Federal domestic policy act makes substantial changes to Medicaid

Resident Commissioner Pablo José Hernández Rivera (Facebook via Pablo José Hernández Rivera)

By The Star Staff

Resident Commissioner Pablo José Hernández Rivera said in a statement over the weekend that the “One Big Beautiful Bill Act” maintains, without cuts or restrictions, Medicaid and the Nutrition Assistance Program (known locally as PAN by its acronym in Spanish) funding for Puerto Rico, ensuring the continuity of those essential benefits for thousands of families on the island.

However, an examination of the text of the new law -- House Resolution (H.R.) 1 -- lists several changes. The sweeping domestic policy bill, which President Trump signed into law last Friday, imposes new requirements states must meet to maintain federal support for Medicaid programs, as well as more strict criteria beneficiaries must meet to qualify for and maintain enrollment in federal healthcare programs.

For instance, able-bodied adults must affirm monthly that they spend no less than 80 hours per month working, participating in a work program, completing community service, participating in an educational program or participating in a combination of those activities. Exceptions are made for certain individuals including those under 19 years of age and individuals experiencing certain short-term hardship events.

The act prevents certain non-citizens from enrolling in or receiving benefits under Medicaid/CHIP and requires states to complete quarterly reviews of death master files to verify deceased beneficiaries and providers do not remain enrolled in Medicaid programs. Eligibility redeterminations will be conducted every six months, starting on or after Dec. 31, 2026.

To prevent dual enrolment, states are required, beginning not later than Oct. 1, 2029, to submit to the U.S. Department of Health and Human Services (HHS) secretary information to determine whether an enrollee continues to be eligible for Medicaid and prevent dual enrollment of individuals in multiple Medicaid programs. Funding of $30 million for implementation is provided, including $10 million for fiscal year (FY) 2026 to establish the system and an additional $20 million for FY 2029 to maintain the system.

The new law also limits payments to “Prohibited Entities.” No federal funding may be used to make payment to prohibited entities, including 501(C)(3) nonprofit organizations, essential community providers primarily engaged in providing family planning services, reproductive health or related services, or entities that provide abortions except under certain circumstances.

Beginning Oct. 1, 2028, states must impose cost-sharing requirements or levy similar charges totaling no more than $35 for certain services, care or items furnished to Medicaid enrollees, excluding primary care, mental health, substance use disorder services, or services provided by federally qualified health centers, certified community behavioral health centers or rural health clinics. Cost-sharing may not exceed 5% of a family’s income.

Currently, a Medicaid Direct Payment Program (DPP) can pay providers up to average commercial rates. The bill establishes a new cap on those rates at 100% of Medicare payment rates for Affordable Care Act (ACA) expansion states and 110 percent for ACA non-expansion states. However, the bill has language that would grandfather DPPs that meet certain submission/approval deadlines.

Current law allows provider taxes up to 6% of provider revenues. Starting in 2028, the bill limits provider taxes in ACA expansion states (that have an enacted provider tax as of the date of enactment of the bill) through a gradually decreasing cap – from 5.5% of net patient revenues in 2028 down to 3.5% by 2032. Non-expansion states will be prohibited from imposing new provider taxes in certain situations but are not subject to the graduated step down to a 3.5% cap.

The bill also contains provisions preventing states from designing tax structures that are based on unit measures of Medicaid, thereby directly impacting seven states that have enacted provider taxes that are assessed based on managed care organization managed care revenues and will likely prohibit future approaches based on Medicaid revenue metrics.

Beginning Jan. 1, 2027, the HHS secretary may not approve an application to begin or renew a demonstration project under Section 1115 unless it is budget neutral. The act prevents certain noncitizens from receiving premium tax credits to reduce the cost under Medicare.

The Inflation Reduction Act exempted orphan drugs – medicines designed to treat rare diseases – from being subject to the Medicare Drug Price Negotiation Program if the drug was intended to treat only a single indication or condition. H.R. 1 expands the exemption to include orphan drugs approved for more than one rare disease starting in 2028.