AMARILLO, TX – The One Big Beautiful Bill Act (“OBBBA”) was signed into law on July 4, 2025, as Public Law 119-21. It is designed as a budget package and will have sweeping impacts across Medicaid, the Affordable Care Act (“ACA”), food nutrition programs, and more. The Congressional Budget Office (“CBO”) estimates the bill’s health provisions will result in 11.8 million people losing health coverage by 2034. Inevitably, the wave of impact will reach Medicaid enrolled DMEPOS suppliers.

Importantly, several provisions of OBBBA pertaining to Medicaid apply only to state Medicaid programs that elected to expand coverage for individuals consistent with the expanded coverage criteria provided under the ACA, or to individuals that qualify for Medicaid solely as a result of the expanded coverage (such as expansion of coverage to reach low-income individuals earning up to 138% of the Federal Poverty Level). As of early 2026, 41 sates (including Washington DC) have expanded their Medicaid programs in accordance with the ACA.

Summary of Select Significant Changes to Medicaid
Shift in federal liability to match erroneous payments provided to Medicaid providers by state Medicaid programs. Implementation of work requirement for Medicaid eligibility. Increased frequency of Medicaid eligibility redetermination. Increased copayments owed by Medicaid beneficiaries.

Federal Liability to Match Erroneous Payments
Prior to the passing of OBBBA, HHS is permitted “to waive the limitation that states may not get a federal match for erroneous payments in excess of 3% of all payments made under their Medicaid program if the state acts in good faith to limit erroneous payments.” Under Section 71106 of OBBBA, effective October 1, 2030, this HHS authority to apply the waiver is significantly reduced, and in practice, may be effectively eliminated. As a result, if HHS finds that a more than 3% of a state Medicaid program’s payments are erroneous, such state may not be entitled to a federal match for Medicaid funding and may be subject to federal recoupment of funds.

Concurrent with the reduction in HHS authority to issue waivers for erroneous payments, Section 71106 expands the definition of “erroneous” payments. Broadly, the definition includes:

• Payments made for products/services provided to  ineligible individuals.

• Including payments made on behalf of individuals where there is insufficient information/documentation to confirm eligibility.

• Overpayments for products/services provided to eligible individuals.

Though the onus of compliance with this Section rests with the state Medicaid programs, Medicaid providers will likely be subject to increased monitoring and enforcement efforts to reduce occurrences of erroneous payments.

State are predicted to implement additional documentation requirements (e.g. Prior Authorizations, specific demonstration of proof of medical necessity), especially for products or services considered to be especially susceptible to fraud, waste, or abuse. Such additional documentation requirements may require providers to expend limited resources to ensure coverage and validity of claims.

States are predicted to conduct more frequent – and more comprehensive – audit and claim review activities to best ensure an erroneous payment measurement of less than 3% of claims. Providers can expect considerably more scrutiny related to claim submissions.

Work Requirement for Medicaid Eligibility
Effective December 31, 2026 (with certain exemptions for compliance until December 31, 2028, if states demonstrate good faith effort to comply), OBBBA will require Medicaid beneficiaries to satisfy an 80-hour-per-month work requirement for low-income people ages 19 to 64. This may be demonstrated by a combined 80 hours per month of (i) paid employment; (ii) half-time education; (iii) work programs/work force training; or (iv) community service documentation.

OBBBA does provide exemptions/waivers to this new requirement for:

• Parents and caretakers with dependents aged 13 and under.

• Individuals with serious medical conditions.

• Individuals who are pregnant or postpartum.

• Individuals experiencing short-term hardship (e.g., inpatient care, related outpatient care, natural disasters or high unemployment rate within their county, or if travel is required for complex medical care).

• Other qualifying criteria.

The work requirements will have an impact on state medical programs: Prior to the implementation of OBBBA, there was no federal requirement that Medicaid beneficiaries meet a work requirement to receive Medicaid benefits. The increased administrative burden (beneficiary demonstration of employment status or satisfaction of exemption eligibility and the state’s processing of the same) is predicted to decrease the number of Medicaid beneficiaries. 

The Congressional Budget Office (“CBO”) estimates 5.3 million people will lose Medicaid coverage. From the provider standpoint, fewer Medicaid beneficiaries will result in decreased revenue from Medicaid.

Increased Frequency of Medicaid Eligibility Redetermination
Prior to OBBBA, states were not permitted to re-determine Medicaid eligibility (for people who were newly eligible under the ACA) more than once every 12 months. Under OBBBA, effective January 1, 2027, such individuals will be required to undergo eligibility redetermination every six months.

The administrative burden and expense associated with more frequent redetermination will likely result in decreased beneficiary enrollment, or complications related to enrollment. The CBO estimates that this could lead to 700,000 people losing Medicaid coverage by 2034.

From a provider perspective, increased uncertainty as to a beneficiary’s coverage status may lead to more reimbursement issues, especially if the provider does not have a robust process for checking, and rechecking, beneficiary coverage.

Increased Copayments Owed by Medicaid Beneficiaries
Effective October 1, 2028, Section 71120 requires states to impose cost sharing on certain individuals (those enrolled in Medicaid as a result of Medicaid expansion under the ACA) with incomes over 100 percent of the federal poverty level. Cost-sharing amounts must be greater than $0 and cannot exceed $35. Exceptions may exist for certain services and products, including prescription drugs, primary care, services provided by rural health clinics, and other services and products.

Copayments owed by Medicaid beneficiaries are expected to increase, though certain protections are still in place that require that out-of-pocket expenses not exceed five percent of an individual’s household income. Patients will face increased hurdles to care and may forego receiving products and services due to inability to afford treatment. In such cases, providers may see a reduction in patient population, and realize a marked reduction in revenue from Medicaid.

How to Prepare for Changes
Because certain provisions of OBBBA are only applicable to states that have expanded their Medicaid program in accordance with the ACA, providers should remain cognizant of the states in which they are enrolled with Medicaid or serve Medicaid beneficiaries. A thorough understanding of the specific rules and regulations applicable to, and promulgated by, each Medicaid program will best ensure compliance.

With a considerable burden of risk for erroneous payments shifted from HHS to state Medicaid programs, experts anticipate increased scrutiny of claims submissions. The best mechanism to refute any unfavorable audit or claims review findings is to (i) ensure all required documentation is on file, and conforms with all requirements; (ii) anticipate any documentation or information shortfalls prior to any Medicaid action; and (iii) implement robust policies and procedures to provide multiple “checks” on documentation.

Changes to eligibility criteria, and the additional administrative hurdles to eligibility implemented by OBBBA, may result in considerable changes to a provider’s patient population. Some DMEPOS providers, by nature of their specific DMEPOS product offerings, may be more susceptible to the eligibility changes. To offset risks, providers may consider opting in to provide products shielded from the Section 70112 increases to patient responsibility; this will help ensure that affordability will not impact expected revenues.

Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, PC, a law firm with a national health care practice based in Texas. He represents pharmacies, infusion companies, HME companies, manufacturers and other health care providers throughout the United States. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization and can be reached at (806) 345-6320 or [email protected].