Background on H.R. 1

H.R. 1, also known as the One Big Beautiful Bill Act (OBBBA), became law July 4, 2025. It implemented changes in tax policy and federal spending in many departments. Health care provisions were a major component, primarily targeting Medicaid, the Affordable Care Act (ACA) Marketplaces, and certain aspects of Medicare.

The Congressional Budget Office (CBO) estimates that H.R. 1 will reduce federal healthcare spending by over $1 trillion between FY2025 and FY2034, while increasing the number of uninsured Americans by approximately 10–11 million by 2034, largely due to Medicaid and Marketplace changes.

Overall Effects of Medicaid and Medicare Changes on Healthcare Delivery

H.R.1’s health-related provisions include:

• New Medicaid eligibility and work requirements
• Increased frequency of eligibility redeterminations
• Limits on state Medicaid financing mechanisms
• Changes to ACA Marketplace subsidies
• Selected Medicare administrative and eligibility rule delays.

Across the healthcare system, H.R. 1 is expected to reduce coverage continuity, increase administrative complexity, and shift financial risk toward providers. Safety-net providers, those that disproportionately serve Medicaid and uninsured populations, are expected to experience the most immediate strain due to enrollment churn potentially leading to declining patient volumes.

Specific Provisions Affecting Healthcare Providers

Hospitals

Hospitals, particularly rural and safety-net facilities, face several direct impacts under H.R. 1. The law limits states’ ability to use provider taxes and supplemental payment arrangements that hospitals rely on to draw down federal Medicaid matching funds. 

While the law establishes a $50 billion Rural Health Transformation Program over five years to stabilize rural health care. These funds are not required to go to hospitals and the portion that does is unlikely to fully offset the Medicaid payment reductions and enrollment declines.

Starting in 2027–2028, many Medicaid beneficiaries must document work or community engagement to maintain coverage, leading to coverage gaps that disrupt continuity of care.

Frequent eligibility redeterminations (every six months for some adult populations) also contribute to “churn,” where patients cycle in and out of coverage. Providers must repeatedly verify eligibility, rebill claims, and manage denials, increasing revenue cycle overhead without corresponding increases in reimbursement.

More frequent eligibility redeterminations and work reporting requirements will likely result in more Medicaid disenrollments. That in turn leads to higher levels of uncompensated care at hospitals.

Reduced Medicaid enrollment has some secondary impact on hospitals’ bottom line. A lower ratio of Medicaid admissions will result in some hospitals no longer qualifying for Disproportionate Share Hospital (DSH) payments.
Via the same Medicaid ratio, certain not-for-profit hospitals qualify for reduced drug costs through 340B. Reducing the ratio will cause some to lose access to that program.

Physician Practices

Physician practices, especially primary care and specialty practices serving Medicaid expansion populations, are expected to experience patient volume declines related to the same eligibility changes impacting hospitals.

Independent practices with limited administrative capacity may find these changes particularly challenging compared to larger health systems.

Financial Impacts on Healthcare Providers

Financially, H.R. 1 introduces significant downside risk for providers reliant on public payers. Reduced Medicaid enrollment translates into lower aggregate reimbursement, while fixed operating costs remain unchanged. Hospitals and practices may also face rising bad debt and charity care expenses as uninsured patient volumes grow.

Tax-exempt healthcare organizations face new pressures as well. The law expands compensation-related excise taxes and increases reporting requirements under IRS Form 990, adding compliance costs, and potential tax exposure for nonprofit hospitals and academic medical centers.

How Healthcare Providers Can Mitigate the Impact

Healthcare providers are already taking steps to mitigate the effects of H.R. 1 through strategic and operational adjustments. Common approaches include:

• Strengthening eligibility and enrollment assistance to help patients maintain coverage and reduce churn
• Diversifying payor mixes through service line expansion or value-based contracts
• Investing in revenue cycle automation to manage eligibility checks and claims resubmissions more efficiently
• Participating in state-level planning for rural health funding and Medicaid implementation strategies.

Additionally, many provider organizations are actively engaging in the federal and state rulemaking processes, where agencies retain discretion over how certain H.R. 1 provisions are implemented.

Conclusion

H.R. 1 introduces a complex mix of reduced coverage, higher administrative burdens, and long-term financial uncertainty. Hospitals and physician practices that proactively adapt by improving operational efficiency, supporting patient coverage continuity, and engaging in policy implementation will be better positioned to navigate the evolving healthcare landscape shaped by H.R. 1.

Published: 07/07/2026

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