The “One Big Beautiful Bill” is officially signed into law. And the impact will be seismic. Though the full extent remains to be seen, we know major changes are coming, but how disruptive they’ll be depends on how states implement the new requirements and how they respond to the funding shifts. On July 4, 2025, both chambers of Congress passed the final version of the federal budget, which President Trump signed shortly thereafter. Now that it’s the law, the Big Beautiful Bill Medicaid changes mark a new era, one defined by historic cuts, first-time-ever work requirements, and sweeping eligibility changes that will redefine how care is funded and delivered. 

This month, we’re breaking down what’s in the final bill, when it goes into effect, and what providers, especially those serving our most vulnerable citizens, need to prepare for what’s next.  

OBBBA Recap: What Passed, and What Didn’t 

The latest version of OBBBA locks in permanent extensions of the 2017 tax cuts. That alone will add $4.1 trillion to the national debt over 10 years. To offset that number, the bill includes about $1.2 trillion in spending cuts, the majority coming from cuts to Medicaid and SNAP. 

Other key provisions include: 

• New federal Medicaid work requirements, effective January 2027 

• Shortened eligibility windows and limits on retroactive coverage 

• A cap on provider tax mechanisms, which limits how states raise their Medicaid match 

• Reduced FMAP for states using their own funds to cover undocumented residents 

• Elimination of enhanced ACA premium subsidies, which expire at the end of 2025 

Taken together, these changes represent one of the most significant shifts in Medicaid policy since the start of the ACA. These are deep and lasting Medicaid cuts, designed to permanently shrink public coverage. And while some components are expected, like Medicaid work requirements, others, like the cap on state flexibility, raise new operational questions for providers and Medicaid agencies alike. 

Another structural shift that flew under the radar

The U.S. Department of Health and Human Services (HHS) are now reorganizing under a new agency, the Administration for a Healthy America (AHA). This merges agencies like HRSA, SAMHSA, and the Office of the Surgeon General into one body with the goal of simplifying oversight and improving coordination.

The AHA will oversee a new Behavioral Health Innovation Block Grant, which replaces several legacy funding programs. While many behavioral health providers may see similar or slightly increased funding in the near term, the consolidation raises questions about longer-term access, eligibility criteria, and how states will operationalize the new grant format. 

Additionally, as of early August, both the House and Senate have advanced appropriations bills for HHS and related agencies. The Senate bill includes a modest increase—about $446 million—for HHS and maintains funding for mental health infrastructure, including a boost to the 988 Suicide Prevention Lifeline (backed at $535 million). This could suggest that funding for crisis services remains a protected priority amid broader cuts. 

16 Million People Projected to Lose Coverage from Medicaid Cuts 

Roughly $1 trillion will be cut from Medicaid and SNAP over the next ten years. 

 According to CBO and Congressional estimates, this means: 

• 16 million people will lose insurance 

• 7.8 million people will lose Medicaid 

• An additional 3 million people will lose SNAP benefits 

 

That means Medicaid is heading toward pre-ACA enrollment levels, essentially reversing the gains made under the Affordable Care Act, and backtracking in terms of gains toward anything like universal health coverage. This is a permanent resizing of public aid programs. 

When Do These Changes Take Effect? 

The Big Beautiful Bill Medicaid changes don’t happen all at once, but some start sooner than you think. Here’s a breakdown of the key dates: 

Change	Start Date (Federal Deadline)	Can States Start Earlier?
More frequent Medicaid renewals	December 31, 2026	✅ Yes
New Medicaid work requirements	January 1, 2027	✅ Yes
Immigrant eligibility restrictions	October 1, 2026	❌ No
Shorter retroactive coverage periods	January 1, 2027	❌ No
Higher out-of-pocket costs ($35 co-pays)	October 1, 2028	❌ No

A First in History: Medicaid Work Requirements 

For the first time ever, Medicaid will now include federally mandated work requirements. Starting in late 2026, adults aged 19 to 64 will need to prove they work, volunteer, or engage in approved community activities for at least 80 hours per month to remain eligible. Here are where the largest Medicaid savings in the bill come from. 

