How the Senate Reconciliation Bill Would Impact Health Care

Author: Manatt Health

Overview

On June 16, the Senate Finance Committee its reconciliation legislation. The Senate Finance Committee has jurisdiction over tax policies, including the Affordable Care Act (ACA) Marketplaces' tax subsidies, and health programs under the Social Security Act, including Medicare, Medicaid and the Children’s Health Insurance Program (CHIP). As such, the 549-page draft includes a broad swath of the GOP’s reconciliation policies.

Overall, the Senate bill’s health policy provisions retain the core elements of the House-passed reconciliation bill—H.R. 1, the One Big Beautiful Bill Act— but also adopt significantly deeper Medicaid cuts.

Medicaid

Mirroring much of the House-passed legislation, the Senate Finance Committee text would make profound changes to Medicaid that would dramatically cut funding and restrict access to health care through the program. Compared to the House language, the Senate included major changes to Medicaid provisions related to provider taxes, state-directed payments (SDPs), Medicaid work requirements and coverage for noncitizens.

Provider taxes: The Senate bill makes a significant change to the House-passed bill’s provider tax provision by layering on top of the moratorium on new or increased provider taxes from the House bill a reduction in the 6% cap down to 3.5% for expansion states only. Expansion states will see their 6% cap decline by 0.5 percentage points per year beginning in federal fiscal year 2027, though skilled nursing facilities and intermediate care facilities are exempt from this cap ramp down.

SDPs: The Senate bill sharply diverges from the House bill with respect to SDPs in expansion states. Under the Senate language, expansion states would need to reduce their SDPs by ten percentage points per year beginning in 2027 until the SDPs were no greater than 100% of Medicare. The Senate language retains the House’s cap on new directed payments of 100% of Medicare for expansion states and 110% of Medicare for non-expansion states.

Work requirements: The Senate Finance Committee bill retains the basic structure of the House-passed work requirements, including the ban on access to subsidized marketplace coverage for those who lose Medicaid, but it makes some modifications that will impact the provision’s implementation and exemptions. First, the Senate version maintains the expedited January 1, 2027 implementation date added at the last minute in the House, and clarifies that states can implement earlier via a section 1115 demonstration. However, it also permits states to—pending approval by the Secretary—request an implementation delay of up to two years through December 31, 2028, as long as the state demonstrates a “good faith effort” to come into compliance and meets new reporting requirements.

The Senate bill makes additional changes to the compliance and exemptions provisions included in the House-passed bill, including by limiting the exemption from work requirements for parents, guardians, caretaker relatives or family caregivers to individuals with dependent children 14 years or younger (no age limit for dependent children was defined in the House-passed bill); giving states flexibility to determine mandatory exemptions without requiring individuals to verify the underlying information; establishing an additional “short-term hardship” exemption for people traveling for an extended period to access medically necessary care for a serious or complex medical condition that is not available in the individual’s community; limiting the look back period for demonstrating compliance up to three months prior to application; and prohibiting states from using contractors (e.g., Medicaid managed care plans, prepaid inpatient health plans) to determine whether enrollees are complying with the work requirements, unless the contractor has no financial relationship with the health plan providing the enrollee’s Medicaid coverage.

Noncitizen coverage provisions: The Senate bill makes three significant changes to the House bill regarding health coverage for noncitizens. First, in a new provision, the Senate bill would end the availability of federal Medicaid funding for certain groups of lawfully residing noncitizens who have been covered through Medicaid for decades, including refugees, asylees, and victims of human trafficking (although states would retain the option to cover children and pregnant people with these statuses). Second, with respect to emergency Medicaid, the Senate bill provides that states will see their federal Medicaid match (the Federal Medical Assistance Percentage or “FMAP”) cut to their regular FMAP for emergency services provided to certain noncitizens who currently qualify for an enhanced rate. Finally, with respect to the House-passed FMAP penalty for expansion states that have programs that provide health coverage to certain types of noncitizens, the Senate bill clarifies that states will not receive an FMAP reduction for providing any form of coverage required by federal law, any form of coverage (including state-funded coverage) to qualified noncitizens (including humanitarian parolees), or federally funded coverage to lawfully residing children and pregnant women in Medicaid or CHIP.

Marketplace

The Senate Finance Committee’s language on premium tax credit (PTC) eligibility would make it harder to enroll and re-enroll in coverage and limit immigrant eligibility for PTC, significantly decreasing the number of individuals receiving PTC and covered by the Marketplace. Provisions to do so include ending automatic re-enrollment and the ability to receive advance payments of the PTC (APTC) with a pending application. A newly added provision would explicitly allow the Marketplace to use electronic data that is available to it or data from a reliable third-party source to determine eligibility through the reverification process. In addition, another change would allow the Secretary to waive the inability to receive APTC while verification is pending for an individual who enrolls in the Marketplace through a special enrollment period (SEP) for a change in family size.

The other committee with health jurisdiction—the Senate Health, Education, Labor, and Pensions (HELP) Committee— its reconciliation proposal on June 10. While the Finance Committee has jurisdiction over the tax policies associated with the ACA, the HELP Committee has primary jurisdiction over the Marketplaces. Its , however, only included one section (Section 87001) appropriating cost-sharing reductions (CSRs) for plans, beginning in 2026, except for those that provide non-Hyde abortion coverage.

Notably, the Senate language does not include many of the Marketplace elements of H.R. 1. Among the many provisions in H.R. 1 that are not included in the Senate Finance or HELP Committee language are: limiting open enrollment periods and SEPs, lowering the permissible actuarial values of Marketplace plans, restricting gender-affirming care as an essential health benefit, creating the Custom Health Option and Individual Care Expense Arrangement (CHOICE) to allow employers to contribute to the purchase of individual market coverage and various private insurance and health savings account provisions. These omitted provisions may return at a later stage in the legislative process. 

Medicare

While the Medicare provisions in H.R. 1 were relatively brief, most of them have been stripped from the Senate Finance Committee proposal. This includes the modified exception for orphan drugs under the Medicare Drug Price Negotiation Program, the Physician Fee Schedule conversion factor update and all of the Medicare Part D pharmacy benefit manager policies. The bill does, however, retain the provision to restrict immigrant eligibility.

Next Steps

Over the course of the week, Senate staff will continue discussions with the Senate Parliamentarian to ensure that the policies adhere to the Congressional Budget Act’s Byrd rule (a process called “the Byrd Bath”). Under the Byrd rule, Senators are able to challenge provisions that are “extraneous”—in other words, provisions that have no federal budgetary effect or have budgetary effects that are far outweighed by their policy implications. While the omission of some of the House-passed policies in the Senate Finance Committee text may reflect Byrd rule considerations, there are likely to be additional changes to the Senate text as the Byrd Bath continues.

In addition to the changes required by the Byrd rule, the absence of a number of policies pertaining to the ACA Marketplaces seems to preview additional—and potentially significant—changes to the health policies in the Senate bill. Since the Senate is bypassing the committee markup process and does not have to go through a committee like the House Rules Committee before consideration on the Senate floor, it is widely expected that a substitute amendment will be unveiled shortly before Senate floor activity begins. As such, members will have a truncated timeline to fully grasp these policy changes.

The current targeted date for Floor consideration is Tuesday, June 24.