On May 22, the House passed a budget reconciliation bill that includes significant changes to the Medicaid program and the Affordable Care Act, as well as additional provisions related to Medicare and Health Savings Accounts. This resource summarizes the relevant sections of the House-passed bill and compares the changes to current law. It reflects the final changes to the House Rules Committee Print released on May 19 version.
Summary of Medicaid Provisions in the House Budget Reconciliation Bill
| Current Law | House Budget Reconciliation Bill (as passed by the House) | KFF Resources | |
| State Directed Payments | States are generally not permitted to direct how managed care organizations (MCOs) pay their providers. However, subject to CMS approval, states may use “state directed payments” (SDPs) to require MCOs to pay providers certain rates, make uniform rate increases (that are like fee-for-service supplemental payments), or to use certain payment methods. A 2024 rule on access to care in Medicaid managed care codified that the upper limit for SDPs is the average commercial rate for hospitals and nursing facilities, which is generally higher than the Medicare payment ceiling used for other Medicaid fee-for-service supplemental payments. |
• Directs HHS to revise state directed payment regulations to cap the total payment rate for inpatient hospital and nursing facility services at 100% of the total published Medicare payment rate for states that have adopted the Medicaid expansion and at 110% of the total published Medicare payment rate for states that have not adopted the expansion. • Grandfathers state directed payments submitted for approval and approved prior to the legislation’s enactment; ; for states that newly adopt the expansion after enactment, the cap at 100% of the Medicare payment rate applies at the time coverage is implemented even for payments that had prior approval. Effective Date: Upon enactment |
10 Things to Know About Medicaid Managed Care 5 Key Facts about Medicaid and Hospitals Medicaid Budget Survey FY 2024-2025, Provider Rates and Taxes |
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| Immigrant Coverage | Undocumented immigrants are not eligible for federally-funded Medicaid coverage. Emergency Medicaid pays hospitals for the costs of emergency department care for immigrants who would qualify for Medicaid, except for their immigration status. States verify immigration status through the DHS SAVE system which can provide automatic real-time verification. If the SAVE system cannot verify immigration status in real time, states are required to provide Medicaid benefits to applicants during a “reasonable opportunity period” of 90 days while their immigration status is being verified, if they meet all other eligibility criteria. Lawfully present immigrants must wait five years after obtaining qualified status before they may enroll in Medicaid; states may waive the five-year wait for children and pregnant individuals. Some states cover undocumented immigrants using only state funds. |
• Eliminates the requirement for states to provide Medicaid coverage during a reasonable opportunity period but allows states to do so at state option. • Prohibits states from claiming federal matching funds during a reasonable opportunity period. Effective Date: October 1, 2026 |
5 Key Facts About Immigrants and Medicaid How States Verify Citizenship and Immigration Status in Medicaid |
| Provider Taxes | States are permitted to finance the non-federal share of Medicaid spending through multiple sources, including state general funds, health care related taxes (or “provider taxes”), and local government funds. Federal rules specify provider taxes must be broad-based and uniform (i.e., states can’t limit provider taxes to only Medicaid providers) and may not hold providers “harmless” (i.e., guarantee providers receive their money back). The hold harmless requirement does not apply when tax revenues comprise 6% or less of providers' net patient revenues from treating patients (referred to as the “safe harbor” limit). | • Prohibits states from establishing any new provider taxes or from increasing the rates of existing taxes. • Revises the conditions under which states may receive a waiver of the requirement that taxes be broad-based and uniform such that some currently permissible arrangements taxes, such as those on managed care plans, will not be permissible in future years. • Provision overlaps with a proposed rule released May 12, 2025. Effective Date: Upon enactment, but states may have at most 3 fiscal years to transition existing arrangements that are no longer permissible |
5 Key Facts About Medicaid and Provider Taxes Medicaid Budget Survey 2024-2025 - Provider Rates and Taxes |
