Information from IARF Regarding the Big Beautiful Bill and Impacts for People

August 4, 2025

Last Friday, the Department of Healthcare and Family Services held a virtual briefing providing updated information on the federal One Big Beautiful Bill Act that was recently passed by the Trump administration. IARF staff attended both the briefing and the Medicaid Advisory Committee meeting that was held prior to the briefing – below is a compilation of the information on OBBBA shared during both.   The Overall Impact of H.R. 1 – The One Big Beautiful Bill Act (OBBBA)  Projected Coverage Loss for Individuals in the Medicaid Program  The Kaiser Family Foundation estimates that approximately 544,000 Illinoisans will lose Medicaid coverage  Manatt estimates that approximately 330,000 Illinoisans will lose Medicaid coverage  HFS is internally estimating between 270,000-500,000 Illinoisans will lose Medicaid coverage due to the work requirement provisions included in OBBBA  Projected Funding Losses for Illinois  Manatt estimates Illinois will face an approximate $51 billion reduction in Medicaid expenditures over the next 10 years  HFS is internally estimating at least a $26 billion reduction in federal funding for Illinois over the next 10 years  Changes to Supplemental Nutrition Assistance Program (SNAP)  OBBBA cuts federal funding for SNAP, limits future benefit increases, and increases work requirements for eligibility   Timeline for Provisions Included in OBBBA  July 4, 2025 – the date the bill was signed into law  A freeze on current and prohibition of new provider taxes  A prohibition of Medicaid funding to Planned Parenthood for a year – this was contested through the filing of a lawsuit and the federal government was blocked from carrying out this provision  Caps new state-directed payments at 100% of Medicare payment rates  December 31, 2025  Applications for the Rural Provider Relief Fund will be due and approved no later than December 31, 2025  October 1, 2026  Narrow the definition of “qualified aliens”  January 1, 2027  New six-month Medicaid eligibility redeterminations for adults covered by the ACA  Work requirements for able-bodied individuals begin  October 1, 2028  Cost-sharing begins for adults covered by the ACA  Phase down of the provider hold harmless threshold  January 1, 2028  Reduce current state-directed payments by 10% points per year until they are no greater than 100% of Medicare rates  **Additionally, there are several other eligibility-related proposals that would take place between January 1, 2027, and October 1, 2029**  Mandatory Work Requirements – Effective January 1, 2027  Medicaid customers will be required to prove they are working or involved in other “eligible activities,” including community engagement, education, and caretaking roles, in order to be eligible for Medicaid benefits  Mandatory work requirements will apply to non-disabled Medicaid customers between the ages of 19 and 64 who do not have dependents under the age of 14  HFS estimates that between 270,000 and 500,000 current Medicaid recipients will lose coverage due to these new work requirements  States will be able to apply for a “good faith effort determination” exemption when the new provision begins, which would extend the timeline for beginning this requirement until January 1, 2029 – HFS has indicated they are looking into all possible options to ensure as many individuals continue to receive the coverage they need   Eligibility and Cost Sharing Requirements   Effective January 1, 2027, states must conduct eligibility redeterminations for adults covered under the ACA expansion every six months – these are now done annually  Reduces retroactive Medicaid coverage to one month prior to enrollment for ACA expansion adults and two months prior for other Medicaid categories and CHIP  Effective October 1, 2028, states are required to impose co-payments (cost sharing) for adult individuals covered under the ACA expansion with income above the federal poverty level ($15,560/year) on most services  Provider Tax Provisions  Provider taxes are used by a vast majority of states as a way to levy taxes and assessments on a variety of provider types, including hospitals and nursing homes in Illinois – these taxes and assessments are used to churn Medicaid dollars by garnering federal matching dollars which are then put back into the states’ systems  Effective immediately, OBBBA freezes current provider taxes and prohibits new ones from being developed  Starting October 1, 2028, Medicaid expansion states must phase down the hold harmless threshold for provider taxes from 6% to 3.5% of net patient revenues (excluding nursing home and intermediate care facilities)   HFS is anticipating a loss of $4.8 billion in federal financial participation (FFP) over the first 5 years of implementation  Effective immediately, OBBBA modifies the criteria used to determine if a “healthcare related tax” is considered “generally redistributive” - i.e. Medicaid businesses can’t be taxed at a higher rate than non-Medicaid businesses  State Directed Payments (SDPs)  SDPs are used as a means to direct Medicaid managed care organizations to make specific payments to providers based on specific criteria  Effective immediately, OBBBA caps new SDPs at 100% of Medicare payment levels for expansion states (Illinois) and 110% for non-expansion states  Beginning January 1, 2028, expansion states must reduce their current SDPs by 10% points per year until they are no greater than 100% of Medicare levels  HFS anticipates this will reduce SDPs to hospitals by approximately $3.4 billion over the reduction period  Rural Provider Relief Fund  OBBBA establishes a $50 billion Rural Health Transformation Program, or relief fund, that aims to offset some of the losses and costs related to other provisions of the bill  In early September, federal CMS is expected to release an application process by which states must apply for in order to qualify to receive any funding through this fun  Funding will be distributed over a period of 4 years as follows:  $25 billion will be equally distributed amongst states whose applications have been approved by CMS  $25 billion we be disbursed amongst approved states at the discretion of CMS  CMS is required to approve or deny applications by December 31, 2025  Rural providers include CCBHCs, CMHCs, FQHCs, and other hospitals and entities as outlined in the bill  Changes to SNAP Benefits  Costs Shifted to States – SNAP has been federally funded since it began in 1960 – states will now incur some of the costs of the program based on their payment error rate  DHS anticipates this will cause Illinois’ annual liability to be $705 million   Reduction in federal funding related to administrative costs  DHS anticipates this will result in a loss of more than $80 million in federal funding for the state  Increased administrative burden  DHS anticipates 258 full time employees will be needed to address the corresponding eligibility and application changes, costing the state an additional $20 million per year  Eligibility changes to qualify for benefits  The age range for Able-Bodied Adults without Dependents (ABAWDs) has been expanded from 18-54 years of age to 18-64 years of age The age for dependents has now been lowered from under 18 years of age to under 14 years of age Veterans, people experiencing homelessness, and former foster children are now subject to these work requirements Work requirement waivers will only be allowed if the county has an unemployment rate above 10% - no Illinois counties currently meet this standard  Illinois’ SNAP population that will be required to fulfill these new work requirements jumps from 10% go 24%, going from approximately 189,000 to approximately 446,000  SNAP eligibility now limited to U.S. citizens, lawful permanent residents, Cuban and Haitian entrants, and individuals allowed to live and work in the U.S. under Compacts of Free Association (COFA) - This would remove 20,000 currently eligible legally present refugees, asylees, and humanitarian parolees from receiving benefits  Eliminates funding for SNAP-Ed, a program that provides nutrition education and health promotion across Illinois – this program de-funding elminates $19.8 million in federal funding and limits access to healthy eating educational materials and other notifications of changes to the program   As HFS and DHS continue to work with federal CMS and others to understand the full impact of these new legislative changes and specifically how they impact Medicaid and SNAP beneficiaries in Illinois, we will continue to provide any and all additional information as it becomes available. In the meantime, please don’t hesitate to reach out with any questions, comments, or concerns.