One Big Beautiful Bill Act - Healthcare
Medicaid, ACA, and Providers.
For those that are interested in the bill and want to review source material: One Big Beautiful Bill Act Language. If you are invested in healthcare related stocks, I implore the reader to go through the bullets I put forth as my general thoughts at the bottom are directly related to them. I did my best to convert legalese into something easier to understand.
The importance of this bill cannot be understated in current form. This is by no means an exhaustive list pertaining to OBBA impact to US Healthcare, but merely what caught my eye (for an exhaustive list, I direct you to the actual bill):
Medicaid
Eligibility
Sec. 44101 – Final Rule published Sept. 21, 2023, titled “Streamlining Medicaid; Medicare Savings Program Eligibility Determination and Enrollment” will NOT be implemented, enacted, administered or enforced prior to 2035.
Sec. 44102 – Final Rule published Apr. 2, 2024, titled “Medicaid Program; Streamlining the Medicaid, Children’s Health Insurance Program, and Basic Health Program Application, Eligibility Determination, Enrollment, and Renewal Processes” will NOT be implemented, enacted, administered, or enforced prior to 2035.
Sec. 44103 – Address Verification and Multi-State Enrollment Checks.
Establishing a system for the verification of addresses to prevent multiple state enrollment and implementing process to continually monitor address of Medicaid/CHIP recipients.
$10 million will be allocated for 2026 until expended.
20 million will be allocated for 2029 until expended.
Sec. 44104 – Removing Deceased Recipients.
Quarterly checks to disenroll Medicaid beneficiaries that have died with protections for those wrongly flagged as deceased.
Quarterly purging of the deceased on Medicaid rolls.
Sec. 44107 – Ending overpayment “good faith” waivers.
Currently state Medicaid overpayments are waived if they show a good faith effort, if OBBA is passed the states will face funding restrictions if eligibility or payment errors occur. This effort is to force states to be accountable for improper payments and fraudulent/negligent oversight of claims and eligibility.
Sec. 44108 & Sec. 44110 – Eligibility Redeterminations and Proof-of-Status.
Increases how frequently Medicaid enrollees’ eligibility is rechecked to “redetermine” if that person is eligible for Medicaid benefits.
Bars those with unverified immigration status from enrolling or being a beneficiary of Medicaid, states must verify this satisfactorily, or they will absorb the full cost of these beneficiaries.
Costs & Wasteful Spending
Sec. 44122 – Cutting Retroactive Medicaid Coverage.
Currently Medicaid will cover eligible medical claims retroactively for the 3 months prior to qualifying for Medicaid.
This section would require states to only cover care from the month before the application. The goal is to incentivize faster enrollment and reduce unpaid care for providers.
Sec. 44124 – Ending PBM Spread Pricing in Medicaid.
Mandates transparent pass-through pricing for PBMs participating in Medicaid managed care.
PBMs under this rule must charge the MCO or State the exact amount paid to pharmacies for drugs plus a dispensing fee, net of any spread.
PBMs can earn an administrative services fee for services performed in this capacity.
PBM must make “available to the State and the Secretary upon request in a form and manner specified by the Secretary, all costs and payments related to covered outpatient drugs and accompanying administrative services […]”
Abusive Financing Practices
Sec. 44131 – No Enhanced FMAP for New Expansion States.
Ends 90% federal match incentive for states that haven’t expanded Medicaid.
This will cause majority of the expansion of Medicaid to fall onto the state, current standard federal match is approximately ~55-75% as opposed to the enhanced FMAP of 90%.
Sec. 44132 – Provider Tax Moratorium.
Imposes moratorium on new or increased taxes that states currently use to fund Medicaid.
Keeps remaining taxes, however.
Personal Accountability
Sec. 44141 – Community Engagement Requirement for Applicable Individuals.
Requires community engagement for Medicaid enrolled adults that are not pregnant, elderly, or disabled. States offering Medicaid to said able-bodied adults must mandate these adults work or volunteer more than 80 hours per month or a combination of education, work, volunteering for 80 hours or more per month.
