Congress is in the midst of the FY25 budget reconciliation process, a months-long effort to review, revise, and realign federal spending to meet fiscal goals. Lawmakers have been tasked with cutting at least $1.5 trillion in mandatory spending over the next decade, with $800 billion of those cuts coming from Medicaid alone.
On May 22, the House of Representatives passed its version of the budget reconciliation bill with a narrow 215–214 vote. The bill proposes sweeping changes to Medicaid, with projected cuts of at least $715 billion over the next decade. These cuts would lead to an estimated 13.7 million more people becoming uninsured. The vote fell largely along party lines, with minor revisions made before passage, including a change to move up the implementation date for Medicaid work requirements to “no later than December 31, 2026, or an earlier date specified by the state.
The House version then moved to the Senate Finance Committee for markup and review, which on June 16 released its recommendations. While much of the Medicaid language mirrors the House version, there are key changes and items we continue to monitor. The Senate is aiming to pass the legislation by the end of this week.
While these proposals don’t directly impact providers like Fello, they would significantly affect people who rely on Medicaid, many of whom are the people we support.
Here’s what’s in the bill, what’s changed in the Senate version, and what we’re watching closely.
What is budget reconciliation?
Budget reconciliation is a legislative process Congress uses to align spending, revenue, and debt levels with agreed-upon budget goals. This year, lawmakers were tasked with cutting at least $1.5 trillion in mandatory spending.
Key Changes in the Senate Version
The Senate Finance Committee released its draft on June 16. While much of the language mirrors the House bill, there are important updates, including:
Provider Taxes
- House version: States would be prohibited from introducing or increasing provider taxes, effectively freezing current rates
- Senate version: Expansion states (those that expanded Medicaid) will see provider tax rates capped and reduced to 3.5% by 2031. Non-expansion states won’t be allowed to increase rates or expand tax bases.
- Impact: This will restrict how states fund their Medicaid programs and could force cuts to optional services like home- and community-based services (HCBS).
State Directed Payments (SDPs)
- States often use SDPs to increase payments to Medicaid providers. The Senate version would cap these payments to align with Medicare rates: 100% for expansion states and 110% for non-expansion states.
- Existing SDPs will be reduced gradually by 10% each year, until the cap is met. No grandfathering allowed.
- Impact: This could lower payments for services like HCBS, which directly support the independence and inclusion of people with disabilities.
Additional Items We’re Monitoring
Cuts for States Covering Undocumented Immigrants: States that use public funds to provide healthcare to undocumented immigrants will see their federal Medicaid match drop from 90% to 80%.
Work or Volunteering Requirements: States must require Medicaid recipients who are able-bodied adults without dependents to work, volunteer, or participate in education/training for at least 80 hours per month. While exemptions exist, the administrative burden of tracking and verifying participation could cause coverage disruptions, including for direct service workers.
Cost Sharing for Low-Income Adults: Adults earning over 100% of the federal poverty level will have to pay a portion of their medical costs. This change could impact caregivers and essential workers with modest incomes, making it harder for them to afford or maintain coverage.
Pause on Enrollment Simplification Rules: A moratorium until 2035 on two HHS rules designed to simplify and safeguard Medicaid enrollment may result in greater coverage loss, especially for people with disabilities.
Delay on Long-Term Care Staffing Rule: A new federal rule that would set minimum staffing levels for long-term care facilities is paused until 2035. This delays much-needed reforms that would strengthen support for direct service workers and improve resident care.
What This Means
The proposed changes in both the House and Senate versions of the reconciliation bill represent the most significant shift in Medicaid policy in years. If passed as is, the bill could:
- Limit how states fund Medicaid programs
- Reduce payments for essential services like HCBS
- Disrupt coverage for people with disabilities and direct service workers
- Increase costs for individuals who already struggle to access care
What’s Next?
The Senate Finance Committee will now collaborate with the full Senate to review the proposed markup.
Significant debate and compromises are expected, as many senators remain divided over key tax revisions and proposed cuts to major programs like Medicare and Medicaid, services heavily relied upon by their constituents. Once the Senate casts its final vote on the budget, it will return to the House for further review and markup before heading back to the Senate. While there is no statutory deadline, lawmakers are aiming to pass the reconciliation bill by early August, ahead of the congressional recess and key fiscal deadlines.
We will continue to monitor every step of the process and keep you informed as more details emerge. As always, our focus remains on the people and communities we serve, and ensuring everyone has access to the resources and support they need.