The One Big Beautiful Bill Act (OBBBA)

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, is not a single policy shift. It is a calendar of cascading changes that will impact the entire US healthcare landscape. Some provisions provide short-term relief, whereas others bring structural reform.

The OBBBA marks a significant departure from previous reform efforts, with unprecedented reduction in spending, and organizations need to prepare accordingly.

Four Themes Healthcare Leaders Need to Consider

Federal healthcare policy has not shifted under the OBBBA; it has changed direction. Coverage is tightening. Financing is changing. State flexibility is shrinking. Risk is moving downstream to plans and providers.

Rather than analyzing provisions of the OBBBA in isolation, BRG Healthcare has shared key themes from the bill and why these should matter to decisionmakers.

Eligibility rules for both Medicaid and the ACA exchanges are tightening. Medicaid beneficiaries in non-expansion states will need to meet work and asset tests. On the exchange side, subsidies are being limited by new documentation requirements and more aggressive income reconciliation at tax time.

For states: Expect a higher volume of eligibility redeterminations, administrative hearings, and coverage churn.
For payers: Enrollment will become less stable, particularly in lower-income and rural populations.
For providers: Safety-net utilization may rise as more individuals cycle on and off coverage.

Several changes reshape how states can fund and manage their Medicaid programs:

• Enhanced FMAP incentives are being phased out for expansion populations.
• Provider taxes are capped more aggressively.
• State-directed payments are subject to stricter oversight and new rulemaking.

At the same time, new rural hospital transformation grants and performance-based funding initiatives introduce conditional support, rather than guaranteed base increases.

For states: Traditional match-generating tools may need to be restructured, especially where supplemental payments rely on local government or provider funding.
For providers: Hospitals and SNFs that receive directed payments may see payment reductions, delays, or compliance audits.
For plans: State contract rates and risk corridors may be affected as passthroughs and supplemental mechanisms are revised.

Strategic implication: Budget officers and chief financial officers should treat historical payment flows as non-guaranteed. Expect questions from CMS and state auditors about financing sources and methodologies.

The law includes new constraints on waivers, more restrictive eligibility documentation rules, and limits on state flexibility to create novel payment pathways. These changes arrive alongside tighter definitions of what counts as allowable use of federal dollars.

While some states may welcome standardization, many will find that their Medicaid programs are being boxed in. Waivers that have served as policy laboratories for years may lose key features or renewal prospects.

For states: Waivers will need to meet a narrower set of federal expectations. Noncompliant programs may face funding cuts or retroactive audits.
For payers and providers: Contracts built on state waivers (including DSRIP-style programs and incentive pools) may need to be renegotiated or phased out.

Strategic implication: Organizations that rely on flexibility should start contingency planning now. The bar for CMS approval is moving, and the standard for oversight is rising.

The federal government has maintained or reduced its financial exposure while placing more responsibility on states, plans, and providers. Whether it involves eligibility tracking, compliance with new financing limits, or delivering care under stricter payment rules, the operational burden is increasingly localized.

This is most evident in the interaction between OBBBA and federal budget enforcement rules like PAYGO. If PAYGO cuts are not waived, Medicare payment rates will be reduced and safety-net grants could shrink. These decisions are largely out of providers and states’ control, but the financial consequences will land directly on them.

For all stakeholders: Be ready for funding reductions with little advance notice. This includes sequestration impacts, grant elimination, and coverage retraction that will require immediate response.

Strategic implication: Build more financial resilience into operating models. Avoid assuming stable federal funding and track each provision’s status even after passage.

How We Can Help

These themes point toward a policy environment that favors standardization, spending restraint, and stricter gatekeeping. States, payers, and providers will all face greater demands to comply, document, and absorb risk that used to be shared more evenly with the federal government.

Standardization, spending restraint, and stricter gatekeeping will force organizations to make difficult decisions. States, payers, and providers will need to evaluate services, where to make cuts, and how to restructure their operations to build a more resilient and sustainable future.

Our team works with clients across the health sector to:

• deconstruct complex legislation into operational and financial forecasts
• redesign Medicaid financing strategies in alignment with new federal limits
• model coverage loss and reimbursement risk across scenarios
• align plan and provider contract strategy with evolving state and federal funding decisions

Many organizations are navigating the OBBBA. BRG Healthcare works with you from strategy through execution—each step of the way—to help you adapt, comply, and compete.