How Senate Reconciliation Bill Would Impact Healthcare

A new report from Manatt Health provides in-depth insight and analysis focused on the impact that the current Senate Reconciliation Bill would have on Healthcare.

The Senate Finance Committee’s reconciliation legislation includes Medicaid and Marketplace policies that resemble those included in the House-passed reconciliation bill—with changes that make even deeper Medicaid cuts. In addition to changing several provisions, the legislation altogether omits a number of policies, including a slew of Marketplace provisions, from the House-passed bill.

Key Provisions related to MEDICAID include:

Medicaid, generally: Mirroring much of the House-passed legislation, the Senate Finance Committee text would make profound changes to Medicaid that would dramatically cut funding and restrict access to health care through the program. Compared to the House language, the Senate included major changes to Medicaid provisions related to provider taxes, state-directed payments (SDPs), Medicaid work requirements and coverage for noncitizens.

Provider taxes: The Senate bill makes a significant change to the House-passed bill’s provider tax provision by layering on top of the moratorium on new or increased provider taxes from the House bill a reduction in the 6% cap down to 3.5% for expansion states only. Expansion states will see their 6% cap decline by 0.5 percentage points per year beginning in federal fiscal year 2028, though skilled nursing facilities and intermediate care facilities are exempt from this cap ramp down.

State Directed Payments (SDPs): The Senate bill sharply diverges from the House bill with respect to State Directed Payments (SDPs) in expansion states. Under the Senate language, expansion states would need to reduce their SDPs by ten percentage points per year beginning in 2027 until the SDPs were no greater than 100% of Medicare. The Senate language retains the House’s cap on new directed payments of 100% of Medicare for expansion states and 110% of Medicare for non-expansion states.

Work requirements: The Senate Finance Committee bill retains the basic structure of the House-passed work requirements, including the ban on access to subsidized marketplace coverage for those who lose Medicaid, but it makes some modifications that will impact the provision’s implementation and exemptions. First, the Senate version maintains the expedited January 1, 2027 implementation date added at the last minute in the House, and clarifies that states can implement earlier via a section 1115 demonstration. However, it also permits states to—pending approval by the Secretary—request an implementation delay of up to two years through December 31, 2028, as long as the state demonstrates a “good faith effort” to come into compliance and meets new reporting requirements.

The Senate bill makes additional changes to the compliance and exemptions provisions included in the House-passed bill, including:

• Limiting the exemption from work requirements for parents, guardians, caretaker relatives or family caregivers to individuals with dependent children 14 years or younger (no age limit for dependent children was defined in the House-passed bill);
• Giving states flexibility to determine mandatory exemptions without requiring individuals to verify the underlying information;
• Establishing an additional “short-term hardship” exemption for people traveling for an extended period to access medically necessary care for a serious or complex medical condition that is not available in the individual’s community;
• Limiting the look back period for demonstrating compliance up to three months prior to application; and
• Prohibiting states from using contractors (e.g., Medicaid managed care plans, prepaid inpatient health plans) to determine whether enrollees are complying with the work requirements, unless the contractor has no financial relationship with the health plan providing the enrollee’s Medicaid coverage.

Noncitizen coverage provisions: The Senate bill makes three significant changes to the House bill regarding health coverage for noncitizens.

1. In a new provision, the Senate bill would end the availability of federal Medicaid funding for certain groups of lawfully residing noncitizens who have been covered through Medicaid for decades, including refugees, asylees, and victims of human trafficking (although states would retain the option to cover children and pregnant people with these statuses).
2. With respect to emergency Medicaid, the Senate bill provides that states will see their federal Medicaid match (the Federal Medical Assistance Percentage or “FMAP”) cut to their regular FMAP for emergency services provided to certain noncitizens who currently qualify for an enhanced rate.
3. With respect to the House-passed FMAP penalty for expansion states that have programs that provide health coverage to certain types of noncitizens, the Senate bill clarifies that states will not receive an FMAP reduction for providing any form of coverage required by federal law, any form of coverage (including state-funded coverage) to qualified noncitizens (including humanitarian parolees), or federally funded coverage to lawfully residing children and pregnant women in Medicaid or CHIP.

Key Provisions related to MEDICARE include:

While the Medicare provisions in H.R. 1 were relatively brief, most of them have been stripped from the Senate Finance Committee proposal. This includes the modified exception for orphan drugs under the Medicare Drug Price Negotiation Program, the Physician Fee Schedule conversion factor update and all of the Medicare Part D pharmacy benefit manager policies. The bill does, however, retain the provision to restrict immigrant eligibility.

Key Provisions related to the MARKETPLACE include:

The Senate Finance Committee’s language on premium tax credit (PTC) eligibility would make it harder to enroll and re-enroll in coverage and limit immigrant eligibility for PTC, significantly decreasing the number of individuals receiving PTC and covered by the Marketplace. Provisions to do so include ending automatic re-enrollment and the ability to receive advance payments of the PTC (APTC) with a pending application. A newly added provision would explicitly allow the Marketplace to use electronic data that is available to it or data from a reliable third-party source to determine eligibility through the reverification process. In addition, another change would allow the Secretary to waive the inability to receive APTC while verification is pending for an individual who enrolls in the Marketplace through a special enrollment period (SEP) for a change in family size.

Notably, the Senate language does not include many of the Marketplace elements of H.R. 1. Among the many provisions in H.R. 1 that are not included in the Senate Finance or HELP Committee language are:

• Limiting open enrollment periods and SEPs,
• Lowering the permissible actuarial values of Marketplace plans,
• Restricting gender-affirming care as an essential health benefit,
• Creating the Custom Health Option and Individual Care Expense Arrangement (CHOICE) to allow employers to contribute to the purchase of individual market coverage, and
• Various private insurance and health savings account provisions. 

The Senate language may change in the days and weeks ahead as negotiations continue and the Senate undergoes the “Byrd Bath.” For now, Senate Republicans still hope to pass the legislation before July 4.

Click HERE to view bill text.
Click HERE for a section-by-section.
Click HERE for a bill overview.
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