Starting in late 2026, adults aged 19 to 64 will need to prove they work, volunteer, or engage in approved community activities for at least 80 hours per month to remain eligible

Exceptions include: 

• Pregnant people 

• Parents with children under 14 

• People receiving federal disability benefits 

 

What counts as “work”? According to the bill, individuals can meet this requirement through: 

• Paid employment 

• Volunteering 

• Participating in job training or workforce programs 

• Enrolling in school or certain educational programs 

• Community service activities (approved by the state) 

 

The burden will fall on individuals to track and verify these hours each month. If they miss the threshold (even by a few hours) they could lose coverage. Unfortunately, not everyone will be able to meet these requirements.  

The Medicaid work requirement will disproportionately affect individuals with behavioral health needs, including those with mental health or substance use disorders, who often experience intermittent employment. These individuals may struggle to maintain a consistent 80-hour monthly threshold or to keep up with the paperwork, broadband access, or technical literacy required to prove exemption. 

Additionally, these individuals often do not qualify for federal disability programs but face real barriers to employment, primarily when navigating recovery, housing instability, or frequent transitions between care settings.  

Human service providers should be vigilant: this group is at the greatest risk of losing coverage. They’ll be among the first to feel the full impact of these Medicaid cuts. 

Changing the Rules of Eligibility 

Beyond who qualifies, staying enrolled is also getting harder. The new law tightens eligibility criteria, shortens coverage windows, and removes key safeguards that helped vulnerable people stay connected to care. Here’s what’s changing: 

• Frequent income verification (every 6 months or monthly) 

• End of 90-day retroactive coverage 

• Work requirement for adults 19–64 

• Restrictions for certain legal immigrants 

• Reduced flexibility for states to offer provisional coverage 

 

For many, the barrier won’t be eligibility, it’ll be red tape. 

New Rules, New Risks: The Return of Medicaid Churn 

The bill doesn’t just change who qualifies, it changes how often people have to prove it. 

Under the new law, states must verify Medicaid eligibility at least every six months.

Under the new law, states must verify Medicaid eligibility at least every six months. But they’re also allowed to verify monthly, and some will. Meanwhile, provisional coverage and retroactive eligibility are now limited or eliminated altogether. Tools that states previously used to help keep people continuously covered, like 90-day retroactive enrollment, are increasingly off the table. 

These shifts might seem administrative on the surface, but they come with operational consequences. States now have far less flexibility in how they manage renewals and re-enrollments, but impact will be hardest on people cycling in and out of coverage due to unstable housing, employment, or documentation barriers. 

And that’s where churn comes in. 

Even people who remain technically eligible are now at much higher risk of losing coverage due to timing, paperwork delays, or missed verifications. We’re going to see more people fall through the cracks, not because they don’t qualify, but because the process is too complex . 

For providers serving high-risk populations, this will show up in very tangible ways: 

• More gaps in coverage during treatment 

• More unpaid services delivered during enrollment lapses 

• More staff time spent helping clients navigate eligibility, again 

• More delays in authorizations, care plans, and continuity of care 

 

And because states can now verify eligibility more frequently than they process claims, there’s a growing risk that providers will deliver services to someone they believe is eligible, only to find out later they’re not. 

In short: churn is back, and providers are on the front lines of absorbing the fallout. 

Early Signals of State Impacts 

Several states have already begun reacting to the bill, some with alarm. That’s because the Medicaid cuts in this bill don’t just affect patients, but the infrastructure that serves them. 

By early August, most states had finalized their FY 2026 budgets, with only a few still outstanding. Some, like Illinois, are already putting state dollars into food assistance to soften the blow they know is coming in 2027. Others aren’t taking any action yet — which means when those federal cuts land, the impact will be sharper and harder to absorb. 

Arizona’s governor has warned that upwards of 55% of hospitals could end up operating in the red. The state is already considering a special session to revise its budget. The Arizona Hospital and Healthcare Association (AzHHA) estimates over $6 billion in losses over seven years. 

New York’s governor estimates that 1.5 million residents (about the population of West Virginia) will lose coverage. The state anticipates $15.4 billion in annual losses and has flagged specific risks to behavioral health and safety-net programs. Hospital closures are also expected in some regions. 

California faces a multi-pronged challenge: 

• The FMAP penalty for providing state-funded care to undocumented immigrants 

• The elimination of ACA premium subsidies for 2.4 million enrollees 

• A potential loss of Medicaid coverage exceeding 5 million individuals due to work requirements 

 

In all three states, the risk isn’t only coverage loss

Its infrastructure collapse, especially in rural or underserved areas that rely on Medicaid to keep providers running. 

