Introduction
The House and Senate are considering a budget reconciliation bill, a process that allows the Senate to pass legislation by a simple majority, rather than the 60 votes usually required to pass any legislation.[1]
The budget framework that guides the reconciliation process – passed by both the House and Senate – directs the House Committee on Energy and Commerce, the House committee with jurisdiction over Medicaid, Medicare, and the Children’s Health Insurance Program, to reduce the federal deficit by $880 billion over 10 years.[2] The House Energy and Commerce Committee released a draft bill on May 11, 2025 that was marked up and passed along party lines (30-24) by the full committee on May 14, 2025.[3]
The policies included in the bill passed by the House Energy and Commerce Committee marks the largest shift in Medicaid policies in years and one of the largest potential changes to healthcare since the adoption of the Affordable Care Act.
This memorandum summarizes the various Medicaid proposals included in the draft reconciliation bill and the estimated cost savings by the non-partisan Congressional Budget Office (CBO) or the House Budget Committee.[4]
Medicaid Policy Changes in House Energy and Commerce Reconciliation Bill
Delay of Implementation of Biden-Era Regulations
During the Biden Administration, several regulations were finalized that allowed for a more simplified and streamlined process for Medicaid enrollment. The implementation of two regulations would be paused for implementation until 2035 in the House reconciliation bill. These rules are:
- “Streamlining Medicaid; Medicare Savings Program Eligibility Determination and Enrollment” which reduces barriers to enrollment in the Medicare Savings Program (MSP)[5]; and
- “Medicaid Program; Streamlining the Medicaid, Children’s Health Insurance Program, and Basic Health Program Application, Eligibility Determination, and Renewal Processes” which streamlines enrollment into Medicaid and reduces barriers to CHIP.[6]
CBO estimates that repealing these rules would save $162 billion over 10 years due to anticipated decreased Medicaid enrollment.
It is anticipated that the delay in these rules would slow Medicaid enrollment and potentially create barriers that would prevent some individuals from enrolling at all. Furthermore, it would create additional administrative barriers for state Medicaid programs.
Increased Oversight of Medicaid Enrollment
In the reconciliation bill, there are several new provisions that would require states to conduct additional reviews of the Medicaid rolls. Currently, state Medicaid programs are required to review their Medicaid rolls on a yearly basis to determine individuals that are no longer eligible due to death, salary increase, change of address, aging-out, etc.
The bill would require the following additional reviews by state Medicaid programs:
- “Regularly” obtain and review addresses of Medicaid beneficiaries beginning 2027. Following that, beginning in 2029, states will submit this information to a new Health and Human Services (HHS) platform. The HHS Secretary must set up a new platform for states that allows submission of enrollee social security numbers and other information and that would automatically disenroll individuals if enrolled in two states by October 1, 2029.[7]
Address information for the enrollee can be obtained from: mail returned by USPS, the national change of address database managed by USPS, a managed care entity or prepaid inpatient health plan (PIHP) or prepaid ambulatory health plan (PAHP), and other data sources as identified by state and approved by HHS.
- Beginning in 2028, state Medicaid programs must review the death master file on a quarterly basis and disenroll enrollees included on the file. If it is found that an individual is erroneously removed, they must be reinstated as soon as possible.[8]
- Beginning in 2027, states would be required to conduct an evaluation of enrollment/redetermination eligibility of all Medicaid expansion individuals every six months.[9] Current law requires evaluation every twelve months.
The increased reviews of state Medicaid rolls will increase administrative burden for state Medicaid programs many of which are already short staffed. With more frequent Medicaid enrollment reviews, it is anticipated that there will be less staffing and fewer resources to enroll new Medicaid beneficiaries.
There are no calculated savings estimates for these provisions by CBO or the House Budget Committee.
Eliminating HHS Secretary Flexibility to Allow Waivers for Erroneous Payments
State Medicaid programs occasionally make erroneous Medicaid payments (e.g., paying for an individual that is not eligible or overpaying for medical services for an enrolled individual). Current statute allows states a 3% error rate for such payments. Any amount over the allowed 3% error rate the state must pay back to the federal government; however, the HHS Secretary has broad authority to waive these erroneous payments that exceed the 3% error rate. The reconciliation package removes the flexibility for the HHS secretary to cover state overpayment in Medicaid beginning in 2030 and requires the Secretary to reduce the Federal Medical Assistance Percentage (FMAP) (i.e., the amount the federal government pays to states for Medicaid enrollees) rate to the state by the amount of overpayment made above the 3% error rate as a punitive action.[10]
Removing the coverage flexibility will have a budgetary impact for states who may experience overpayment of Medicaid due to errors in the system or oversight.
