Key Provisions and Impacts of the One Big Beautiful Bill Act and How Providers Can Prepare

On July 4, 2025, President Donald Trump signed the One Big Beautiful Bill Act (OBBBA), a sweeping piece of legislation that reshapes the American healthcare landscape. While the bill introduces some short-term benefits, its long-term implications for physician practices and Medicaid recipients are both profound and complex. For physician practices, independent clinics and hospitals alike, understanding the key provisions and preparing now will be essential to sustaining stability and access to care in the years ahead.

A Temporary Boost for Physicians

The bill includes a one-year 2.5% increase to the Medicare physician fee schedule for 2026, offering a modest financial uplift to providers. This adjustment is intended to help physician practices account for exceptional circumstances and maintain stability in the Medicare payment system.

However, this benefit is overshadowed by broader concerns around Medicaid cuts and heightened administrative burdens.

Medicaid Cuts and Work Requirements

The most controversial element of OBBBA is its $1 trillion reduction in Medicaid spending over the next decade.

Among the key provisions:

• Provider taxes reduced: State Medicaid provider taxes will be reduced from 6% to 3.5%, eliminating a crucial revenue stream for
• Work requirements: Able-bodied adults must complete 80 hours of work per month, with mandatory semi-annual re-verification.
• Co-pays increase: Starting in January 2027, service co-payments will reach $35.
• Coverage eliminations: Refugees, asylum seekers, and certain immigrants lose eligibility.
• Retroactive coverage limits: Presumed eligibility falls to 30 days in expansion states and 60 in non-expansion states. These measures are expected to increase administrative complexity for states, as they are tasked with determining and tracking the new eligibility requirements of individuals and providers. Some reductions take place as early as January 1, 2026.

ACA Marketplace Insurance

The bill eliminates certain tax credits for ACA Marketplace enrollees and narrows eligibility and enrollment periods. Projections suggest 10-15 million fewer insured individuals over the next decade, which will place additional strain on hospitals and practices serving vulnerable populations.

Impact on Medical Education and Workforce

The bill also caps federal loans for medical school at $50,000 per year, with a lifetime limit of $200,000. This change eliminates the Grad PLUS loan program, which many students rely on to cover tuition and living expenses. 

The Association of American Medical Colleges warns this could worsen the nation's doctor shortage, especially in underserved areas.

Allocations to the Rural Health Transformation Fund

The bill allocates $50 billion to the Rural Health Transformation Fund (RHTF), which supports rural providers such as Certified Community Behavioral Health Clinics (CCBHCs) and Community Mental Health Centers (CMHCs). 

While promising, access to this funding may be limited for smaller independent practices unless they meet specific criteria. In addition to a complicated determination process, CMS has not released additional information about the application process; however, it appears that applications must be submitted no later than November 5, 2025, and CMS must approve applications no later than December 31, 2025. 

Usage of Health Savings Accounts

On a more positive note – and as a small win for direct primary care – patients can now use Health Savings Accounts (HSAs) to pay for monthly fees charged by direct primary care providers – up to $150 per person or $300 per couple. 

While this won’t cover major procedures or prescriptions, it could improve access to routine care.

What This Means for Medicaid Recipients

For Medicaid recipients, the bill tightens access across multiple fronts:

• Work requirements may disqualify many due to disability, caregiving responsibilities, or lack of employment opportunities.
• Funding reductions could also lead to fewer covered services, longer waiting times, and reduced provider participation.

Financial Pressure on Independent Practices

OBBBA prohibits states from creating or increasing provider taxes, further straining Medicaid funding.

This restriction could:

• Reduce Medicaid reimbursements.
• Limit state flexibility to support providers.
• Increase administrative burdens for eligibility documentation.

Independent practices, especially those in rural or underserved areas, those servicing behavioral health facilities and Federally Qualified Health Centers (FQHCs), could see sharp patient volume declines and may struggle to absorb these changes without the financial buffer larger systems enjoy.

Ripple Effects on Physician Workloads

Physicians who treat a high volume of Medicaid patients – historically around 12-17% of the average provider’s payor mix – may face increased uncompensated care. As hospitals struggle, patients will turn to outpatient practices, potentially overwhelming providers and reducing the quality of care.

Preparing For the Change

As these provisions take effect, the full impact on America’s healthcare system will become clearer, but early projections suggest significant challenges ahead for both patients and healthcare providers. Providers should begin preparing now, rather than waiting until 2026, with the following actions:

• Audit Medicaid patient panels: Identify patients at risk of losing coverage.
• Prepare for increased uncompensated care: Adjust budgets and staffing accordingly.
• Engage with state Medicaid offices: Advocate for waivers or phased implementation.
• Transition to value-based care programs: Shift from traditional volume-based models to value-based care, engaging in downside risk and full-risk contracting arrangements, while also building population health capabilities.
• Diversify revenue streams: Explore revenue streams outside of traditional insurance-based claims, such as direct-to-employer contracting or consumer-directed care models.
• Monitor RHTF opportunities: Stay informed about state applications, awards and potential funding access. Although the application to CMS will be submitted by states, healthcare providers should be aware of the process and how their respective states are responding to determine if they qualify for the $50B transformation fund.
  
  

If you have questions about the OBBBA or how to prepare for its impact, we’re here to help. Please reach out to Ronnen Isakov to schedule a conversation.

Ronnen Isakov is Managing Director Advisory Service of Management Group, LLC. His background includes extensive work in areas including business advisory, valuation, network optimization, transaction support, and project management.