Jun 26 Reconciliation Update and Medicaid Policy Impact

(June 26, 2025)

The budget resolution bill, which includes reconciliation instructions, continues to progress in Congress after a version of the bill, known officially as the “Big Beautiful Bill Act,” passed in the House. The Senate recently moved the bill through committees, with hopes of completing the Congressional process and getting the legislation on the President’s desk by the July 4 holiday.

Currently, the Senate is undergoing the “Byrd Bath” process, where Congress reviews provisions to ensure compliance with the Byrd Rule, which governs the reconciliation process. The questionable provisions are ruled on by the Senate Parliamentarian, who makes the final call. When reviewing the bill, the Parliamentarian will be looking at specific criteria, including does the bill have a budgetary effect, does that effect align with the budget resolutions reconciliation instructions, does the bill increase the federal deficit beyond year 10, and does the bill impact Social Security. These rulings may lead to some revisions to the text of the bill, which continues to occur up to and including the time that the bill is on the Senate floor. Once the Senate finalizes and passes the consolidated bill, it then needs to get back to the House for their agreement.

The Senate Bill’s Unique Medicaid Provisions

The most recent proposal for Medicaid provisions is from the Senate Finance committee. Several Medicaid provisions in the Senate proposal could have a significant impact on health coverage for children in PA. Some of the proposals mirror the House-passed version, such as increasing the frequency of eligibility redeterminations. However, there are also a few ways that the Senate bill stands to uniquely impact children’s health.

The Senate proposal stands out through restricting Medicaid state financing rules. For states that expanded Medicaid, which includes Pennsylvania, the Senate draft would reduce the maximum amount of provider taxes. States tax providers, including hospitals, up to 6% of net patient revenues. Many expansion states have hospital, MCO and ambulance taxes above 5%. Under the proposal, provider taxes would be walked back from 6% to 3.5% by 2031. Restricting the use of provider taxes would significantly cut state funding for Medicaid. States that have not expanded Medicaid would get to keep their rates the same, and taxes on nursing homes and intermediate care facilities are also exempt from the rate change. The provider tax rule provision is likely to change given the recent Senate Parliamentarian ruling that it is not in compliance with the Byrd rule. The proposal would also reduce state-directed payments (SDPs) in expansion states. SDPs are helpful for hospitals that rely on Medicaid patients by helping fund operations and essential care in underserved communities.

Medicaid cuts proposed by each chamber include adding work requirements for “able-bodied” adults between the ages 19-64 without dependents, which is essentially the Medicaid Expansion population. However, the House and Senate provisions look a bit different. One key difference is that the House bill allows for exemptions to all parents with children, and the Senate bill focuses on exempting parents only with children 14 and under. Another key difference is that the House bill proposes that the work requirements be met 1 month prior to application, while the Senate bill proposes 3 months.

How Senate and House Proposals Would Impact Families and Communities

These proposals will impact individuals’ access to health coverage, but it will also impact our communities by reducing federal funding for states, impacting state budgets as well as local hospitals and health clinics.

Reducing states’ flexibility to fund their Medicaid programs, such as reducing state directed payments and penalizing Medicaid expansion states, means more people will be left uninsured. People without health insurance still get sick, and hospitals are legally required to treat emergency cases. This would also hit providers that operate on thin margins the hardest – including children’s hospitals.

An increase in the number of uninsured will increase the amount of uncompensated care that hospitals need to cover. Uncompensated care involves services provided by healthcare providers where they do not receive payment from patients/insurers: This includes charity care, which nonprofit hospitals are required to provide as a condition of their tax-exempt status, and services where payment was expected but not received. When uncompensated care increases, providers are then bound to shift the costs they can’t cover to those who pay for services, which would raise the cost of care for all. As uncompensated care rises, states will need to pick up the costs or many hospitals are at risk for closure. In Allegheny County, an analysis by Pennsylvania Health Access Network (PHAN) found that UPMC Magee Women’s Hospital, UPMC McKeesport, and UPMC Mercy could all be at moderate to severe risk of closure if these Medicaid proposals are enacted.

In rural areas, sustaining health care is a challenge across the country. Since children in small towns and rural areas are more likely to utilize Medicaid and CHIP, populations in rural areas of Pennsylvania could be disproportionately impacted by policies that cut Medicaid funding to hospitals. Those in rural areas already have greater challenges accessing needed health services compared to urban areas. This includes significant provider shortages, lack of internet access, and challenges with distance to and lack of transportation to health care. As the Senate version of the bill text gets finalized, some Senators are proposing a stabilization fund for rural hospitals.

Work requirements will lead to coverage losses. Work requirements are a big element in both of the bills, though they vary slightly in the House and the Senate. More than 92% of people who use Medicaid are either already working, are chronically ill/disabled, caregiving, or attending school. Through state imposed work requirements, we have some evidence that additional reporting, confusing rules, and complex red tape resulted in significant coverage losses for children and families. In Arkansas, when work requirements were implemented, 18,000 Medicaid enrollees lost their coverage within the first seven months (soon after, a court order halted the program due to COVID-19).

Low income workers are more likely to have unstable or seasonal jobs without health coverage, and these provisions would put them at greater risk for losing coverage, especially during these periods of unemployment. These families are also more likely to lose coverage due to the increased paperwork burden. The Congressional Budget Office (CBO) estimated that the House passed bill would cut 5.2 million adults from Medicaid.

Many proposed cuts target the Medicaid ACA expansion group, which includes parents and caregivers. States are also at risk of losing jobs if Medicaid Expansion were eliminated. Research shows that when parents and caregivers lose coverage, so do their children. It’s also estimated by PHAN that Pennsylvania would lose over 61,000 jobs – 28,000 in healthcare and 33,000 in other sectors – if the bill eliminated Medicaid Expansion.

Overall, even where policies may not impact children directly, an estimated 1 in 5 children’s Medicaid coverage is at risk with significant Medicaid cuts. The proposals shift costs to states, which will require tough budget decisions at the state level, and it is challenging to predict what the ultimate consequences will be; however, cuts to our public benefits programs will eventually impact the most vulnerable individuals, including children, in the long term. Both Chambers’ versions of the Medicaid cuts, whether House or Senate, will decrease Medicaid coverage across the state. The Center for Budget and Policy Priorities has estimated that the Senate bill would put up to 14.8 million people at risk of losing Medicaid coverage in 2034, which is up to 380,000 more people than under the House version.

To advocate for Medicaid funding, visit: https://familiesusa.org/defending-medicaid/

Cristina Codario, Allies for Children Policy Director