At the same time, some states are increasing investments in behavioral health and housing. New Jersey’s budget includes expanded funding for Medicaid crisis services, food assistance, and behavioral health integration. The state is also transitioning its behavioral health services into Medicaid managed care, a significant structural change with implications for providers, billing systems, and care coordination. This may open new billing pathways, but also introduces more complex data reporting, authorization workflows, and compliance tracking. 

While 1115 waivers remain an area to watch nationwide, New Jersey’s Family Care Housing Supports, along with similar initiatives in New York, are considered stable for now, with no expectation of early termination or major curtailment. That stability could help buffer some of the operational turbulence these states face as other Medicaid changes take hold. 

And California’s Proposition 1 continues to fund behavioral health and housing infrastructure, even as long-term sustainability remains tied to Medicaid. 

States That Expanded Medicaid Are at Greater Risk 

A key factor in the severity of a state’s Medicaid cut is whether it is one of the 41 states (including DC) that expanded Medicaid eligibility for adults under the ACA. 

Several elements of the bill, including the new work requirements in particular, target funding for expansion enrollees. Other policies, such as SNAP state match, limits on Medicaid health care provider taxes, and state-directed payments, limit the ways states can raise revenue 

Some states could discontinue ACA Medicaid expansion if FMAP falls too low. Nine states have “trigger laws” if the 90% FMAP reduces (AZ, AK, Il, IN, MT, NH, NC, UT, VA). 

Geographical Area	Estimated # Losing ACA Coverage	Estimated # Losing Medicaid Coverage	Estimated Totals
United States	8,542,105	7,457,895	16,000,000
Arizona	148,584	193,980	342,564
California	695,285	1,507,358	2,202,643
Illinois	163,674	335,000	498,674
New Jersey	180,263	161,571	341,834
New York	77,812	858,102	935,914
Pennsylvania	174,448	277,279	451,727
Texas	1,393,105	210,125	1,603,230
Utah	148,185	32,085	180,270
Wisconsin	110,142	148,254	258,396

What’s at Stake for Rural Communities 

Rural health is something we’re most worried about. 

These communities already sit on a knife’s edge. Their hospitals are more likely to be operating in the red. Provider networks are thinner. Infrastructure is less stable. And now, they’re absorbing massive federal cuts to the very programs that have kept them afloat. 

One of the core issues is that rural health doesn’t have a reliable coverage-based safety net. Instead, it runs on one-time pilots, grants, and braided funding streams that are constantly expiring. When Medicaid is cut, there’s no backstop. And these hospitals don’t have the reserves or revenue diversity to fill the gap. 

A missing grant, a paused pilot, a reduced match, it all leads to the same place: a rural hospital unable to sustain services. That means behavioral health crisis teams shrink. Emergency departments lose staffing. And in some areas, there may no longer be a provider to absorb the care at all. 

These losses don’t affect patients and communities in silos. They shrink the tax base, reduce state revenue, and erode the infrastructure that makes healthcare delivery possible. We’re not only looking at a coverage crisis. We’re staring down a structural collapse. 

It’s Not Just Medicaid: HUD, SNAP, and Medicare Are Reshaping Too 

While most of the attention has been focuses on the Big Beautiful Bill Medicaid changes in the bill, it’s important to understand this isn’t happening in a vacuum. Other systems [SNAP, Medicare, and HUD], are also significantly impacted, and they all intersect with Medicaid-funded care. Providers that work across programs, or serve complex populations, are going to feel this convergence the most.

SNAP Cuts: Expanded Requirements, Zero Error Tolerance 

The bill broadens SNAP work requirements in a way that’s going to catch a lot of people off guard. The age threshold was raised to 64, and exemptions for parents now only applies to those with kids under 7. In practical terms, this means parents of a 7-year-old now have to work to receive SNAP, regardless of childcare access or job market barriers. 

At the same time, states will now face financial penalties for even minor errors in SNAP administration. The old tolerance threshold is gone. If a state’s error rate is anything above zero, they could be on the hook for up to 25% of the program’s cost.

If a state’s error rate is anything above zero, they could be on the hook for up to 25% of the program’s cost.

That’s a huge shift, and one that’s likely to lead to more restrictive or cautious benefit determinations. 