There are no calculated savings estimates for these provisions by CBO or the House Budget Committee.
Statutory Cap on Home Equity in Long-Term Care Eligibility
Eligibility for long-term care (LTC) services under Medicaid considers a number of factors including home-equity. Current statute allows for the home equity determination cap to grow annually based on the rate of inflation. The 2025 Medicaid LTC eligibility rules specified that limits on home equity must be between $730,00 and $1,097,000.[11] Current statute also allows for the state to disregard home equity caps when determining Medicaid LTC eligibility for long-term care for those who are “medically needy” including elderly, blind or disabled individuals.
Provisions in the reconciliation bill would cap the home equity limit for LTC coverage at $1,000,000 and does not allow for any yearly inflation changes, effective January 2028.[12] It would also prevent states from disregarding home-equity considerations when making eligibility decisions about individuals who are medically needy.
Such amendments to the home-equity consideration for LTC could remove eligibility for individuals in a number of states with higher per-capita income including California, Colorado, Connecticut, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Washington, and Wyoming.
There are no calculated savings estimates for these provisions by CBO or the House Budget Committee.
Medicaid Considerations for Non-Citizens
Under current Medicaid statute, a state must provide coverage for an individual who has unverified citizenship status for 90 days to allow the individual adequate time to provide documentation of American citizenship. Provisions included in the reconciliation bill would remove the requirement that states continue to provide Medicaid coverage during the 90 day period, effective October 2026.[13]
Effective October 2027, the reconciliation bill would reduce FMAP for Medicaid Expansion states by 10 percentage points, from 90 to 80%, if a state provides Medicaid coverage or uses state funds to provide health coverage for “aliens” as a punitive measure.[14] The FMAP would be evaluated quarterly instead of annually. This change would impact state Medicaid budgets for states with stand-alone health programs or medical assistance programs for non-citizens.
There are no calculated savings estimates for these provisions by CBO or the House Budget Committee.
Shortening Retroactive Coverage Window
The reconciliation bill would amend retroactive coverage statute for Medicaid beneficiaries and CHIP beneficiaries, including for pregnant women, from three months retroactive coverage prior to Medicaid enrollment approval to one month retroactive coverage prior to enrollment approval, effective October 2026.[15]
Reducing Medicaid and CHIP retroactive coverage from three months to one month would leave many low-income individuals, including pregnant women, vulnerable to uncovered medical bills for care received before enrollment. This change could also strain hospitals and safety net providers, who often rely on retroactive payments to cover services for eligible but not-yet-enrolled patients.
There are no calculated savings estimates for these provisions by CBO or the House Budget Committee.
Ends 5% FMAP Increase Implemented During COVID
During COVID-19, under the Families First Coronavirus Response Act, Medicaid Expansion states received an FMAP increase of 5% to encourage more states to implement Medicaid expansion and reduce uninsured individuals that could qualify for Medicaid.[16] The reconciliation package would end that FMAP increase of 5% points for Medicaid expansion states by January 2026.[17]
Ending the 5% FMAP increase for Medicaid expansion states by January 2026 could strain state budgets, potentially leading to cuts in Medicaid services or reduced provider payments. It may also reduce incentives for remaining states to expand Medicaid, leaving more low-income individuals without coverage.
There are no calculated savings estimates for these provisions by CBO or the House Budget Committee.
Prevent Flexibility in Medicaid Rates for State Directed Payments
The reconciliation bill would require that any Medicaid state directed payments (SDP) to Managed Care Organizations (MCO), Prepaid Inpatient Health Plans (PIHP), and Prepaid Ambulatory Health Plans (PAHP) cannot exceed the Medicare published rate.[18] The bill does provide exceptions for rates already set for services prior to the date of enactment.
Typically, MCOs, PIHPs and PAHPs set their own pricing and state Medicaid cannot interfere. There are some exceptions, as approved by CMS, where states can set criteria for the set price.
The House Budget Committee estimates that this could save $25 billion over 10 years.[19]
Impact to Provider Taxation
States finance portions of their Medicaid programs by taxing Medicaid providers no typically more than 6% of the providers’ net revenues. The revenue generated through these taxes is then supplemented with federal matching funds, allowing states to reimburse providers at higher rates and effectively mitigate any financial impact of the tax on providers (i.e., hold harmless).
