Mid-Atlantic Health Law TOPICS

The One Big Beautiful Bill Act (OBBBA) became law on July 4, 2025. This is the second article in a series of articles about OBBBA, and discusses the significant changes to Medicaid eligibility that will take place over the next three years.

The changes, most of which will not be implemented until 2027, will decrease the number of Medicaid beneficiaries, and thereby reduce aggregate federal spending on Medicaid. Further, absent an increase in state spending for safety net programs, the changes could also significantly increase the amount of uncompensated care being delivered.

Changes in each state’s Medicaid program will also need to reflect as-yet unwritten federal regulatory guidance.

Medicaid Overview 

To better understand these changes, it is important to provide a general overview of the Medical Assistance Program, commonly known as Medicaid.

Each state designs its own health plan for its residents, subject to the approval of the Centers for Medicare and Medicaid Services (CMS). The federal government then pays each state for a share of the state’s Medicaid program.

Many states, including Maryland, provide benefits to different groups of Medicaid populations. For example, one population group is made up of individuals who are either pregnant women or parents with dependent children who have a low income based on the federal poverty level, another population group are children of low income, and a third group is made up of individuals with disabilities.

A fourth population group includes individuals whose income is greater than the federal poverty limit but receive benefits under the voluntary Medicaid expansion provisions of the Affordable Care Act (the ACA Medicaid Expansion). The “expansion” extended eligibility to any adult whose income is less than 138% of the federal poverty level (FPL), which greatly increased the number of Medicaid beneficiaries.

The amount of federal Medicaid funding generally varies from approximately 55% to almost 80%. In 2024, the federal share of Maryland Medicaid (covering approximately 1.1 million lives) for the three non-expansion population groups was $6.9 billion, while the State share was $6.1 billion.  

However, the federal government reimbursement for the ACA Medicaid Expansion is at least 90% of the state’s costs. In Maryland, the federal share is $3.6 billion (for 331,000 lives), with Maryland contributing less than $400 million.

New Non-Eligibility 

Effective on October 1, 2026, OBBBA will limit federal funding to U.S. citizens, U.S. nationals, lawfully admitted aliens for permanent residence (so-called “green card” holders), Cuban and Haitian entrants, and entrants from the freely associated island nations in the Pacific.

In contrast to prior law, individuals who are lawfully allowed in the United States but are without a permanent status, most notably refugees, asylum seekers, and parolees, will be ineligible for federal funding of Medicaid benefits.

Some states, including Maryland, provide Medicaid coverage for emergency services for undocumented immigrants and similarly provides services through Maryland’s Healthy Babies program. If programs such as these continue after October 1, 2026, they must be funded 100% with state funds.

Effective January 1, 2027, there are also two new requirements for ACA Medicaid Expansion beneficiaries only. First, each state will be required to verify that each ACA Medicaid Expansion beneficiary satisfies the 138% FPL income test every six months. Currently, eligibility verification is required annually, and during the COVID-19 public health emergency, eligibility verification was suspended.

Second, each ACA Medicaid Expansion beneficiary aged 19-64 will also be required to meet community engagement work requirements of up to 80 hours per month. They can meet that requirement through volunteer hours, work-study, education hours, employment, or a combination of the four.

OBBBA also seeks to prevent payments on behalf of deceased individuals or to deceased providers. To address this problem, each state must compare their list of Medicaid beneficiaries with the master file of deceased individuals at the Social Security Administration (the so-called Death Master File) quarterly by January 1, 2027. By January 1, 2028, each state must also confirm each Medicaid provider is not on the Death Master File at least quarterly and upon enrollment, re-enrollment, or validation.

One new Medicaid eligibility standard actually increases the potential Medicaid-eligible population by creating a $1 million exemption for home ownership when seeking Medicaid long term care. This standard will go into effect on January 1, 2028.

Christopher P. Dean
410-576-4249 • E-mail cdean@gfrlaw.com