Congress Passes Tax and Immigration Bill, with Massive Medicaid Cuts

On Thursday afternoon, July 3, the House of Representatives passed its tax and immigration bill, after dramatic twists and turns through the House itself, and then the Senate, and then back again in the House. The bill will slash Medicaid and create other major disruptions for healthcare consumers and for the U.S. healthcare system. As the Washington Post’s Jacob Bogage and Marianna Sotomayor wrote on Thursday afternoon, “Republicans on Thursday notched the first major legislative victory of President Donald Trump’s second term, a mammoth tax and immigration agenda the GOP hopes will reshape the U.S. economy and unwind many of the Biden administration’s accomplishments. The House, in a 218 to 214 vote, passed Trump’s so-called ‘One Big Beautiful Bill,’ a $3.4 trillion measure to extend tax cuts from Trump’s first term and implement new campaign promises — such as eliminating income taxes on tips and overtime wages — while spending hundreds of billions of dollars on immigration enforcement and defense. It raises the country’s borrowing cap by $5 trillion, staving off a debt default that the Treasury was weeks away from breaching. The House’s approval sends the bill to Trump’s desk to be signed into law in time to beat a self-imposed July 4 deadline. The Senate passed its edition of the legislation Tuesday.”

As Bogage and Sotomayor noted, “To offset the cost of the bill, the legislation cuts about $1 trillion from Medicaid, the federal health insurance program for low-income individuals and people with disabilities, and other health care programs. It reduces spending on anti-hunger programs, including SNAP, the Supplemental Nutrition Assistance Program formerly known as food stamps, by $185 billion. Nearly 17 million people will lose health care coverage or health care subsidies over the next decade if the bill becomes law, according to the nonpartisan Congressional Budget Office, and the bill would add roughly $4 trillion to the debt over the next decade, when factoring in debt service payments.”

The New York Times’s Michael Gold, Robert Jimison, and Megan Mineiro reported that “The final vote, 218 to 214, was mostly along party lines and came after Speaker Mike Johnson spent a frenzied day and night toiling to quell resistance in his own ranks that threatened until the very end to derail the president’s signature measure. With all but two Republicans in favor and Democrats uniformly opposed, the action cleared the bill for Mr. Trump’s signature, meeting the July 4 deadline he had demanded. The legislation extends tax cuts enacted in 2017 that had been scheduled to expire at the end of the year, while adding new ones Mr. Trump promised during this campaign, on some tips and overtime pay, at a total cost of $4.5 trillion. It also increases funding for defense and border security and cuts nearly $1 trillion from Medicaid, with more reductions to food assistance for the poor and other government aid. And it phases out clean-energy tax credits passed under former President Joseph R. Biden Jr. that Mr. Trump and conservative Republicans have long decried. Also included is a $5 trillion increase in the debt limit, a measure that Republicans are typically unwilling to support but that was necessary to avert a federal default later this year.”

And The Hill’s Mike Illis, Mychael Schnell, and Emily Brooks wrote that “The overwhelming Republican support was a reflection of both the enormous appetite within the GOP for extending their 2017 tax cuts, and a demonstration of Trump’s immense grip on his party, where loyalty to the president is presumed and defectors risk a career-ending political backlash. The legislation combines virtually all of the major campaign planks of Trump’s domestic policy platform. In addition to extending the 2017 tax cuts of Trump’s first term, it expands those cuts to eliminate some taxes on tips and Social Security and increase the state and local tax (SALT) deduction cap, which had emerged as one of the thorniest sticking points throughout negotiations.” What’s more, The Hill’s reporters noted, the legislation “features sharp cuts to low-income health and nutrition programs — reductions designed to help offset the loss of revenues from the tax cuts but that are also expected to eliminate health coverage for millions of people. Even so, the cuts aren’t steep enough to cover the whole tab: The Congressional Budget Office estimates the net effect of the package will be an additional $3.3 trillion in deficit spending over the next decade.”

Immediately after passage of the bill, Anders Gilberg, senior vice president, government affairs, at the Englewood, Colo.-based Medical Group Management Association (MGMA), released a statement, in which he said that ““Today's Congressional passage of the One Big Beautiful Bill Act (OBBBA) paints a grim future for America's physician practices by stripping healthcare coverage from millions of Americans. While MGMA supports meaningful healthcare reform, it is not in the best interest of patients or providers to rescind coverage for 11.8 million people without providing an alternative pathway to receiving care. Make no mistake, these beneficiaries are not going anywhere. They will still find care in our US healthcare system. Only now, under the OBBBA, medical groups and hospitals will be left picking up the enormous tab. With these historic Medicaid cuts, dedicated physicians and medical practices committed to providing care in our country's most underserved areas will face growing financial burdens as they are forced to offer more and more uncompensated care. While we appreciate the inclusion of a one-year Medicare conversion factor increase for 2026, physician practices are still dealing with the detrimental consequences of this year's 2.83-percent cut, and a future one-year adjustment fails to provide long-term financial stability for practices. If the administration's commitment is to make America healthy, it must work with Congress to ensure both practices and physicians have the wherewithal to continue providing healthcare for all Americans,” Gilberg said.

