State Medicaid systems are scrambling to prepare for painful cuts under the One Big Beautiful Bill Act, leaving private insurers with mounting financial pressure and state officials with few options for relief 16 months before the new policies take effect.
The megabill represents the largest cuts to Medicaid in its 60-year history — roughly $1 trillion — and while most of the changes won’t take effect until after next year’s midterm elections, the state-run programs are already facing a time crunch.
Matt Salo, the former executive director of the National Association of Medicaid Directors and CEO of the health consulting firm Salo Health Strategies, predicted many states will request delays.
“The real question is, will the administration grant that? Because it’s entirely up to the administration to say yes or no to that,” Salo added. “I might venture to say, you know, if you have 25 blue states coming in and saying, ‘Hey, give us two more years because we really need that much time,’ the administration might not be all that keen to grant it.”
Much of the cuts come from new, strict work requirements and restrictions on state-levied taxes on health providers, which account for a significant amount of revenue for states to fund their Medicaid programs.
Beginning on Jan. 1, 2027, the megabill will require that people who are not already working at least 80 hours a month be denied coverage. While many Medicaid enrollees will likely remain eligible for coverage under the new work requirement, many are expected to lose coverage because of red tape.
Caregivers with children aged 13 and younger, people with disabilities and pregnant people are among those who are exempted from this requirement.
States can, however, request a temporary delay in implementing the work requirements from the secretary of the Health and Human Services Department.
The administrative burden of meeting the 2027 deadline could further compound the coverage losses already expected to occur because of policy changes and additional paperwork.
“Given the timing, [it’s] a pretty fast requirement. This would involve significant challenge for states to implement,” Fred Blavin, senior fellow at the Urban Institute, recently said on the podcast “Hospitals in Focus.”
“Based on previous work requirements that were implemented in states such as Arkansas or Georgia, some other provisions on the Medicaid side would significantly increase the administrative burden on enrollment in Medicaid, which could adversely affect coverage,” Blavin said.
As Medicaid insurers try to prepare for the upcoming changes, they will have to factor in how these new policies will impact their projections. States will have to contend with the highly complex matter of identifying exempt populations and balancing their budgets.
“There tends to be kind of a decision tree that they go through when they need to figure out how to resolve budget imbalances or deficits,” Salo said.
States will likely first look at spending that is technically optional, such as Medicaid expansion and long-term care benefits. Other benefits that could be on the chopping block are adult dental care, optometry or podiatry, though they won’t save as much money.
Major Medicaid service providers are anticipating slower economic growth this year.
Centene, which offers Medicaid plans in about 30 states, withdrew its 2025 guidance this month after an independent analysis found market growth in 22 states was lower than expected and the ill health in those states was “significantly higher” than they’d assumed. This update caused Centene’s stock to immediately plunge by nearly 40 percent.
Molina Healthcare similarly lowered its 2025 expectations, saying this month it expects its adjusted earnings for the year to be $5.50 per share, which it described as “modestly below its prior expectations.”
Medicaid beneficiaries are already worried about how the “big, beautiful bill” will impact their coverage.
New polling by KFF found that 65 percent of people who are on Medicaid and younger than 65 said they think the bill will hurt them and their families. Overall, 46 percent of those in the poll said they think the bill will harm them, 26 percent think it will help and 28 percent don’t think it will make much of a difference.
According to an analysis by KFF released before the bill was signed into law, six states are at particular risk as a result of Medicaid spending reductions: Kentucky, Mississippi, Missouri, New Mexico, South Carolina and West Virginia.
There are already efforts in Congress to pull back on some of the changes to Medicaid included in the bill.
Missouri Sen. Josh Hawley (R), one of the loudest GOP opponents to the bill on account of its Medicaid provisions, introduced legislation to repeal some parts of the bill, which he ultimately voted for. His bill would repeal provisions that limit states’ ability to levy taxes on health providers to receive more money from the federal government.
It would also repeal a cap on state-directed payments, which allow states to direct how providers are paid by privately run, managed care plans.
“I want to see Medicaid reductions stopped and rural hospitals fully funded permanently,” Hawley said.
The Federation of American Hospitals has put its backing behind Hawley’s bill.
“By introducing S. 2279, you rightly acknowledge that hospitals cannot maintain essential health care services if the provider tax and state directed payment (SDP) changes in [the bill] are implemented. SDPs and provider taxes provide critical sources of revenue that allow states to support hospitals that disproportionately serve Medicaid patients,” the organization wrote in a letter to Hawley.
A policy response from Medicaid providers and groups has not come out yet. The sort of relief that Medicaid programs call for in response to the added pressures from the megabill will depend on how the Centers for Medicare and Medicaid Services chooses to interpret the provisions of the bill.
For experts like Salo, the current outlook on relief is bleak.
“I don’t know that there’s much, to be honest. I think things have to get worse before they are to get better,” Salo said. “I don’t see a legitimate pathway for significant relief in the short term.”
“Are the Democrats going to want to let the Republicans off the hook for all these cuts? I think the answer is no. Are the hard-line conservative budget folks in the GOP going to want to go and increase the deficit debt again after having just passed [the bill] and doing hundreds of billions of more spending? I just don’t see any of that in the near term.”
