Welcome to another round of PYA Washington Updates! It’s the first official day of summer, and here’s what’s been heating up in healthcare policy this week!
2025 Medicare Trustees Report
On Wednesday, the Medicare Trustees released their annual report regarding the health of the Medicare Part A trust fund (the portion of Medicare funded by payroll taxes). The trustees project that the fund will deplete its reserves by 2033. That’s 3 years earlier than last year’s projection, thanks to increased utilization of Part A services. According to the Trustees, default would necessitate an immediate 11% cut in Part A payments which would grow for at least the following decade. Options for avoiding default are limited: reduce Part A spending (either by reducing coverage or cutting provider payments) or increase Medicare payroll taxes.
New CBO/JCT Analysis of OBBBA’s Macroeconomic Impacts
On Tuesday, the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) released their macroeconomic analysis of the House-passed bill. This analysis, known as the Dynamic Estimate, differs from the CBO’s report released earlier this month because it considers the legislation’s broader economic effects, not just the impact on federal spending and revenue.
According to the CBO and JCT, the tax cuts and other policies would boost annual economic growth by 0.5% on average over 10 years, with most of that growth occurring in the first two years. This, in turn, would reduce the primary deficit (i.e., the difference between total spending and total revenue excluding interest payments on the national debt) by $85 billion over the 2025-2034 period. However, rising interest rates and higher public debt would be counterweights. Bottom line: OBBBA would increase the deficit by $2.8 trillion over the 2025-2034 period.
The CBO and the JCT also analyzed the distributional effects of the tax cuts and the spending reduction. While the wealthiest 10% of households would see their federal tax bill reduced by an average of $12,000 a year, the poorest 10% would lose an average of $1,600 a year in benefits from Medicaid, SNAP, and other program cuts.
Most Senate Republicans are critical of the CBO/JCT Dynamic Estimate, claiming it vastly underestimates OBBBA’s economic benefits. They cite a report from the White House’s Council for Economic Advisors that asserts the bill would lead to long-run GDP growth of up to 3.5%.
Senate Committees Release Draft Bill Text
Since returning to Washington after the Memorial Day holiday, Senate Republicans have been meeting behind close doors to hammer out changes to OBBBA. Two Senate Committees – the Finance Committee and the Health, Education, Labor, and Pension (HELP) Committee – now have released draft bill text. From here, it appears things will move quickly, as Majority Leader Thune intends to schedule initial procedural votes for next Tuesday or Wednesday with a final vote on the Senate’s version of the reconciliation bill coming next weekend. Assuming some version of the bill passes the Senate, House and Senate leaders would then meet to resolve any and all differences. Majority Leader Thune is still saying publicly that Congress will have OBBBA on the President’s desk by July 4. That’s just two short weeks from today.
And there are significant differences between the Senate committees’ draft bill text and the legislation that passed the House. Some may be resolved before the full Senate votes on the bill. Here are the key healthcare provisions to which we will pay attention over the next several days.
- Medicaid provider taxes and state-directed payments (SDPs). Decrease cap on hospital provider taxes in expansion states by 0.5% each year between 2027 and 2031 (from 6% to 3.5%) and reduce existing SDPs by 10% each year beginning in 2027 until equivalent to Medicare rates (or 110% of Medicare rates in non-expansion states). For more context, please see the discussion of provider taxes and SDPs in last week’s Friday Morning Report. Hospitals would stand to lose billions in Medicaid reimbursement under this provision. Acknowledging the negative impact of these cuts on rural providers, some Senators are floating the idea of a rural provider relief fund to win over colleagues who have expressed concerns over Medicaid cuts.
- Medicaid work requirements. Limit the exception for parents and guardians with dependent children to include only those with children 14 or younger. Allows states to request up to 2 additional years to fully implement work requirements and verification processes.
- Non-citizen Medicaid coverage. Discontinue federal Medicaid funding for certain groups of lawfully residing noncitizens (refugees, asylees, victims of human trafficking). Permit states to continue providing state-funded coverage for certain types of non-citizens (e.g., undocumented pregnant women and children without penalty. Reduce FMAP for emergency services provided to certain non-citizens who currently qualify for an enhanced rate.
- OBBBA provisions not included in the Senate bill text. Changes to the Medicare Physician Fee Schedule, delays in Medicaid DSH cuts, expansion of the rural emergency hospital program, limits on ACA marketplace enrollment periods, changes to HSA contribution rules, tax benefits to employers that make contributions to employees’ purchase of ACA marketplace coverage.
Public Opinion of OBBBA
According to a KFF Tracking Poll released Tuesday, nearly two-thirds (64%) of the public views OBBBA unfavorably. Large majorities of Democrats (85%) and independents (71%) oppose the bill, but 61% of Republicans view it favorably (61%). Nearly three-fourths (72%) of those who identify as MAGA support OBBBA, while two-thirds (66%) of non-MAGA Republicans view the legislation unfavorably.
Court Decision on HIPAA Final Rule to Support Reproductive Health Care Privacy
Following the Dobbs decision overturning Roe v. Wade, the Biden Administration promulgated a rule prohibiting the use or disclosure of protected health information for purposes of conducting a criminal, civil, or administrative investigation into or impose criminal, civil, or administrative liability on any person for the act of seeking, obtaining, providing, or facilitating reproductive health care. The requirements of the rule took full effect on December 23, 2024. Late Wednesday, a federal district court judge in Texas struck down the rule. According to the judge’s decision, the ruling applies nationwide, thus nullifying the rule effective immediately. It’s highly unlikely the Trump Administration will appeal the decision. The federal district court earlier denied requests by third parties to intervene in the lawsuit. Had those requests been granted, those organizations could have pursued appeals. The district court’s denial of those requests is now on appeal to the 5th Circuit Court of Appeals. For now, providers do not have to comply with the rule’s requirements, including securing attestations from parties requesting disclosures of reproductive health information.
Court Decision on NIH Grant Cancellations
On Monday, a Reagan-appointed federal district court judge in Boston ruled that the Trump Administrative acted illegally in terminating about 800 National Institutes of Health research grants that had been deemed to focus on gender identity or diversity, equity, and inclusion. The judge concluded that the grant terminations were “arbitrary and capricious”and ordered the Trump Administration to immediately resume payments. Because the list of grants impacted by the court’s order has not been made public, researchers still are waiting to learn whether they can get back to work. And it’s likely the decision will be appealed, potentially delaying resumption of grant payments.
New PYA Webinar
The next episode of PYA’s Healthcare Regulatory Round-Up webinar series will be Wednesday, June 25, beginning at 11 am ET. The webinar, entitled Washington Updates: Heading into a Long, Hot Summer, will include an OBBBA update (with a specific focus on Medicaid provider taxes and state-directed payments), the latest on the President’s FY 2026 budget request, and new CMS guidance on price transparency, EMTALA, and treatment for gender dysphoria. You can register for the webinar here.
Please do not hesitate to contact us if you have any questions regarding these latest developments, and please continue to check PYA’s website for updates.