Generally, Medicaid provider taxes must be broad-based – applied equally to all providers – and uniform— imposed on all providers. However, a state may obtain a waiver from these requirements if they demonstrate that the taxes are “generally redistributive” and not exclusively applied to Medicaid providers. Currently, states that have a generally redistributive waiver have been able to levy higher taxes on Medicaid providers than on private insurers, thereby increasing the federal match (FMAP) they receive.
The reconciliation package would prevent the implementation of new provider taxes or increase existing provider taxes upon enactment of the reconciliation bill.[20] The bill would also prohibit taxing Medicaid businesses and Medicaid enrollees at a higher level than privately insured enrollees.[21]On May 12th, Trump Administration released a regulation on the r the same policy.[22]
Changes to a state’s ability to tax providers could lead to a reduction of Medicaid dollars at the state level.
CBO estimated that a full repeal of the provider tax would save the federal government $668 million over 10 years.[23]
Codify 1115 Waiver Budget Neutrality Requirement[24]
The reconciliation bill would codify, or formally enact in law, the current CMS regulatory requirement that 1115 waiver demonstration projects be budget neutral.[25] In other words, a Medicaid demonstration project cannot result in an increase in the federal expenditures compared to the amount the federal government would pay absent the 1115 waiver.
The bill would requires that the HHS Secretary specify a methodology for how any “savings” provided from the 1115 waivers will be used for any subsequent waiver approval period. Currently, states negotiate with CMS the investment of any savings from 1115 waiver demonstration projects.
There are no calculated savings estimates for these provisions by CBO or theHouse Budget Committee.
Instituting Medicaid Work Requirements
Under the reconciliation bill, beginning January 1, 2029, an individual is not eligible for Medicaid unless they meet one of the following “community engagement” requirements within a month period:
- The individual works not less than 80 hours.
- The individual completes not less than 80 hours of community service.
- The individual participates in a work program for not less than 80 hours.
- The individual is enrolled in an educational program at least half-time.
- Or a combination of the above.[26]
Exemptions are provided those who are under the age of 19, pregnant or entitled to postpartum medical assistance, aged or disabled as described under Title XVII, foster care youth under the age of 26, members of Tribes, and inmates.
The reconciliation package also would allow for short-term “community engagement” exemptions for individuals who are hospitalized or in a nursing home, in an intermediate care facility for individuals with intellectual disabilities, receiving inpatient psychiatric hospital services, or residing in a county with an emergency or disaster declaration.
States would be required to determine eligibility for community engagement in each enrollment/reenrollment. If the enrollee is not meeting community engagement requirements as determined by the state, then the enrollee would have 30 days to address noncompliance.
Currently, Medicaid eligibility cannot be conditioned on work requirements. Under the first Trump Administration, 13 states received 1115 work requirement waivers. However, under the Biden Administration, 12 of those 13 state’s waivers were rescindeds, with the exception of Georgia..
CBO estimates work requirements will save $100 billion over 10 years.[27]
Instituting Individual Cost Sharing Requirements for Medicaid Expansion States[28]
The reconciliation bill would require states to impose cost sharing (i.e., co-pay) for Medicaid Expansion individuals with an income over 100% of the poverty line for services. Currently, states have the option to charge a nominal amount for premiums or cost sharing, but it is not required. Under the reconciliation bill, beginning October 2028, a state would be required to impose cost sharing – between $0 and $35 per service –for medical services provided to a Medicaid Expansion individual with an income exceeding 100% of the federal poverty line. The policy would allow exceptions for individuals who are receiving pregnancy services, nursing, receiving mental in-patient facility services, emergency services or hospice care. This section would not permit cost-sharing on primary care, prenatal care, pediatric care, or emergency room care
The proposal also states that the total aggregate amount of cost sharing may not exceed 5% of total family income. Currently the cost sharing amount is nominal as determined by the HHS Secretary through regulations.
For individuals on a low income, implementing cost sharing requirements would be a barrier to care.
House and Senate Republicans estimate that this would save $18 billion over 10 years.[29]
Delay Minimum Staffing Requirements for Long Term Care Facilities
Under the Biden Administration, the Centers for Medicare & Medicaid Services (CMS) finalized a rule “Medicare and Medicaid Programs; Minimum Staffing Standards for Long-Term Care Facilities and Medicaid Institutional Payment Transparency Reporting” in June 2024.[30] This rule significantly increased the nursing staffing requirements for long term care facilities receiving Medicaid payment. In addition, states would be required to report to CMS the percentage of Medicaid payments for nursing facilities and intermediate-care facilities for individuals with intellectual disabilities that is spent on direct care workers and support staff. The rule has additional transparency provisions.