Access is the Cost of Savings

As noted by experts, shifting more SNAP costs to the states is likely to reduce participation, not because people don’t qualify, but because the burden to stay enrolled gets harder to meet. 

And even for those who manage to stay enrolled, many will still lose support: 

• 600,000 households will lose an average of $100/month, from changes in how utility costs are calculated 

• Future benefit increases are now capped at cost-of-living adjustments, preventing any meaningful expansion, even in times of rising need.  

These SNAP cuts have put states in a position where they must decide whether to raise taxes, cut other programs, or quietly make SNAP harder to access. And for the people who rely on it, this translates to less food, more paperwork, and a higher likelihood of falling off the rolls for technical, not financial, reasons. 

This is another example of a policy where people may believe they’re doing the right thing, or may actually be eligible, but lose benefits because they didn’t know the rules changed or couldn’t keep up with verification requirements. And that creates risk. Not just for the client, but for the provider who’s trying to coordinate care across programs. 

Medicare Cuts: Quiet Changes, Real Consequences 

Medicare didn’t take center stage in this bill, but that doesn’t mean it escaped untouched. While the changes weren’t sweeping or obvious, they introduce technical barriers that are likely to result in real Medicare cuts on the ground. This will hit hardest for providers serving immigrant populations, low-income seniors, and people with dual-eligibility. 

Is Medicare being cut? Not directly. But the bill did narrow who’s eligible, and that’s going to show up in the form of coverage loss and unreimbursed care. 

One of the biggest changes applies to people with legal but non-permanent immigration status. These are individuals who have contributed to Medicare through payroll taxes, followed the rules, and are now aging into the system only to find they no longer qualify. The bill tightens thresholds in a way that removes access to Medicare Part A and B in some cases, and limits Medicare Advantage enrollment for certain groups. 

It also impacts the Medicare Savings Programs, which helps people afford premiums and out-of-pocket costs. These programs are a lifeline for dual-eligible clients, and without them, more people will end up losing coverage, even if their actual financial or medical situation hasn’t changed. For providers, that translates to delivered services that can’t be billed, and a loss of predictability when working across funding streams. 

Not Sweeping Cuts. But Medicare Cuts Nonetheless 

Medicare isn’t a huge focus of the bill, but there are changes that are still significant. These are the kinds of changes that won’t show up in a funding alert or grab media attention, but they shift the landscape in quiet but serious ways. The complexity increases, the eligibility boundaries move, and the risk shifts to providers. 

And then there’s the bigger picture. The Medicare Hospital Insurance Trust Fund will reach insolvency by 2031, but under current trends, some retirees could face up to $18,100 in annual benefit cuts within seven years. While not directly triggered by OBBBA, the bill doesn’t slow that trajectory and, in some ways, it accelerates it. 

So, when people ask, “Is Medicare being cut?”, the answer is yes. Not with a headline or a funding slash, but with a slow erosion of access, eligibility, and affordability. 

And for providers, that erosion shows up fast as coverage loss, documentation challenges, and unreimbursed care. 

HUD Cuts: Deep Setbacks and Operational Breakdowns 

HUD experienced significant cuts in this bill, but not as severe as previous projections. The early projections, including the President’s budget proposal, had HUD losing nearly half of its funding. That would have been catastrophic. The final appropriations numbers are still lower than last year, but the drop is closer to $939 million instead of 44–51%, and some key programs, like tenant support, managed to dodge the worst of it. But some restructuring is still underway:  

• Section 811 and Section 202 didn’t go away like we thought they might — they actually got small increases in the House bill. 

• HOPWA and Continuum of Care are still intact but face changes in allocation, with the original consolidation proposal replaced by a smaller, more targeted funding approach. 

• HMIS infrastructure and staffing face reductions that will impact capacity. 

 

And perhaps most concerning: HUD itself has lost over half its staff. Even for agencies trying to adapt or reapply, there simply may be no one at the federal level left to help them navigate the new funding landscape.

HUD itself has lost over half its staff. Even for agencies trying to adapt or reapply, there simply may be no one at the federal level left to help them navigate the new funding landscape.

For Medicaid-funded providers also offering housing navigation, re-entry services, or behavioral health stabilization, this presents a cascading challenge. Many of these providers have spent years building out systems that integrate housing and healthcare. Those systems don’t work without HUD. And now, that support structure is gone. 

