Medicaid cuts would squeeze provider pay, CBO says

Modern Healthcare – Tuesday, June 24, 2025
By Michael McAuliff

States would be forced to reduce provider reimbursements to cope with the Medicaid cuts in the One Big Beautiful Bill Act of 2025, the nonpartisan Congressional Budget Office concludes in an analysis issued Tuesday.

The legislation, which passed the House last month and which President Donald Trump and Senate GOP leaders are hurrying to finish as soon as this week, would reduce federal Medicaid spending by more than $800 billion over 10 years, in part by restricting provider taxes that states use to help cover their Medicaid expenses.

In a letter sent to House Budget Committee Chair Jodey Arrington (R-Texas) and House Energy and Commerce Committee Chair Brett Guthrie (R-Ky.) — leading supporters of the legislation — the CBO reaffirms earlier estimates that the bill would cause 7.8 million people to become uninsured.

In addition to reducing provider payments, states would likely have to cut back on optional Medicaid benefits and strive to keep enrollment down, the CBO concludes.

The independent legislative branch agency elaborates on its previous assessments of the House-passed bill and offers new projections about how states would respond to significantly lower federal support and limitations on how they raise revenue.

The CBO identifies provisions of the One Big Beautiful Bill Act that would have the greatest impact on states, hospitals, physicians and other healthcare providers. The analysis does not address the sections of the Senate bill produced by the Finance Committee, which calls for even stiffer restrictions on provider taxes.

The House bill would freeze current provider taxes and raise the bar for federal approval of future levies. The legislation also would reduce federal Medicaid funding for states, such as California, Illinois and Minnesota, that use state revenue to cover undocumented immigrants and would bar the Centers for Medicare and Medicaid Services from waiving penalties for “good-faith” billing errors.

“CBO expects that in response to those provisions, states would modify their Medicaid or state-funded insurance programs to curtail their spending by reducing provider payment rates, reducing the scope or amount of optional services, and reducing Medicaid enrollment,” CBO Director Phillip Swagel wrote.

States would reduce their Medicaid rolls by about 2 million people as a consequence, the CBO projects.

The Medicaid provisions of the bill that include work requirements for many adults, more stringent eligibility reviews and the end of state-run programs for undocumented immigrants would reduce state expenditures by $214 billion, the CBO estimates. Yet $201 billion in federal budget cuts would compel states to tap into their own resources to make up some of the difference, according to the analysis.

The CBO predicts that 4.8 million Medicaid enrollees subject to work requirements would lose coverage, as would 2.2 million people who fail to navigate the eligibility determinations process and 1.4 million who wouldn’t qualify because of their immigration status. That totals more than 7.8 million because about 600,000 people stand to lose benefits for more than one reason.

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