Non-compliance would result in losing coverage.
Affordable Care Act
Sec. 44201 – Enrollment Period Changes for Exchanges.
Shorter Open Enrollment window fixed on Nov 1 – December 15.
Eliminates the Low-Income 150% FPL SEP (previously mentioned in CMS proposed rule in from March 10, 2025.)
Tighter income attestation to ensure enrollees are qualifying for the correct amount of subsidy (if any).
Extra Health Related Matters
Sec. 44304 – Stopping Medicare Physician Fee Reductions.
Adjusts Medicare fee conversion factors.
Sec. 44305 – Modernizing and Ensuring PBM Accountability.
Mandates greater transparency and passes savings to consumers/plans.
Mandates starting July 1st, 2028 PBMs shall submit to the PDP sponsor and to the Secretary a report that covers:
All covered drugs, including brand name, generic, non-prop, and NDC.
Number of enrollees for whom drug was dispensed, total number of Rx claims for the drug, and total dosage units.
Dispensing channel metrics for each drug (retail, mail order, spec. pharmacy, home infusion).
Average Wholesale Acquisition Cost.
Average Wholesale Price.
Total out of pocket spending by plan enrollees.
Total Rebates paid by manufacturer.
All other direct remuneration or indirect remuneration on the drug.
Average NADAC (National Average Drug Acquisition Cost)
Manufacturer derived revenue attributable to the drug and retained by the PBM or subsidiaries.
Etc.
General Thoughts
Increased Medicaid redeterminations labeled in Sec. 44108 will allow for Sec. 44141 – Community Engagement to become a viable strategy. By increasing the quantity of redeterminations and the thoroughness of said engagements it will be easier for States and CMS to redetermine non-compliant individual off the plan.
Nothing regarding the ACA Sec. 44201 should come as a surprise to anyone that pays attention to CMS notices/proposed rules. As covered in my April 3rd post:
The rules are pretty similar if you scroll to the ACA section of the above article: reducing enrollment period, eliminating the 150% FPL SEP, and tighter income attestation verification.
One thing that strikes me is the mandated reporting in Sec. 44305. It is thorough and for all the right reasons. It’s hard to appreciate if you don’t have familiarity with the underwriting process for medical and pharmacy coverage, but most people would be stunned by how little data there really is for plan sponsors (even those that are self funded). Currently, the process is very cut and dry, if you are eligible you are given a claims feed for the period in question and you can use that when you market your Employer Sponsored Plan to other MCOs, but the level of granularity that Sec. 44305 requires is a huge step in the right direction. Most plan sponsors do not have access to this level of granularity and it will be hugely informative to their process when negotiating with both incumbent carriers as well as competing carriers. For larger plan sponsors who are self-funded under an ASO (administrative services only), having this level of granularity I would expect to see a reduction in ASO and a commensurate increase for to a fully carved out model where the plan sponsor can mix and match networks, stop loss providers, TPAs, and PBMs.
This bill is pretty remarkable, there’s a lot of stuff I like to be frank. There’s no reason we shouldn’t be extremely thorough and frequent with redeterminations, ensure we purge deceased Medicaid recipients from the rolls, force PBMs to be more transparent for plan sponsors, enforce personal accountability.
However, these are absolutely massive cuts, $793 Billion over 10 years estimated by KFF. The work reporting requirements would undoubtedly reduce Medicaid enrollments and the commensurate federal spending associated with those enrollments. The ACA changes probably impact 3-5 million individuals over the next decade, resulting in a loss of health insurance. KFF estimates 22 million people would be impacted by this. KFF. I can’t emphasize enough just how massive this would be to the providers that depend on “payor flow business",” i.e. business that relies on members of health plans to walk through the door and be consumer healthcare services. If you reduce the number of individuals with insurance there will be a reduction in earnings of the providers as well as the insurers that rely on these programs (ACA and Medicaid), of that I have no doubt.