The impacts of HUD cuts are already visible.

The potential impacts were massive. In New York, the President’s proposal would have taken HUD funding from $8.7 billion down to $4.8 billion, a 46% cut that could have put over a million people at risk of losing their housing. Congress stepped in and moderated that, but we’re still seeing the ripple effects: affordable housing projects stalled or canceled, rental assistance programs being reshaped mid-stream, and some housing authorities warning Section 8 voucher holders of changes or reductions in support.

In many cities, rental assistance waiting lists have closed indefinitely, while existing tenants are facing time limits on aid, a move that could affect more than 3 million people, half of them children (CBPP). 

These HUD cuts reduce spending. But they also dismantle the infrastructure that enabled Medicaid, housing, and behavioral health to operate together. 

And we know that when housing navigators are gone, HMIS is defunded, and Continuum of Care safeguards shut down…  

…the system doesn’t break all at once, but it does start to strain. 

For providers doing crisis response, re-entry work, or post-discharge support, losing housing as a stabilizing anchor makes everything harder. The clients with the most complex needs end up with fewer safety nets, and the care system that’s left behind has to scramble to fill the gap. 

As we’ve said before: housing isn’t optional. It’s infrastructure. And right now, it’s under real pressure.  

What Providers Should Be Watching 

We’re dealing with more than funding changes. We’re experiencing a fundamental shift in how Medicaid is structured, accessed, and enforced and the clock on these changes is already ticking. 

Implementation may not officially begin until late 2026, but preparation starts now. 

States will spend the next year writing rules, issuing RFPs, and designing new systems. The operational foundation is being laid, and providers need to know where they stand. 

Start by identifying your exposure: 

• Which programs rely on waiver flexibilities? If you’re operating under 1915(i), 1915(c), or 1115 waivers, including those tied to housing or behavioral health, those definitions could change. 

• Where are you using provisional eligibility or retroactive coverage to fill gaps? These tools have been sharply limited. If you’re depending on 90-day lookbacks or coverage that starts before documentation is finalized, that safety net is no longer guaranteed. 

• Do your clients fall into high-risk categories? People with mental health or substance use disorders, people transitioning from incarceration, people experiencing homelessness. These are the folks most likely to lose coverage even if they technically remain eligible. We need to prepare for that. 

• What systems do you have in place to track coverage lapses and re-enrollment? If you’re not already flagging clients who fall off Medicaid mid-treatment or lose eligibility mid-month, you’ll be delivering a lot of services you can’t bill for. 

 

Audit activity is also going to increase. The bill expands definitions of waste, fraud, and abuse, and providers will have to validate not only the service, but the eligibility at the time of delivery. There will be less room for grace and more pressure to prove everything is authorized, appropriate, and aligned with coverage on the exact date of service. 

This is where systems, workflows, and documentation protocols become critical. Providers who’ve done this work before (during redeterminations, waiver transitions, and MCO shifts) know what it takes. Now is the time to bring that same diligence forward. 

What Comes Next 

Final implementation guidance is expected by the end of 2025. How states choose to absorb and respond to the Medicaid cuts will vary. Either way, states will need to move quickly to build infrastructure and write policies. 

We can expect: 

• RFPs for verification and eligibility tools 

• Rulemaking on how exemptions are enforced 

• Waiver renewals that reflect new policy guardrails 

 

Some states may take an aggressive approach. Others might delay or ask for flexibility. But the variability is coming, and providers need to be ready to adapt to very different conditions depending on where they operate. 

The Big Beautiful Bill Medicaid changes lock in a lot. But they don’t lock in everything. CMS still has discretion on how it interprets waiver language, how it audits state systems, and how it allows for adjustments.

CMS still has discretion on how it interprets waiver language, how it audits state systems, and how it allows for adjustments.

There’s room for evolution and provider input will be part of that process. 

For now, the job is to prepare. Know where your risks are. Strengthen your internal systems. Identify clients who are likely to be affected. And stay connected to what’s happening at the state level because the playbook will look different everywhere. 

We’ll keep monitoring what comes next and sharing what it means for you. 

📖 Past updates and analysis on Big Beautiful Bill Medicaid changes here.
📬 If your state is moving faster or taking a new approach, we want to know.  

Intel By Juliette Palmer, Regulatory Intelligence Analyst