Debate over the One Big Beautiful Bill Act (OBBBA) of 2025 has eased in Washington, but its impact on providers, hospitals, and healthcare systems may not be fully realized for years to come. Extensive press coverage of OBBBA has explored various angles, from financial planning to education and healthcare, leading to a better understanding of its long-term impact on the healthcare industry.
Reductions to social programs under the OBBBA are slated to be introduced gradually, phasing in over three years. The ultimate impact on healthcare providers will vary significantly depending on their funding, specialty, and procurement system. Particularly important will be their patient mix; organizations serving a higher proportion of Medicaid or Medicare beneficiaries are likely to feel the effects sooner and more acutely, while those with more commercially insured populations may experience a slower or less pronounced shift.
Some projections project a significant drop, upwards of 8% or more, in net operating margin for healthcare providers, depending on their patient mix, revenue volume, and grant exposure.
The bill will drastically change the healthcare playing field, roiling budgets and injecting new uncertainty into healthcare providers’ planning process. As healthcare leaders prepare their organizations for these changes in the healthcare landscape, here’s how the legislative changes in the bill may impact your organization.
Both expansion and non-expansion states will suffer
States that chose to expand Medicaid under the Affordable Care Act (ACA) (“Expansion States”) will be impacted more profoundly by OBBBA provisions. For example, starting in 2026, expansion states shoulder the administrative burden of enforcing Medicaid work requirements for enrollees and twice-yearly eligibility checks. Beginning in 2028, a phased 4% cap will apply to provider taxes, reduced from the previous 6% under pre-OBBBA regulations. These taxes are used to finance the state’s share of Medicaid programs.
Non-expansion states are impacted to a lesser degree, as fewer individuals as a percentage of the overall population were eligible under pre-OBBBA rules. In these non-expansion states, the Medicaid population will retain annual eligibility checks, and the existing cap on provider taxes will remain unchanged. Despite this, a reduction in overall Medicaid spending is anticipated, which is expected to negatively affect state budgets and lead to coverage loss for some low-income residents.
Medicare stays unaffected…for now
According to the Balanced Budget and Emergency Deficit Control Act of 1985, sequestration (automatic, across-the-board-spending cuts) is required, unless Congress waives them. Tax legislation in the OBBBA, adding an estimated $4.1 trillion to the national debt, could have triggered these provisions. However, the stopgap spending bill, enacted on November 12, served to temporarily maintain key federal operations and avoid significant disruptions, including a looming $536 billion reduction in Medicare spending. This major provision waived the automatic Medicare cuts that had been triggered under the Statutory Pay-As-You-Go (PAYGO) Act.
Beyond the health provisions, the legislation provided funding for various federal agencies. The Department of Health and Human Services (HHS) received temporary funding extensions until January 30. While the stopgap measure avoids immediate disruptions and averts a significant Medicare cut over the coming years, industry leaders argue that more decisive, long-term action is needed.
Rising numbers of uninsured increase strain on healthcare systems
The Affordable Care Act (ACA), enacted in 2010, was designed to broaden access to health insurance for previously uninsured Americans. The legislation has been the subject of continuous policy debate since its inception.
Under the OBBBA provisions, the reduction of funding and limits on tax credits associated with ACA insurance policies are projected to contribute to premium increases for many Americans in 2026. Simultaneously, OBBBA introduces new requirements for enrollment, making the process of proving eligibility more complex.
The combined effect of these changes to the ACA is projected to reverse some prior coverage gains, potentially leading to an increase in the number of uninsured individuals, whose inability to pay for services as a private pay patient could further intensify financial pressures within a health system.
Research funding cuts create yet more financial demand
Changes in funding levels have presented significant challenges for the biomedical research community. The reduction or elimination of numerous grants has led many universities and medical centers to pause or postpone clinical trials.
Beginning in 2025, a new federal policy introduced a 15% cap on the indirect costs associated with research grants. These costs, which cover essential infrastructure and overhead rather than specific project tasks, were historically negotiated institutionally. Proponents of the cap argue that because these funds aren’t tied to specific project costs, they are prone to waste, abuse, and fraud. However, critics warn that such a strict limit may severely restrict the resources needed to comply with evolving federal requirements, potentially hindering healthcare providers’ ability to manage future grants effectively, given the high administrative burden involved.
340B
The 340B Drug Pricing Program is undergoing significant policy changes that modify hospital eligibility criteria and alter reimbursement structures. Because 340B eligibility is partially determined by Medicaid inpatient days and Disproportionate Share Hospital (DSH) percentages, it is estimated that upwards of 10% of currently eligible hospitals could fall below the new required thresholds.
Proposals from the Centers for Medicare & Medicaid Services (CMS) and new legislative directives are advancing the timeline for hospitals to fulfill their obligation to repay 340B discounts. Organizations with a high reliance on 340B revenue to subsidize uncompensated care for uninsured and underinsured patients face the greatest financial sensitivity to these changes. The comprehensive impact on provider net margins is projected to occur in 2027.
Impact of other proposed legislation and executive orders
The implementation of new tariffs on U.S. imports from various trading partners is impacting sectors with high import dependence, such as medical devices, supplies, pharmaceuticals, and raw inputs. While these policy changes are immediate, the total effect on healthcare is not anticipated until 2027, due to the inherent delays in policy and procurement cycles. However, the exact timing will differ significantly based on an individual provider’s dependence on imported supplies and their exposure to countries subject to higher tariffs.
How can Providers respond
While the changes as outlined above are projected to shift significant amounts within the U.S. healthcare system away from federal funding sources, there are some areas healthcare providers can focus on to manage the impact of these policies:
- Operational optimization through AI
- Intelligent Scheduling
- Ambient Documentation (auto-generated medical notes, etc.)
- Predictive Staffing & Bed Management
- Patient encounter sequencing
- Billing and revenue cycle management
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- Claim Processing & Denial Management
- Revenue Cycle Management Optimization
- Patient Engagement & Billing Transparency
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- Patient access and navigation support
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- Enrollment Assistance & Care Navigation
- Preventative Outreach
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- Provider resource collaboration & focus
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- Elimination of duplicative services
- Focus on more profitable service lines
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- Stakeholder improvement
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- Corporate sponsors
- Political representation at the federal, state, and municipal levels
- Insurance provider relationships
Face a changing healthcare economy with confidence
The difficult reality is that OBBBA and other government policies put the financial sustainability of many healthcare providers and hospital systems at risk. Navigating this evolving landscape requires a highly specific, strategic approach that can flex as conditions change. Turn to the healthcare experts at Mauldin & Jenkins. We offer the deep industry knowledge and nuanced guidance your organization needs to thrive.
