CBO breaks down how and when the budget reconciliation bill will reduce insurance enrollment

The Congressional Budget Office (CBO) released its most detailed projections yet about how the budget reconciliation bill stands to affect healthcare coverage.

According to data published Aug. 11 as part of a report requested by Democratic congressional leaders, the CBO estimates that 10 million people will be uninsured in 2034 because of the new law. The share of the population with access to federally subsidized health insurance — i.e., through Medicaid, the Affordable Care Act (ACA) marketplaces or employer-sponsored coverage — will drop from 53% in 2026 to 37% in 2034.

In terms of early impact, 1.3 million people are expected to lose coverage in 2026. Among the provisions factoring into the projected initial decline are annulment of 2024 regulations that were intended to streamline Medicaid eligibility verification and enrollment processes, and a prohibition on ACA subsidies for immigrants who have been deemed ineligible for Medicaid.

New limits on Medicaid provider taxes are anticipated to result in 200,000 fewer people with insurance next year as state programs incur revenue losses. Although current tax arrangements can remain at their present rate until 2028, the law immediately prohibits implementation of new taxes or rate increases.

The CBO does not provide a margin of error for its estimates, meaning the agency could be overstating or understating the eventual impact by any amount.

Additional declines loom

Neither the ’26 estimate nor the decade-long projection accounts for the possibility that enhanced subsidies for buying insurance in the ACA marketplaces will expire at the end of this year.

If Congress does not renew the subsidies, according to previous projections, the coverage loss would amount to 2.2 million people in 2026 and 4.2 million in 2034. The CBO also had estimated that 1.8 million more people would be uninsured in 10 years due to provisions in a CMS rule designed to improve program integrity in ACA enrollment processes.

However, that was before changes eased some of the proposed restrictions starting in 2027. Also, some of that fall-off already is accounted for in the estimates regarding the legislation also known as the One Big Beautiful Bill Act, since several components are included in both the final rule and the bill.

CMS said the rule will lead to a marketplace enrollment decrease of between 725,000 and 1.8 million in 2026, but some of the disenrolled would be expected to find other insurance options.

High-impact policies

The biggest projected rollback to Medicaid coverage begins in 2027, when each state must implement a work requirement for able-bodied beneficiaries unless the state has received a temporary exemption. The CBO said the provision will increase the number of uninsured by 2.2 million that first year and 5.3 million in 2034.

A loss of state funding through the tighter restrictions on provider taxes in expansion states is expected to lead to a 2034 uninsured increase of 1.1 million.

The requirement for states to conduct eligibility checks on expansion enrollees every six months as opposed to annually is projected to be less disruptive than the work requirement, with an uninsured increase of 700,000 in 2034.

An estimated 900,000 fewer people will have insurance that year because of a provision narrowing ACA subsidy eligibility among immigrants, specifically ending eligibility for refugees, people seeking asylum and people with temporary protected status. Only lawful permanent residents, some immigrants from Cuba and Haiti, and immigrants with residence under the Compacts of Free Association can obtain subsidized insurance starting in 2027. (On Tuesday, CMS announced an initiative to enforce Medicaid eligibility rules pertaining to immigrants.)

Another ACA-related provision, requiring subsidized enrollees to file tax returns and reconcile their subsidy amount with their actual income, begins in 2028 and is expected to trigger an enrollment decrease of 700,000 as of 2034.

Such reductions have obvious consequences for hospital payer mix.

“We expect to see a noticeable decline in insurance coverage, and ultimately those people are going to need hospital [care] at some point,” Mark Pascaris, senior director with the U.S. Not-for-Profit Healthcare team at Fitch Ratings, said during an Aug. 12 webinar. “They’re still going to receive care, and that will lead to more charity care and bad debt.”

Medicare cuts are conceivable

There’s also the possibility of a significant payment cut in Medicare next year unless Congress enacts a workaround, the CBO wrote in another estimate requested by Democratic leaders in Congress.

The Office of Management and Budget (OMB) is statutorily required to issue a sequestration of federal spending when a piece of legislation is projected to increase the federal deficit over a five- and 10-year period. The budget reconciliation bill is estimated to increase the deficit by $415 billion per year through 2029, according to the CBO, meaning that amount of spending would need to be pared in FY26 and for each of the ensuing three years.

Annual reductions of $339 billion then would be required based on projections for the 2030-34 window.

Medicare cuts in any such scenario are limited to 4% of specified program spending, or roughly $45 billion in FY26, adding to the across-the-board 2% sequestration that originally was implemented as part of the ACA. The CBO projects the total reduction in Medicare spending between 2027 and 2034 from a 4% sequester would be $491 billion.

It’s possible, however, that OMB’s official numbers will differ from the CBO’s data in determining whether a sequester is required and in what amount. Furthermore, Congress can waive the requirement to offset the deficit increase. If either party resists doing so, the political risks could be significant, especially given the difficulty of finding $415 billion in annual cuts.