General Discussion

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FIVE CONSEQUENTIAL PROVISIONS OF THE SPENDING BILL took immediate effect when President Trump signed the mega-bill into law July 4, four of which account for more than $340 billion in slashed funding over the next decade, according to the bipartisan Congressional Budget Office. The legislation immediately forced most states to cap newly initiated state-directed payments (SDPs), which had been a way for states to raise the low rates of Medicaid closer to those of private insurance. Now, the 40 states that expanded their Medicaid programs under the Affordable Care Act and Washington, D.C., can only charge rates equal to Medicare, which is less generous than what insurance payers pay. Non-expansion states must cap the payments at 110 percent of Medicare rates. The CBO expects the change to eventually strip away almost $150 billion.

Existing state-directed payments don’t have to ratchet down to Medicare or near-Medicare levels until 2028. But SDPs have been a widely used source of federal funding for Medicaid in recent years. According to an issue brief last October from the Medicaid and CHIP Payment and Access Commission, the federal government approved 302 different SDPs from February 2023 to August 2024, about 60 percent of all SDPs in existence. If the payments are now less generous, this key revenue source is no longer as useful. As a result, health programs will start dropping Medicaid, as UCare in Minnesota did temporarily to 88,000 patients in 11 counties last week.

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Furthermore, the bill immediately nixed a Biden-era rule setting a minimum number of nurses in long-term care facilities, a workforce already stretched thin. Killing that rule will save more than $23 billion, the CBO says, but the quality of care will suffer. Staff will likely manage the work overload by drugging residents more often, warned a column in Morningstar last week based on recent research. University of Pennsylvania’s Wharton School of Business researchers found that nursing home residents are about 10 percent more likely to be “chemically restrained” than they would be if the staffing level rule was still in place.

The spending package also immediately barred Planned Parenthood from receiving any Medicaid funding, a change that the CBO expects won’t save anything but will actually end up costing taxpayers $52 million. Massachusetts U.S. District Judge Indira Talwani issued a temporary restraining order on July 7 to block the change and told the Health and Human Services Department it must “take all steps necessary to ensure that Medicaid funding continues to be disbursed in the customary manner and timeframes.” The order remains in effect for 14 days. Talwani will hear arguments on July 21.

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https://prospect.org/health/2025-07-15-gop-wrecking-ball-slams-through-medical-system/