The One Big Beautiful Bill Act: Medicaid and Medicare Under the Microscope
Summary
Last week, the House passed the “One Big Beautiful Bill Act,” and while headlines have focused on its political theatrics, the text within the law outlines changes that will have consequences for millions. Over the next few weeks, we’ll be breaking down the most important sections of this bill and the impact it has on Pennsylvania and Philadelphia. The bill passed through the House by just one vote amongst a divided Republican conference. It may have a tougher time in the Senate, where Republicans who say it isn’t doing enough to cut down the national debt might stop it up with changes. The prognosis on its passage by GovTrack.US, an independent informational organization publishing the status of federal legislation, puts the likelihood of passage in the Senate at 55%.
This week, we’re taking a closer look at the bill’s final Medicaid and Medicare provisions and what they could mean for Pennsylvanians.
Here’s what we found in the latest version of the bill, what’s changed since earlier drafts, and how the policies will ripple through Pennsylvania and Philadelphia.
1. Medicaid Work Requirements (Section 32101)
The bill imposes mandatory work requirements for able-bodied adults without dependents (ABAWDs). To remain eligible, individuals must work, volunteer, or participate in job training for at least 80 hours per month. The bill also mandates that Medicaid funding be limited to individuals with verified citizenship, nationality, or immigration status. States using Medicaid systems to cover undocumented individuals would face a 10% FMAP (Federal Medical Assistance Percentage, or, how Medicaid is funded) reduction.
How This Affects PA: Pennsylvania has nearly 3 million Medicaid enrollees, some of whom are underemployed or in non-traditional work environments, such as gig work. Non-traditional workers may have trouble proving eligibility as their hours and income vary. Work requirements could lead to thousands of eligible residents losing coverage due to paperwork errors or inconsistent reporting. The state would be tasked with enforcing compliance, creating new administrative burdens. Though it doesn’t impact Pennsylvania, a state with no coverage for non-documented persons, other states may have to reassess their eligibility requirements or risk losing funding.
2. Continuous Coverage for Children
As it stands now, the bill removes the federal requirement that states provide 12-month continuous Medicaid eligibility for children, a policy that was enacted during COVID-19.
How This Affects PA: Nearly 1.2 million Pennsylvania children are covered by Medicaid or CHIP. If continuous eligibility is removed, children are liable to be dropped from coverage mid-year due to administrative issues or changes in family income. This increases the risk of major coverage gaps and delayed care.
3. Quarterly Eligibility Checks
The legislation mandates quarterly eligibility verification for all Medicaid recipients. States will receive funding incentives to uncover and remove ineligible individuals.
How This Affects PA: While intended to prevent fraud, increased eligibility checks have historically removed eligible people due to documentation issues. Pennsylvania would need to scale up staff and technology to manage the new requirements, causing potential disruptions in care.
4. Medicaid Provider Tax Cap
The bill freezes states’ ability to raise provider taxes, a common mechanism used to draw down additional federal Medicaid dollars.
In essence, provider taxes allow states to collect revenue directly from healthcare providers—such as hospitals or nursing homes—and use that money to fund their share of Medicaid costs. Because Medicaid is jointly funded by states and the federal government, this spending draws down additional federal matching dollars. For providers, the arrangement often makes financial sense: although they pay the tax, they typically receive more back in Medicaid payments than they contribute, making it a net gain.
How This Affects PA: Pennsylvania uses provider taxes to support hospitals serving Medicaid patients. By capping provider taxes, the state loses a major tool for closing funding gaps, threatening hospital systems already stretched thin in Philadelphia and especially in rural areas. This creates an actual funding issue—even if care is not technically lost, providers could close and subsequently reduce the ability for people to find lifesaving care.
5. Medicare Advantage Benchmark Changes
The bill redefines how Medicare Advantage plans are benchmarked against traditional Medicare spending to reduce federal payments.
How This Affects PA: Over 1 million Pennsylvanians are enrolled in Medicare Advantage plans. Payment cuts could prompt insurers to reduce benefits or exit certain counties, affecting seniors' choice and cost, an issue already prevalent after hospitals and insurers across the country dropped Medicare Advantage plans.
6. Expanded Income-Based Premiums for Medicare
The bill lowers the income threshold at which Medicare Part B and Part D enrollees must pay income-related premium surcharges.
How This Affects PA: More middle-income seniors would be impacted, especially retirees living on fixed incomes but with modest investment returns, or those reporting an above $212,000 joint income. Roughly 120,000 Pennsylvania seniors could see their premiums rise.
7. Medicare Spending Growth Cap
A new cap ties Medicare spending growth to the CPI-Medical index plus 1%. If spending exceeds that rate, automatic payment reductions could occur.
How This Affects PA: Any automatic cuts would affect providers first, but could trickle down to patients in the form of longer wait times, reduced services, or fewer plan options.
8. A Note on the 1115 Waiver
Pennsylvania’s "Keystones of Health" Section 1115 Medicaid waiver, approved by CMS in December 2024, allows the state to test innovative approaches to Medicaid by addressing health-related social needs (HRSNs). Key components include:
Pre-Release Services: Limited Medicaid coverage for incarcerated individuals 90 days pre-release
Housing & Nutrition Supports: Services for those facing housing instability or food insecurityContinuous Coverage for Children: Medicaid guaranteed from birth through age six
These efforts aim to improve health equity and reduce long-term costs. The waiver runs through December 31, 2029. However, its future will be impacted by two major federal shifts:
House-passed legislation proposing major Medicaid cuts and new work requirements
The ability to pay for Health Related Social Needs (such as housing and food). CMS’s March 2025 policy change, rescinded previous guidance that allowed states to use Section 1115 waivers to cover health-related social needs. CMS now evaluates such proposals on a case-by-case basis, signaling a shift in federal policy that may affect the implementation of programs like "Keystones of Health".
Final Thoughts
Pennsylvania relies greatly on federal support for programs like Medicaid and Medicare. With an older population that makes up a great portion of the constituency, changes to Medicaid and Medicare are impactful.
The window to shape what comes next is narrow, but it’s still open. We’ll keep tracking it every step of the way.
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