The bill includes a provision that would require CMS to delay implementation of this rule from 2026 until January 1, 2035.[31]
House and Senate Republicans estimate that delaying implementation of this regulation would save $22 billion over 10.[32]
[1] More about budget reconciliation from the Bipartisan Policy Center available at https://bipartisanpolicy.org/explainer/budget-reconciliation-simplified/
[2] U.S. House of Representatives. (2025). H. Con. Res. 14 – Concurrent resolution supporting the goals and ideals of International Transgender Day of Visibility. 119th Congress. https://www.congress.gov/bill/119th-congress/house-concurrent-resolution/14
[3]U.S. House of Representatives. (2025). Subtitle D—Health. In Committee Print: Providing for reconciliation pursuant to H. Con. Res. 14, the Concurrent Resolution on the Budget for Fiscal Year 2025. https://d1dth6e84htgma.cloudfront.net/Subtitle_D_Health_ae3638d840.pdf;
The Hill Staff. (2025). Republicans advance Medicaid bill aligned with Trump agenda. The Hill. https://thehill.com/policy/healthcare/5299154-republicans-advance-medicaid-bill-trump-agenda/
[4] Congressional Budget Office (2025) Estimates for Medicaid Policy Options and State Responses. https://www.cbo.gov/system/files/2025-05/Wyden-Pallone_Letter.pdf; U.S. Senate Committee on Finance. (2025). Budget Options. https://www.finance.senate.gov/imo/media/doc/budget_optionspdf.pdf
[5] Centers for Medicare & Medicaid Services. (2023). Streamlining Medicaid; Medicare Savings Program eligibility determination and enrollment. Federal Register, 88(182), 65230–65271. https://www.federalregister.gov/documents/2023/09/21/2023-20382/streamlining-medicaid-medicare-savings-program-eligibility-determination-and-enrollment;
Section 44101 of U.S. House of Representatives. (2025). Subtitle D—Health. In Committee Print: Providing for reconciliation pursuant to H. Con. Res. 14, the Concurrent Resolution on the Budget for Fiscal Year 2025. https://d1dth6e84htgma.cloudfront.net/Subtitle_D_Health_ae3638d840.pdf.
[6] Centers for Medicare & Medicaid Services. (2024). Medicaid Program; Streamlining the Medicaid, Children’s Health Insurance Program, and Basic Health Program Application, Eligibility Determination, and Renewal Processes. Federal Register, 89(64), 22780–22878. https://www.federalregister.gov/documents/2024/04/02/2024-06566/medicaid-program-streamlining-the-medicaid-childrens-health-insurance-program-and-basic-health;
Section 44102 of U.S. House of Representatives. (2025) Subtitle D—Health. In Committee Print: Providing for reconciliation pursuant to H. Con. Res. 14, the Concurrent Resolution on the Budget for Fiscal Year 2025. https://d1dth6e84htgma.cloudfront.net/Subtitle_D_Health_ae3638d840.pdf.
[7] Section 44103 of Ibid.
[8] Section 44104 of U.S. House of Representatives. (2025) Subtitle D—Health. In Committee Print: Providing for reconciliation pursuant to H. Con. Res. 14, the Concurrent Resolution on the Budget for Fiscal Year 2025. https://d1dth6e84htgma.cloudfront.net/Subtitle_D_Health_ae3638d840.pdf
[9] Section 44108 of Ibid.
[10] Section 44107 of Ibid.
[11] Centers for Medicare & Medicaid Services. (2024). 2025 SSI, Spousal Impoverishment, and Medicare Savings Program Resource Standards. CMCS Informational Bulletin. https://www.medicaid.gov/federal-policy-guidance/downloads/cib11152024.pdf
[12] Section 44109 of U.S. House of Representatives. (2025) Subtitle D—Health. In Committee Print: Providing for reconciliation pursuant to H. Con. Res. 14, the Concurrent Resolution on the Budget for Fiscal Year 2025. https://d1dth6e84htgma.cloudfront.net/Subtitle_D_Health_ae3638d840.pdf.
[13] Section 44110 of Ibid.
[14] Section 44111 of Ibid.
