enrollment period and a significant contraction of special enrollment periods).

CMS in the proposed rule estimated that enrollment would drop by between 790,000 and 2.1 million over four years. The CBO projects a net enrollment loss of 1 million over a decade. On the plus side for those not eligible for subsidies, the changes are projected to lower gross benchmark premiums by 1.4% in the marketplaces as of 2034 (in 2024, only about 1.5 million of 21.6 million ACA enrollees were unsubsidized).

“The stability of the American healthcare system and the economic security of millions of Americans are on the line due to the proposed changes to marketplaces,” 18 leaders of state-run ACA marketplaces wrote in a May 21 letter to House leadership.

They said the bill turns marketplace coverage into “the most costly, onerous and volatile source of health coverage compared with all other coverage types.”

Medicare

The CBO added a new wrinkle to the discussion about the budget reconciliation bill by reporting its projection that the deficit increase resulting from the bill theoretically would trigger a slashing of Medicare spending.

Whereas the legislated Medicaid and ACA cuts are, in truth, spending increases that would be lower than previously projected, the Medicare impact would be a true reduction in spending, per a CBO report requested by House Democratic leaders.

Pay-as-you-go statutory provisions require spending cuts to mandatory programs including Medicare if a bill increases the federal deficit by a certain amount. Such provisions would apply to the budget reconciliation bill based on a projected deficit increase of $2.3 trillion.

Medicare cuts of 4% per year would be triggered in 2027, totaling $490 billion through 2034 and peaking at $75 billion that final year.

There are routine workarounds, however, such as a congressional directive for the reconciliation bill’s budgetary impact to be disregarded.

Still, the CBO report is feeding Democratic talking points about the cascading impact of the budget reconciliation bill. It remains to be seen whether any resulting political pressure affects what transpires as the Senate formally begins its work.

A separate, smaller Medicare impact is less hypothetical. Some groups of lawfully present immigrants, including work-visa holders and immigrants with temporary protected status, would lose access to Medicare even if they have paid into the program for more than the required 10 years, according to an analysis by Brookings.

In addition, more than 1.3 million Americans who are dually eligible for Medicare and Medicaid would lose the Part B cost-sharing assistance they receive through Medicaid, potentially leading to reduced access to primary care and hospital outpatient services.