H.R. 1, previously titled the “One Big Beautiful Bill Act”, represents one of the most comprehensive federal policy changes in recent decades. It touches healthcare, taxes, and social programs, and shifts financing and implementation responsibilities across federal, state, and local governments. The Congressional Budget Office (CBO) estimates it will reduce federal Medicaid spending by about $1.04 trillion over ten years and lead to around 16 million fewer people with coverage, split between Medicaid (about 7.8 million) and the Affordable Care Act (ACA) Marketplaces (about 8.2 million). This overview explains H.R. 1’s major provisions and what they could mean for states, consumers, providers, and payers.
Medicaid: Financing and administrative changes
Work requirements. Most adults ages 19–64 must now document at least 80 hours per month of work or a qualifying activity to maintain Medicaid coverage. Individuals who do not verify compliance lose eligibility for both Medicaid and ACA Marketplace premium tax credits. Exemptions apply for pregnant people, caregivers, and those recently released from incarceration, among others. Research shows most adults on Medicaid already work or qualify for an exemption; KFF estimates that in 2023, 64% were employed and over 90% were either working or exempt.
Faster renewals and more verification. Expansion adults must now renew eligibility every six months, and states are required to conduct additional verification and interstate data-matching. These steps are intended to strengthen program integrity by improving the accuracy of eligibility determinations and reducing improper payments. They may also add administrative complexity and raise the risk of coverage loss for eligible individuals—particularly those with unstable housing, limited internet access, or language barriers.
Provider taxes. The federal “safe harbor” cap on provider taxes will decrease from 6% to 3.5%. States have historically relied on these taxes to generate federal matching funds—accounting for about 17% of non-federal Medicaid financing in 2018, or 28% when including local contributions (MACPAC). The lower cap may prompt states to reassess Medicaid financing strategies and weigh trade-offs in how programs are structured.
State Directed Payments (SDPs) and rural care. Beginning in FY 2028, SDP limits will be tied to Medicare rates, reducing states’ flexibility to supplement managed care payments. With roughly $110 billion in annual SDP spending, largely financed through provider taxes and intergovernmental transfers, this change could constrain a key tool states use to support provider networks in underserved areas. Federal Medicaid spending in rural communities is projected to decline by $155 billion over ten years. A new $50 billion Rural Health Transformation Program aims to offset some of these reductions, with impacts dependent upon state capacity and program decisions.
ACA Marketplaces: Subsidies and enrollment
Stricter verification. Consumers must now fully verify income, immigration status, residency, and family size before receiving premium tax credits (PTCs) or cost-sharing reductions (CSRs). Roughly one in five HealthCare.gov enrollments occur through “passive” renewal; ending automatic re-enrollment for individuals with incomplete verification may increase the risk of coverage disruptions.
Full repayment of excess subsidies. Consumers will no longer have caps on how much excess premium tax credit (PTC) they must repay at tax filing. Some immigration categories will lose eligibility for subsidies, and people enrolling outside a qualifying life event will not qualify for financial assistance. Together, these changes may reduce enrollment continuity and raise financial exposure for households with variable income.
Enhanced subsidies expire. The enhanced premium tax credits (PTCs) introduced under the American Rescue Plan Act and extended through 2025 by the Inflation Reduction Act will expire. Beginning in 2026, subsidies will revert to pre-2021 levels, increasing required premium contributions across income groups. These enhancements had boosted Marketplace enrollment by lowering premiums and eliminating the “subsidy cliff” for many middle-income and older adults.
Analyses by KFF and the Urban Institute project that, without an extension, average consumer-paid premiums could more than double in 2026 and coverage could decline by approximately 4.8 million people. Their expiration has become a central issue in ongoing Congressional negotiations during the federal government shutdown. If no deal is reached, higher premiums and reduced enrollment are likely outcomes.
Ending “silver loading.” Insurers have historically increased silver-tier premiums to offset the cost of providing cost-sharing reductions (CSRs), which raised the benchmark used to calculate premium tax credits (PTCs). H.R. 1 ends this practice. Silver premiums would likely decline along with the benchmark—reducing subsidies across all plan tiers. Brookings estimates that current silver benchmarks are about 28% higher because of silver loading; removing it could lower subsidies by a similar amount. While unsubsidized silver-plan enrollees may see lower gross premiums, many subsidized consumers—particularly those in bronze, gold, or platinum plans—could face higher net premiums and greater sensitivity to income fluctuations.
Coordination gets harder. Medicaid and the ACA marketplaces act as complementary coverage systems, with many individuals moving between them as incomes change. Tighter Medicaid eligibility rules and shorter redetermination cycles may increase these transitions. At the same time, reduced Marketplace subsidies and stricter enrollment criteria may limit affordable coverage options for those losing Medicaid—leading to higher churn, uncompensated care, and pressure on risk pools. These dynamics could create coordination challenges for states and insurers as they manage eligibility transitions and enrollment stability.
Medicare: Payments and innovation models
Eligibility and payments. H.R. 1 narrows Medicare eligibility rules, delays implementation of the 2023 Medicare Savings Program enrollment rule until 2034, and links physician payment updates to the Medicare Economic Index, slowing projected growth after 2027. The law also ends enhanced payments for Advanced Alternative Payment Models (APMs), extends orphan-drug exemptions from federal price negotiation, and postpones new federal nursing home staffing standards until 2034. Changes may affect payment stability and innovation pathways—potentially increasing attribution volatility, complicating risk adjustment, and adding operational and financial complexity for organizations participating in value-based or alternative payment models.
Outlook and implications
H.R. 1 marks a broad realignment of federal health policy, tightening eligibility standards, expanding verification and reporting requirements, and revising financing structures across Medicaid, the ACA Marketplaces, and Medicare. Overall, the legislation redistributes financial responsibilities among federal, state, and local entities and is expected to reshape healthcare coverage, financing, and innovation over the next decade.
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