[15] Section 44122 of U.S. House of Representatives. (2025) Subtitle D—Health. In Committee Print: Providing for reconciliation pursuant to H. Con. Res. 14, the Concurrent Resolution on the Budget for Fiscal Year 2025. https://d1dth6e84htgma.cloudfront.net/Subtitle_D_Health_ae3638d840.pdf.
[16] U.S. Congress. (2020). Families First Coronavirus Response Act, Public Law No. 116-127. https://www.congress.gov/116/plaws/publ127/PLAW-116publ127.pdf.
[17] Section 44131 of U.S. House of Representatives. (2025) Subtitle D—Health. In Committee Print: Providing for reconciliation pursuant to H. Con. Res. 14, the Concurrent Resolution on the Budget for Fiscal Year 2025. https://d1dth6e84htgma.cloudfront.net/Subtitle_D_Health_ae3638d840.pdf.
[18] Section 44133 of Ibid.
[19] U.S. Senate Committee on Finance. (2025). Budget Options. https://www.finance.senate.gov/imo/media/doc/budget_optionspdf.pdf
[20] Section 44132 of U.S. House of Representatives. (2025) Subtitle D—Health. In Committee Print: Providing for reconciliation pursuant to H. Con. Res. 14, the Concurrent Resolution on the Budget for Fiscal Year 2025. https://d1dth6e84htgma.cloudfront.net/Subtitle_D_Health_ae3638d840.pdf.
[21] Section 44134 of Ibid.
[22] Centers for Medicare & Medicaid Services. (2025, May 12). CMS moves to shut down Medicaid loophole—Protects vulnerable Americans, saves billions. https://www.cms.gov/newsroom/press-releases/cms-moves-shut-down-medicaid-loophole-protects-vulnerable-americans-saves-billions.
[23] Congressional Budget Office (2025) Estimates for Medicaid Policy Options and State Responses. https://www.cbo.gov/system/files/2025-05/Wyden-Pallone_Letter.pdf
[24] An 1115 waiver is a provision under Section 1115 of the Social Security Act that allows states to test new or innovative approaches in their Medicaid programs that differ from federal rules. These waivers give states flexibility to design and implement experimental projects aimed at improving care, expanding coverage, or controlling costs, while still receiving federal Medicaid funding. States must submit a proposal to the Centers for Medicare & Medicaid Services (CMS) and demonstrate that their plan promotes Medicaid’s objectives. Examples include expanding eligibility beyond traditional groups, altering benefit packages, or changing delivery and payment systems.
[25] Section 44135 of U.S. House of Representatives. (2025) Subtitle D—Health. In Committee Print: Providing for reconciliation pursuant to H. Con. Res. 14, the Concurrent Resolution on the Budget for Fiscal Year 2025. https://d1dth6e84htgma.cloudfront.net/Subtitle_D_Health_ae3638d840.pdf.
[26] Section 44141 of U.S. House of Representatives. (2025) Subtitle D—Health. In Committee Print: Providing for reconciliation pursuant to H. Con. Res. 14, the Concurrent Resolution on the Budget for Fiscal Year 2025. https://d1dth6e84htgma.cloudfront.net/Subtitle_D_Health_ae3638d840.pdf
[27] Congressional Budget Office (2025) Estimates for Medicaid Policy Options and State Responses. https://www.cbo.gov/system/files/2025-05/Wyden-Pallone_Letter.pdf
[28] Section 44142
[29] U.S. Senate Committee on Finance. (2025). Budget Options. https://www.finance.senate.gov/imo/media/doc/budget_optionspdf.pdf
[30] Federal Register (2024). Medicare and Medicaid Programs; Minimum Staffing Standards for Long-Term Care Facilities and Medicaid Institutional Payment Transparency Reporting. https://www.federalregister.gov/documents/2024/05/10/2024-08273/medicare-and-medicaid-programs-minimum-staffing-standards-for-long-term-care-facilities-and-medicaid
[31] Section 44121 of U.S. House of Representatives. (2025) Subtitle D—Health. In Committee Print: Providing for reconciliation pursuant to H. Con. Res. 14, the Concurrent Resolution on the Budget for Fiscal Year 2025. https://d1dth6e84htgma.cloudfront.net/Subtitle_D_Health_ae3638d840.pdf.
[32] Senate Finance Committee (2025). Budget Options. https://www.finance.senate.gov/imo/media/doc/budget_optionspdf.pdf