| Expansion Coverage and Financing | The Affordable Care Act expands Medicaid eligibility to non-elderly adults with incomes up to 138% FPL based on modified adjusted gross income and provides 90% federal financing for the expansion population. The Supreme Court effectively made expansion an option for states. The American Rescue Plan Act (ARPA) added a temporary financial incentive for states that newly adopt expansion. Currently, 41 states, including DC, have implemented the Medicaid expansion. | • Eliminates the temporary incentive for states that newly adopt expansion. Effective Date: January 1, 2026 |
5 Key Facts About Medicaid Expansion New Incentive for States to Adopt the ACA Medicaid Expansion: Implications for State Spending Eliminating the Medicaid Expansion Federal Match Rate: State-by-State Estimates Medicaid Expansion Tracker |
| Good Faith Waiver for Payment Reduction Related to Certain Erroneous Medicaid Payments | Federal law directs CMS to recoup federal funds for erroneous payments made for ineligible individuals and overpayments for eligible individuals if the state’s eligibility “error rate” exceeds 3 percent. CMS may waive the recoupment if the Medicaid agency has taken steps to demonstrate a “good faith” effort to get below the 3 percent allowable threshold. | • Requires HHS to reduce federal financial participation to states for identified improper payment errors related to payments made for ineligible individuals and overpayments made for eligible individuals. Effective Date: Beginning FY 2030 |
5 Key Facts About Medicaid Program Integrity – Fraud, Waste, Abuse and Improper Payments |
| Medicaid Provider Screening Requirements | Provider screening and enrollment is required for all providers in Medicaid fee-for-service or managed care networks. Additionally, the ACA requires states to terminate provider participation in Medicaid if the provider was terminated under Medicare or another state program. CMS has multiple tools to assist states with provider screening and enrollment compliance, including leveraging Medicare data. | • Requires states to conduct checks at enrollment, reenrollment, and on a monthly basis to determine whether HHS has terminated a provider or supplier from Medicare or another state has terminated a provider or supplier from participating in Medicaid or CHIP. • Requires states to conduct quarterly checks (in addition to at provider enrollment or reenrollment) of the Social Security Administration’s Death Master File to determine whether providers enrolled in Medicaid are deceased. Effective Date: January 1, 2028 |
5 Key Facts About Medicaid Program Integrity – Fraud, Waste, Abuse and Improper Payments |
| Work Requirements | Current law prohibits conditioning Medicaid eligibility on meeting a work or reporting requirement. During the first Trump administration, 13 states received approval to implement work requirements through Section 1115 waivers. Work requirement waiver approvals were either rescinded by the Biden administration or withdrawn by states, and Georgia is the only state with a Medicaid work requirement waiver in place. Several states have recently submitted new 1115 waiver requests to implement work requirements. | • Requires states to condition Medicaid eligibility for individuals ages 19-64 applying for coverage or enrolled through the ACA expansion group on working or participating in qualifying activities for at least 80 hours per month. • Mandates that states exempt certain adults from the requirements. • Requires states to verify that individuals applying for coverage meet requirements for 1 or more consecutive months preceding the month of application and that individuals who are enrolled meet requirements for 1 or more months between the most recent eligibility redetermination (at least twice per year). • These provisions cannot be waived, including under Section 1115 authority. Effective Date: Not later than December 31, 2026, or earlier at state option |
5 Key Facts About Medicaid Work Requirements Understanding the Intersection of Medicaid and Work: An Update Section 1115 Waiver Tracker Work Requirements Medicaid Work Requirements: Implications for Low Income Women’s Coverage An Overview of Medicaid Work Requirements: What Happened Under the Trump and Biden Administrations? |
| Eligibility and Enrollment Final Rule | CMS issued two separate rules, collectively referred to as the Eligibility and Enrollment final rule. The first rule reduces barriers to enrollment in Medicare Savings Programs (MSPs), which provides Medicaid coverage of Medicare premiums and cost sharing for low-income Medicare beneficiaries. The second rule streamlines application and enrollment processes in Medicaid, aligns renewal policies for all Medicaid enrollees, facilitates transitions between Medicaid, CHIP, and subsidized Marketplace coverage, and eliminates certain barriers in CHIP. Implementation deadlines for states to vary across provisions, but many provisions are already in effect, and for others, states are already in compliance. | • Delays implementation of both rules until January 1, 2035. Effective Date: Upon enactment |