Gilberg’s statement, and those of other healthcare associations and organizations that flooded out immediately after the bill’s passage echoed statements made as it was making its way through the House and Senate. Indeed, virtually all national-level associations and organizations representing healthcare providers and healthcare consumers had already lined up to oppose the legislation’s key provisions as it made its way through the House, then the Senate, and back again to the House. As Healthcare Innovation reported on July 1, when the bill passed through the Senate, “On June 25, leaders of the American Medical Association came out strongly against the bill. Kevin B. O’Reilly, a senior news editor at the AMA, wrote that “The AMA is expressing concerns about the Senate budget-reconciliation bill, citing cuts to Medicaid and Children’s Health Insurance Program (CHIP) funding and changes in eligibility criteria that will reduce patients’ access to care and affect physician practices’ viability, particularly in rural and underserved areas. Additionally, the AMA pointed to the exclusion of the House-passed effort to connect Medicare physician payment to the cost of running a practice.” And he quoted Bobba Mukkamala, M.D., the AMA’s president, and a practicing otolaryngologist in Flint, Mich., as stating that “Patients across the country are already struggling to access care. Physician burnout, early retirements and—with the cost of running a practice constantly rising—the challenge of keeping a practice financially afloat are contributing to a physician shortage expected to reach 86,000 by 2036.”

Healthcare Innovation also noted in its July 1 report that, “Similarly, leaders at the Alexandria, Va.-based American Medical Group Association (AMGA) had expressed alarm prior to the Senate’s passage of the bill, with Jerry Penso, M.D., AMGA’s president and CEO stating on June 17 that ‘Patients who are dropped from Medicaid will forgo care until they show up in our already overcrowded and strained emergency departments. Cuts of this magnitude will only result in fewer services, fewer providers, and the closure of healthcare facilities. This proposal not only will devastate the ability of medical groups and integrated delivery systems to provide care to their Medicaid patients, but also will have far-reaching ramifications beyond the Medicaid population.’”

And AMGA noted that a recent member survey found that 85 percent of its member physician organizations would be forced to eliminate services for Medicaid patients, with 51 percent saying they would have to reduce pediatric care and 47 percent saying they would have to cut maternity services, while 72 percent anticipated layoffs or furloughs. And, referring to the provision involving ongoing cuts to Medicare Party B payments, Dr. Penso added that “Our medical group and health system physicians have coped with 8-percent cuts to their physician services the past four years. Eliminating relief for these services only exacerbates the strain on providers. This bill increases cuts to Medicaid and lowers payments for Medicare, all while increasing the number of uninsured patients,” said Penso. “Congress should reject this bill.”

And, immediately after the bill’s passage, Anthony Wright, executive director of the non-profit, non-partisan healthcare consumer advocacy organization Families USA, released a statement condemning its passage. “All Americans should be not just angry but furious by the passage of this budget bill that makes history in all the worst ways — including as the biggest rollback of coverage and the biggest cut to health care this country has ever seen,” Wright said. “Members of Congress who supported this bill will be haunted by this vote for a long time, unable to hide from the cascading consequences of cutting more than a trillion dollars from our nation’s health care system. Because of the votes for this bill, we will start to see a dramatic return of millions more uninsured Americans, living sicker, dying younger, racking up medical debt and knowing they are just one emergency from financial ruin.”

Further, Wright stated, "Americans will know who to blame for spiking premiums and cost-sharing, more bureaucratic barriers to coverage and care, scaled-back benefits and closed services, if not loss of their public or private health plan. When health insurance premiums spike later this year, Americans should remember this bill as a primary reason. When people get trapped in a web of complex and confusing paperwork just to get on and stay on coverage, they should remember that those bureaucratic barriers were intentionally placed by this big, bad bill and its backers. When rural hospitals, maternity wards, nursing homes and Planned Parenthood and other clinics close, Americans should remember this bill as a leading factor. When states face budget shortfalls and make dramatic cuts to health care benefits and services next year and over the next several years, much of that blowback should be borne by those who backed this bill. When millions of Americans get pushed and priced out of both public and private health coverage, they and their families and neighbors will know to place the blame squarely at the feet of those who voted for this disastrous bill. The standard rule applies to the health system and this bill's backers, that they broke it, they bought it.”

Wright’s statement on Thursday echoed an analysis by leaders at Families USA that had been released the day before. Among other elements, that analysis found that “[s]ignificantly restricts state use of provider taxes, a key tool for financing the state share of Medicaid (E&C Section 44132; SF Section 71117). Would prevent states from increasing provider taxes or expanding their provider tax base to additional health care provider categories. Nursing homes and intermediate care facilities are exempt in the Senate version. By freezing the ability to generate revenue to finance Medicaid coverage even as cost pressures go up, states will ultimately be forced to cut benefits for millions of people or make major cuts in provider reimbursement rates. The Senate version adds an additional provision to change the ‘safe harbor’ threshold for Medicaid expansion states from 6 percent to 3.5 percent by 2032, further penalizing expansion states and reducing their provider taxes.” What’s more, the Families USA analysts write, “The Senate-passed version asserts that no new provider taxes can be implemented above what the safe harbor threshold was in place as of May 1, 2025. Any state that imposes new or increased taxes would result in the safe harbor limit reducing to zero. CBO [the Congressional Budget Office] estimates the House provision would cut $89.3 billion over 10 years, and the Senate version would cut $191.1 billion over 10 years.”

This is a developing story. Healthcare Innovation will bring readers updates as new developments emerge.