The largest Medicaid rollback in the program’s history

The reconciliation law signed on July 4, 2025 — formally the One Big Beautiful Bill Act, commonly OBBBA or H.R. 1 — is the most consequential change to Medicaid since the program was created. The Congressional Budget Office estimates it reduces federal Medicaid and CHIP spending by roughly $900 billion to just over $1 trillion over ten years, depending on how interacting provisions are counted (KFF), and that around 11.8 million people lose Medicaid coverage as a result (CBO).

The law also creates a $50 billion Rural Health Transformation Fund, which supporters describe as protecting rural hospitals from the cuts. This brief explains where the cuts come from, how the new work requirements operate, and whether the rural fund does what its name suggests.

Where the cuts come from

The savings are not a single across-the-board reduction. CBO’s allocation, as distributed across the states by KFF, attributes most of the federal Medicaid spending cut to a handful of provisions (KFF):

• Work-reporting requirements — the single largest piece, on the order of $325-345 billion in federal savings.
• Repeal of Biden-era eligibility and enrollment rules that had simplified signing up and renewing coverage — roughly $165-170 billion.
• More frequent eligibility redeterminations for the ACA expansion population — roughly $60-65 billion.
• A moratorium on new or increased state provider taxes — roughly $90 billion. Provider taxes are a long-standing mechanism states use to help finance their share of Medicaid.
• New limits on state-directed payments to providers — roughly $70 billion.

Two features of the math matter for reading the cut. First, provisions that apply only to ACA Medicaid expansion states account for roughly half the total federal reduction. Second, the cuts are backloaded: KFF notes that nearly two-thirds of the ten-year reduction falls after fiscal year 2030 (KFF).

How the work requirements work

The work-reporting requirement is the law’s largest single cut and its most contested provision.

• Who it covers. Adults aged 19-64 in the ACA Medicaid expansion group. It does not apply to the traditional Medicaid populations (children, pregnant women, people with disabilities, the elderly), and the law lists exemptions — caregivers of young children, people who are medically frail, and others.
• What it requires. At least 80 hours per month of work, job training, schooling, or community service — or proof of an exemption — reported to the state, generally verified twice a year.
• When it takes effect. Nationally, January 2027, though states may begin earlier.

The mechanism by which the requirement reduces coverage is well documented from earlier state experiments. The cut does not come primarily from people who refuse to work. It comes from administrative attrition: eligible enrollees — people who are working, or who qualify for an exemption — lose coverage because they do not successfully navigate the reporting process. When Arkansas tried a Medicaid work requirement in 2018, thousands lost coverage with no measurable gain in employment (Urban Institute). Georgia’s program has spent the large majority of its budget on administration rather than benefits (ProPublica). CBO’s coverage-loss estimate reflects this: the projected losses are concentrated among people who remain eligible on the merits.

Nebraska became the first state to act under OBBBA, beginning work-reporting on May 1, 2026 — eight months ahead of the federal deadline (NPR). Roughly 28,000 expansion enrollees must now periodically prove compliance or claim an exemption. Nebraska is using a “soft start” that allows self-attestation without immediate documentation, and the state has said it will tighten verification over time (KFF). Analysts caution against reading the soft start as low-risk: even with self-attestation, coverage is lost whenever an enrollee fails to file — through confusion, missed notices, address changes, or administrative backlog — regardless of whether they are actually working.

Does the rural health fund offset the damage?

OBBBA creates a $50 billion Rural Health Transformation Fund, distributed by CMS to approved states at $10 billion per year across fiscal years 2026 through 2030. Half is split roughly equally among participating states; half is distributed by a CMS formula weighing rural population and facility mix. States have wide latitude over how to spend it — provider payments, workforce, technology, behavioral health, chronic-disease programs.

It is real money, and it is targeted. But framed as an offset to the Medicaid cuts, it falls short on three measurable counts:

1. It is smaller than the rural cut it is meant to address. KFF estimates the fund covers about 37% of the roughly $137 billion in federal Medicaid cuts that hit rural areas over the decade — and only about 5% of the law’s total federal Medicaid reduction (KFF).
2. It is temporary and front-loaded; the cuts are permanent and back-loaded. The fund is spent down by the end of fiscal 2030. The Medicaid cuts deepen after that — exactly when rural providers will have lost the cushion.
3. It funds providers, not coverage. The fund can pay hospitals and clinics, but it does not restore Medicaid eligibility to people who lose it. A rural hospital can receive transformation dollars and still face rising uncompensated care as its patients become uninsured — the dynamic that drove the rural hospital closures of the past 15 years.

The fund mitigates. On the available estimates, it does not offset.

What to ask your representatives

• Do they support repealing or delaying the Medicaid work-reporting requirement before its January 2027 national effective date?
• How do they respond to the evidence that work requirements remove coverage mainly from eligible people through paperwork, not from people who decline to work?
• Do they accept CBO’s estimate of roughly 11.8 million people losing Medicaid coverage — and if not, what is their alternative figure and source?
• Will they acknowledge that the $50 billion rural health fund is smaller and shorter-lived than the rural Medicaid cuts it is paired with, and what do they propose for rural providers after the fund expires in 2030?