Cuts, Care, and Consequences: A Closer Look at the One Big Beautiful Bill Act
How OBBBA Reshapes Federal Healthcare Spending
Key Terms:
Affordable Care Act (ACA) – Also known as “Obamacare,” was a federal law aimed to expand health insurance coverage and reduce healthcare costs.
State Provider Taxes – Taxes that states impose on healthcare providers (like hospitals) to draw down additional federal Medicaid matching funds; the revenue collected is then used by the state to qualify for more federal dollars, effectively increasing total Medicaid funding without raising general taxes.
Medicaid Employment Requirements – Policy conditions that require certain Medicaid recipients to work, volunteer, or participate in job training to maintain their eligibility for coverage.
Medicaid – A joint federal and state program that provides health insurance to low-income individuals and families, including children, the elderly, and people with disabilities.
Medicare – A federal health insurance program primarily for people aged 65 and older, as well as some younger individuals with disabilities or serious medical conditions.
As of May 24th, 2025, the One Big Beautiful Bill Act (OBBBA), has narrowly passed the U.S. House of Representatives by a vote of 215-214. OBBBA, championed by President Donald Trump, is a budget reconciliation bill which seeks to reallocate funding from healthcare and social programs. The bill aims to establish tax cuts and re-bolster other federal initiatives such as the American military and border security. Although President Trump has expressed the desire to cut the federal deficit, OBBBA raises the debt ceiling by 4 trillion primarily through the bill’s tax cuts to wealthier income brackets. Supporters of the bill argue that tax cuts will stimulate the economy by boosting investment, job creation, and consumer spending.
At the core of the bill are deep cuts to Medicare, Health Insurance and, most significantly, Medicaid. Key provisions include:
Below is a summary of the bill’s largest funding cuts. While not comprehensive, it captures the majority of reallocated funds. All estimates come from the Congressional Budget Office.
New employment requirements for Medicaid enrollment eligibility ($280 billion).
Limits on state provider taxes—an indirect method states use to maximize federal Medicaid matching funds. Hospitals, for example, rely heavily on provider tax funding ($197 Billion – A generous estimate from an older, un-modified version of the bill which was more limiting).
A suspension of federal Medicare and Medicaid centers to ease program enrollment ($82 billion).
Requires eligibility redeterminations for adults covered by Affordable Care Act (ACA) every 6 months ($53 Billion).
Stricter Medicaid enrollment verification through regularly updated beneficiary lists ($17 billion).
I've also noted the most significant changes for Medicare and Health Insurance.
Health Insurance: Institutes stricter eligibility and income verifications for low-income individuals ($101 billion).
Medicare: Suspends a rule which facilitates Medicare Savings enrollment. This will disproportionately impact low-income individuals ($84 Billion)
After reading these statistics, you may be curious… Why exactly would a president want to cut so much healthcare coverage? Take it from Jonathon Bush, co-founder of athenahealth and American technology entrepreneur: “hospitals aren’t in the business of pleasing consumers… they are in the business of billing insurers and government programs.” President Trump aligns with this point of view. Bush’s statement reflects the belief that the third-party payer system (insurance/government) disconnects providers from patients. In other words, providers, who are being paid primarily by insurance companies, do not compete for patients, but instead, for government and insurance contracts. Bush and President Trump believe that this dynamic breaks the feedback loop which, drives accountability, innovation, and efficiency within the healthcare sector. Thus, in reducing healthcare spending and coverage, Trump is in part hoping to encourage innovative, cost-effective, and specialized businesses that benefit the consumer.
Nonetheless, leaders in healthcare have pushed back on Trump’s strategy of decentralization. Many decision-makers in the healthcare space regard the third-party system as necessary to ensure equitable access, manage financial risk, and maintain the complex infrastructure required for delivering high-acuity care.
Susan Dentzer, President and CEO of the American Physician group, criticizes the bill as being based on a misleading premise: cutting waste in the public sector. Instead, she argues that the bill’s core cuts target initiatives that millions of Americans rely on. Ms. Dentzer contends that these reductions are less about reforming the public sector and more about creating fiscal space for lowering taxes. According to her, the trade off, which primarily benefits high earners, is "inexcusable." Her comments reflect a broader concern of the American left that OBBBA shifts the burden of deficit reduction onto the country’s most vulnerable. All the while, the bill delivers financial gains to high-income tax payers.
Rick Pollack, CEO of the American Hospital Association, publicly expressed that many hospitals—especially rural ones—rely on Medicaid to stay operational. According to the Chartis Center for Rural Health, Medicaid accounts for 9.3% of revenue for rural hospitals. With many of these hospitals operating on tight margins, Medicaid cuts could be devastating leading to cuts in staff and services. Rural hospitals often serve small, geographically dispersed populations, which means lower patient volumes and less revenue from privately insured patients
Jim Kendrick, CEO of the Community Hospital Core, notes that a weak hospital system could also cripple rural economies. Hospitals are huge employers and, more broadly, companies prefer to be in close proximity to hospitals to have healthier employee bases. Lastly, American families often choose to live near hospitals to have access to high quality healthcare. In turn, the value of real estate in the vicinity of hospitals is driven up.
Urban hospitals too will be impacted. Dr. Mitchell Katz, CEO of NYC Health and Hospitals, cites that, yearly, 70% of the 1 million patients served by NYC’s public healthcare system are covered by Medicaid. Of the 16,000 babies delivered yearly, 97% are covered by Medicaid. Katz continues to argue that Medicaid is not a “blank check,” but a smart investment. These numbers underscore the importance of Medicaid in primary care, prenatal services, and chronic disease management for low-income urban populations. Dr. Katz argues that “preventative care reduces costly emergency room visits for non-emergency issues.” In other words, by cutting Medicaid, the government would likely increase uncompensated care burdens on hospitals. The result could be longer wait times, resource rationing, and poor health outcomes.
Whether you are a proponent of a market-based healthcare system, or a firm believer in centralized healthcare delivery, OBBBA forces a reckoning with the fundamental tradeoffs at the heart of American healthcare policy. The bill compels the public to confront whether cost-cutting and decentralization can truly coexist with the promise of accessible, high-quality care for all.
Citations
https://www.modernhealthcare.com/opinion/safety-net-hospitals-medicaid-mitchell-katz
https://www.modernhealthcare.com/politics-policy/healthcare-sector-slams-gop-medicaid-medicare-cuts
https://www.modernhealthcare.com/providers/community-hospital-jim-kendrick-lobbying-medicaid
https://www.foxnews.com/politics/dawns-early-light-battles-trumps-big-beautiful-bill-face-senate
https://www.cnn.com/2025/05/24/politics/house-tax-spending-cuts-bill-explained
Where Does It Hurt?: An Entrepreneur's Guide to Fixing Health Care by Jonathon Bush
https://www.modernhealthcare.com/politics-policy/big-beautiful-bill-medicaid-medicare-pbms
Very informative! Thank you.