5 Things to Know: A Look at the Proposed Medicaid Eligibility & Enrollment Rule What Does the Medicaid Eligibility Rule Mean for Low-Income Medicare Beneficiaries and the Medicare Savings Programs (MSPs)? Potential Effects of the Proposed Medicaid Eligibility Rule for Newly Enrolled Medicare-Medicaid Enrollees |
| Verifying Enrollee Address and Other Information | States are not required to take proactive steps to obtain updated enrollee contact information. The Eligibility and Enrollment final rule (see below) requires states to leverage reliable data sources to update enrollee address information, effective June 2025. | • Requires states to obtain enrollee address information using reliable data sources, including the National Change of Address Database and managed care entities. • Requires the Secretary to establish a system to share information with states for purposes of preventing individuals from being simultaneously enrolled in two states and requires states to submit monthly enrollee SSNs and other information to the system. • Requires states to review the Master Death File at least quarterly to determine if any enrolled individuals are deceased. Effective Date: January 1, 2027 for states to obtain contact information; October 1, 2029 to establish system to prevent enrollment in two states simultaneously; January 1, 2028 to review Master Death File |
Medicaid and CHIP Eligibility, Enrollment, and Renewal Policies as States Resume Routine Operations Following the Unwinding of the Pandemic-Era Continuous Enrollment Provision |
| Eligibility Determinations | States must renew eligibility for Medicaid enrollees whose eligibility is based on modified adjusted gross income (MAGI), including children, pregnant individuals, parents, and expansion adults, every 12 months and must renew eligibility at least every 12 months for enrollees whose eligibility is based on age 65+ or disability. States are required to review eligibility within the 12-month period if they receive information about a change in a beneficiary’s circumstances that may affect eligibility. | • Requires states to conduct eligibility redeterminations at least every 6 months for Medicaid expansion adults. Effective Date: For renewals scheduled on or after December 31, 2026 |
Medicaid and CHIP Eligibility, Enrollment, and Renewal Policies as States Resume Routine Operations Following the Unwinding of the Pandemic-Era Continuous Enrollment Provision Recent Medicaid/CHIP Enrollment Declines and Barriers to Maintaining Coverage |
| Home Equity Limits | Most Medicaid enrollees who qualify for Medicaid because they need long-term care (LTC) are subject to limits on their home equity. In 2025, federal rules specified that states’ limits on home equity must be between $730,000 and $1,097,000, and those amounts are updated each year for inflation. | • Reduces the maximum home equity limits to $1,000,000 regardless of inflation. • Allows states to apply different requirements for homes that are located on farms. Effective Date: January 1, 2028 |
Medicaid Eligibility Levels for Older Adults and People with Disabilities (Non-MAGI) in 2025 |
| Disproportionate Share Hospital Payments (DSH) | Medicaid provides DSH payments to hospitals that serve a disproportionate percentage of low-income, uninsured and Medicaid patients. The payments can be used to cover unpaid costs of care for people who are uninsured and to supplement Medicaid payment rates that often do not fully cover provider costs. DSH payments totaled over $17 billion in federal FY 2023. Federal DSH spending is capped for each state and facility, but within those limits, states have considerable discretion in determining the amount of DSH payments to each DSH hospital. The Affordable Care Act (ACA) called for a reduction in federal DSH allotments starting in FY 2014 based on the anticipated reduction in uninsured rates stemming from the ACA implementation, but the cuts have been delayed several times and are currently delayed through September 30, 2025. | • Delays the DSH reductions (of $8 billion per year) through September 30, 2028. • Extends Tennessee’s DSH program through September 30, 2028. Effective Date: Upon enactment |
Medicaid Financing: The Basics |
