OBBBA Key Provisions for Medicaid and Medicare Access

October 23, 2025

Within the One Big Beautiful Bill Act (OBBBA) is a large section outlining who will be eligible for Medicaid as well as eligibility and access to Medicare programs in the future.

These changes leave questions for states, healthcare providers as well as supportive housing models and regional centers that rely on Medicare and Medicaid funding.

In this article, we outline provisions in the OBBBA regarding these programs. How can affordable housing organizations, regional centers and health and human services providers plan for changes in Medicaid and Medicare? Here are some takeaways so far.

Medicaid Eligibility and Payment Changes

The OBBBA has updated Medicaid eligibility requirements with new requirements and has excluded eligibility for designated undocumented immigrants.

Starting in 2027, eligible individuals defined as “able-bodied adults,” ages 19 to 64, must show completion of at least 80 hours/month of work, education program or community service to continue qualifying for Medicaid. Individuals can qualify through any combination of these activities. There will be some exceptions for individuals such as proving a short-term, unexpected hardship or the need to care for children or a disabled individual.
Enrollees will require biannual redetermination for benefits, rather than annual, and certain enrollees may require more frequent redeterminations. This new requirement will begin after December 31, 2026.
Starting October 1, 2028, cost sharing co-pays or premiums at the state level are capped at $35 per service, up to a maximum 5 percent of family income per month or quarter, as determined by the state. This excludes:

Effective October 1, 2026, the OBBBA makes most immigrants ineligible for Medicaid, allowing only citizens, certain U.S. lawful permanent residents, Cuban and Haitian entrants and COFA citizens from the Marshall Islands, Micronesia and Palau. “Non-citizen refugees, asylees, parolees and abused spouses and their children” will no longer be eligible. In addition, states will be penalized financially for covering ineligible applicants on Medicaid.
Medicaid funding will be banned for one year to nonprofits that provide abortions; however, this provision in the OBBBA has already faced a federal lawsuit. It is important to note that the one-year period began July 4, 2025; exceptions in the law include abortions related to “rape, incest or a pregnancy that endangers the life of the woman”.
The OBBBA eliminates a 6 percent safe harbor threshold for states imposing taxes on providers, now requiring Centers for Medicare and Medicaid Services (CMS) to review and approve any such provider tax.
New provisions set a maximum on what Medicaid managed care plans can pay providers; expansion states under the Affordable Care Act (those that expanded Medicaid coverage since the ACA) cannot exceed 100 percent of Medicare rates and non-expansion states cannot exceed 110 percent of Medicare rates to providers.

How do Medicaid Cuts Affect Not-for-Profit Organizations?

States that rely heavily on provider taxes, including California, may be forced to cut provider rates or eligibility, leading to reduced benefits to individuals or increased patient cost-sharing. States and not-for-profit organizations may see increased demand for other necessities such as food and housing assistance as health care costs increase.
With additional money going to health care costs among Medicaid-dependent households, affordability for housing becomes even tighter, potentially increasing homelessness or at-risk households.
Access to health care services will be more limited if DSH hospitals or rural and smaller clinics close due to insufficient state funding. Closures will place higher demands on larger clinics, hospitals and health professionals.
Human services agencies and regional centers that rely on current levels of Medicaid payments will need to seek alternative funding or implement cost-sharing measures.
Supportive housing models will need to offset losses in Medicaid payments with other programming models or funding sources.
Beginning July 1, 2028, there will be more red tape to receive federal funding to access home and community-based services (HCBS) waivers. The OBBBA provides a new category of HCBS waivers for people with disabilities who do not require institutional levels of care, but the process to access such waivers is complicated by changes to Medicaid eligibility and redeterminations.

Medicare Eligibility and Administrative Changes

Although Medicare is left mostly intact compared to the extensive changes to Medicaid, there are still several changes that impact low-income, eligible recipients while also disallowing coverage for illegal immigrants and refugees.

The OBBBA prohibits implementation of new rules for Medicare Savings Programs (MSPs) that would make it easier for low-income beneficiaries to apply and cover their premiums and cost-sharing. Implementation of the new rules is delayed until at least October 1, 2034.
The statutory Pay-As-You-Go Act of 2010 will go into effect in 2027 due to the net effects of the OBBBA raising the federal deficit anywhere between $2.3 trillion and $3.8 trillion over 10 years (according to different estimates); this means that Medicare spending could be reduced by 4 percent per year, or by $45 billion in 2026.
Eligibility for Medicare is limited to U.S. citizens, certain U.S. lawful permanent residents, Cuban and Haitian entrants and COFA citizens from the Marshall Islands, Micronesia and Palau. Current eligible enrollees in Medicare can remain on Medicare for about 18 months after the OBBBA’s enactment, or technically until January 4, 2027.
The OBBBA reverses Medicare drug pricing negotiation authority, established under the Inflation Reduction Act (IRA), which would have begun negotiating pricing in 2026 for the 10 most popular, high-cost prescription drugs covered under Medicare Part D. By 2029, negotiations with drug companies would have expanded to 60 drugs in Medicare Part D and Part B. Section 71203 clarifies exclusion on orphan drugs (expensive drugs for a rare disease) and will apply to initial price applicability years beginning after January 1, 2028.

How do Medicare Cuts Affect Not-for-Profit Organizations?

Health and human services organizations that work with low-income populations, particularly the disabled, veterans and the elderly, will face challenges when assisting with eligibility as well as coordinating coverage for multiple services.
Additional red tape will complicate already tight staffs at not-for-profit organizations, requiring innovative solutions for administration, compliance and service coordination.
Burnout among case workers and practitioners could lead to a greater talent deficit among human services organizations and not-for-profit healthcare providers.
Organizations may need to seek a higher proportion of non-government funding through grants and philanthropy that may or may not be more restricted. Other remedies may include consolidation of locations, reduction in services or merging with other organizations to reduce costs and share resources.

Talk to the tax team at LvHJ for ideas to plan for these extensive changes to Medicaid and Medicare eligibility and access. We will continue to monitor how the OBBBA impacts these programs in the near future, delivering new guidance that benefits you.