What Does the One Big Beautiful Bill Mean for Medicaid? Part 2

In my blog post last week, I reviewed some of the changes to Medicaid contained in the One Big Beautiful Bill (OBBB) that was signed into law earlier this month.  These changes are specific ones, such as imposing a work requirement for some Medicaid recipients (doesn’t apply to those receiving long term care Medicaid benefits) and requiring states in certain case to conduct redeterminations every 6 months instead of once a year.

Other changes are less direct in the sense that they may affect federal funding of Medicaid which is administered by each state.  States also carve out money from their own budgets to apply towards their Medicaid programs. So, if the federal government provides less funding, each state must increase their own contributions to make up the difference.  Alternatively, they can reduce the services or coverage they provide.

States impose what is called a provider tax on health care providers.  By raising the overall cost of services, this also raises the part that is reimbursed by the federal government, the federal matching funds.  OBBB freezes this provider tax so states can’t raise it in the future.  States are also prohibited from creating new provider taxes.  This provision will take effect beginning Fiscal Year 2026 which begins July 1, 2025.

For this reason, it becomes impossible to determine with any certainty how reductions in funding will impact Medicaid programs.  Responses will vary from state to state so we’ll just have to wait and see how New Jersey reacts.

As for any direct changes to the Medicaid nursing home programs there is one.  Under Medicaid rules a recipient’s home is an exempt asset but only up to a certain amount of equity ($1,097,000 in NJ in 2025).  The change now limits the equity exemption to $1,000,000 regardless of inflation.  In other words, the exemption won’t be adjusted year to year to account for inflation.