| Section 1115 Demonstration Waiver Budget Neutrality | Under long-standing policy and practice, Section 1115 demonstration waivers must be “budget neutral” to the federal government over the course of the waiver. Federal costs under an 1115 waiver may not exceed what they would have been for that state without the waiver. Typically, budget neutrality calculations are determined on a per enrollee basis—so, per enrollee spending over the course of the waiver (usually 5 years) cannot exceed the projected per enrollee spending calculated in the “without-waiver baseline.” Budget neutrality calculations and the use of “savings” when expenditures decrease on account of the waiver are negotiated between states and CMS and the Office of Management and Budget). |
• Requires the HHS Secretary to certify 1115 demonstration waivers are not expected to result in an increase in expenditures compared to expenditures without the waiver and to specify a methodology for applying any budget neutrality “savings” in a waiver extension period. Effective Date: Upon enactment |
Medicaid Section 1115 Waivers: The Basics |
| Gender Affirming Care | States currently vary in their coverage for gender affirming care in Medicaid. A number of states have imposed restrictions on such care in Medicaid and for other payers, many of which are subject of ongoing litigation. | • Prohibits federal matching funds for “gender transition procedures,” defined to include puberty blockers, hormone treatment and surgery, for any individuals enrolled in Medicaid and CHIP. Effective Date: Upon enactment |
Policy Tracker: Youth Access to Gender Affirming Care and State Policy Restrictions |
| Prescription Drug Pricing and Rules for Pharmacy Benefit Managers | States are not required to offer Medicaid prescription drug coverage, but all states do. States provide prescription drug benefits through either fee-for-service (FFS) Medicaid or through managed care organizations (MCOs). Under FFS, states often use the National Average Drug Acquisition Cost (NADAC) survey, which surveys pharmacies about their costs of acquiring prescription drugs, to inform their prescription drug payment rates. The survey is optional for pharmacies to complete and may overstate prescription drug costs. When MCOs provide prescription drugs, they often use Pharmacy Benefit Managers (PBMs) to administer pharmacy benefits. Some PBMs charge Medicaid MCOs for pharmacy costs that far exceed the actual costs of reimbursing pharmacies for drugs, a practice known as “spread pricing.” As of 2019, only 11 states had prohibited spread pricing in MCO contracts. |
• Requires all retail pharmacies and certain non-retail pharmacies to complete the NADAC survey and imposes penalties for non-completion. • Requires the Secretary of Health and Human Services to make data from the NADAC survey about prescription drug costs and pricing publicly available. • Establishes requirements for PBM payments to pharmacies, including that they be no less than what FFS payments would be. • Prohibits spread pricing and requires that payments to PBMs and similar entities reflect the pharmacies’ costs and an administrative fee that is fair market value. Effective Date: Starting 6 months after enactment for the Drug Acquisition Cost Survey, 18 months after enactment for the requirements governing PBMs |
Prohibition of Spread Pricing in Medicaid MCO Contracts Medicaid Budget Survey 2024-2025 - Pharmacy Section |
| Coverage for Lawfully Present Immigrant Children and Pregnant People and State Funded Coverage of Undocumented Immigrants | Immigrants who are eligible for Medicaid must wait five years after obtaining qualified status before they may enroll. States have the option to waive this five-year waiting period for children and pregnant people, referred to as the ICHIA option, which also extends coverage to certain lawfully present immigrants without a qualified status in Medicaid and in separate Children’s Health Insurance Programs (CHIP). Currently, 39 states and DC have taken up this option for children and/or pregnant people, of which 33 states and DC have also expanded Medicaid. Under current law, undocumented immigrants are not eligible for Medicaid coverage. KFF data show that as of April 2025, 14 states and DC use state-only funds to provide health coverage to children regardless of immigration status, including 7 states that do so for at least some adults. |
• Reduces the expansion match rate from 90% to 80% for states that provide health coverage or financial assistance, including using their own funds, to purchase health coverage for individuals who do not have a qualified status and who are not lawfully residing children or pregnant adults covered under the Medicaid option for these groups. Effective Date: October 1, 2027 |
Proposed Medicaid Federal Match Penalty for States that Have Expanded Coverage for Immigrants: State-by-State Estimates Which States Would Be Affected by a House Proposal to Cut Federal Medicaid Funding for States That Cover Undocumented Immigrants? Key Facts on Health Coverage of Immigrants 5 Key Facts About Immigrants and Medicaid |
| Nursing Home Staffing Final Rule | A 2024 Biden-administration final rule requires long-term care facilities (LTC) to meet minimum staffing levels (including a 24/7 RN on-site and a minimum of 3.48 total nurse staffing hours per resident day (HPRD)), requires state Medicaid agencies to report the share of Medicaid payments for institutional LTC that are spent on worker compensation, and provides funding for people to enter careers in nursing homes. On April 7, the US District Court for Northern Texas ruled to overturn the minimum staffing requirements, and it is expected that the Administration will not appeal that decision. |
• Prohibits the Secretary of Health and Human Services from implementing, administering, or enforcing the final rule. Effective Date: Upon enactment |
Texas Judge Overturns Controversial Nursing Facility Staffing Rule A Closer Look at the Final Nursing Facility Rule and Which Facilities Might Meet New Staffing Requirements 10 Things About Long-Term Services and Supports (LTSS) |
| Cost Sharing | States have the option to charge premiums and cost-sharing for Medicaid enrollees within limits, and certain populations and services (emergency, family planning, pregnancy and preventive) are exempt from cost-sharing. Cost-sharing is generally limited to nominal amounts but may be higher for those with income above 100% of the federal poverty level (FPL). Out-of-pocket costs cannot exceed 5% of family income. States may allow providers to deny services for enrollees for nonpayment of copayments. | • Eliminates enrollment fees or premiums for expansion adults. • Requires states to impose cost sharing of up to $35 per service on expansion adults with incomes 100-138% FPL; explicitly exempts primary care, mental health, and substance use disorder services from cost sharing; maintains existing exemptions of certain services from cost sharing; and limits cost sharing for prescription drugs to nominal amounts. • Maintains the 5% of family income cap on out-of-pocket costs. Effective Date: October 1, 2028 |
Understanding the Impact of Medicaid Premiums & Cost-Sharing: Updated Evidence from the Literature and Section 1115 Waivers |
| Free Choice of Provider | States must generally allow beneficiaries to obtain Medicaid services from any provider that is qualified and willing to furnish services. Managed care organizations (MCOs) may restrict enrollees to providers in the MCO’s network, except that such plans cannot restrict free choice of family planning providers. | • Prohibits Medicaid funds to be paid to providers that are nonprofit organizations, essential community providers primarily engaged in family planning services or reproductive services, provide for abortions outside of the Hyde exception and received $1,000,000 or more in payments from Medicaid; this would affect Planned Parenthood and other Medicaid essential community providers. Effective Date: Upon enactment for 10 years. |
What’s at Stake in the Supreme Court Case Medina v. Planned Parenthood South Atlantic? The Impact of Medicaid and Title X on Planned Parenthood |
| Prescription Drugs | |||
| Streamlined Enrollment for Out-of-State Pediatric Providers | Medicaid only reimburses providers that are enrolled in the state’s Medicaid program. To receive reimbursement for services provided to a Medicaid enrollee from another state, providers must generally enroll with that state’s Medicaid program. However, states are required to pay for out-of-state necessary medical services if any of the following apply: they are needed because of a medical emergency, travel to the home state would endanger health, the services are more readily available in another state, or general practice is for residents of a particular locality to use resources provided in another state. | • Requires states to establish a process for out-of-state providers to enroll as participating providers without further screening requirements if they are providing services to enrollees under age 21. • Specifies that enrollment of out-of-state providers is to last 5 years unless the provider is terminated or excluded from participation during that period. Effective Date: 4 years after enactment |
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| Retroactive Coverage | Under current law, states are required to provide Medicaid coverage for qualified medical expenses incurred for up to 90 days prior to the date of application for coverage. | • Limits retroactive coverage to one month prior to application for coverage. Effective Date: December 31, 2026 |
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