Impact of the Budget Reconciliation Act of 2025 on Medicaid and Medicare
The Budget Reconciliation Act of 2025 (H.R. 1 or P.L. No. 119-12) introduces significant revisions to Medicaid and Medicare programs, impacting individuals who are dually eligible for these services. This article outlines key adjustments and their implications from an insurance industry perspective.
Dually eligible individuals are those qualifying for both Medicare and Medicaid. Approximately 12 million people are currently enrolled in both programs, with around 65% aged 65 and older, and the remainder under 65. These changes will affect eligibility and funding, posing challenges for insurers and state regulators concerned with coverage for these individuals.
Medicare eligibility includes individuals aged 65 and older or those receiving Social Security disability benefits for 24 months, alongside certain conditions such as End Stage Renal Disease (ESRD). Medicaid eligibility requires individuals to meet income and asset thresholds and be aged 65 and over or have qualifying disabilities. H.R. 1 will reduce federal Medicaid funding by $990 billion over the next decade, significantly impacting states' ability to finance Medicaid.
These funding reductions could pressure states to curtail optional Medicaid benefits crucial for dually eligible individuals, such as home and community-based services (HCBS), dental, vision, and hearing services. States historically cut these optional benefits under budget constraints, and may also reconsider eligibility extensions for programs serving dually eligible individuals.
The Act halts enforcement of provisions within the Medicaid Streamlining Eligibility and Enrollment Rules until 2034, affecting low-income individuals' ability to enroll in Medicaid and Medicare Savings Programs (MSPs). While states can implement streamlining provisions, non-compliance may result in continued enrollment barriers.
H.R. 1 alters non-citizen eligibility for Medicare and Medicaid, limiting coverage to legal permanent residents, Cuban/Haitian entrants, and citizens of certain associated states by October 2026. This change could increase the number of uninsured lawfully-present immigrants by 2027.
Impact on Medicaid Expansion Enrollees
Work requirements and bi-annual eligibility reassessments will be mandated for Medicaid Expansion enrollees, excluding dually eligible individuals under aged or disabled pathways. Continued advocacy is necessary to manage exclusions and prevent erroneous application of these rules.
Moreover, the Act reduces the retroactive Medicaid coverage period from three months to two months for dually eligible individuals starting January 2027, potentially weakening financial protection and access to essential care. The legislation also limits the home equity exclusion in Medicaid long-term care eligibility to $1 million starting January 2028, forcing some individuals to sell homes to qualify for Medicaid amidst inflationary pressures on property values.
Insurance industry participants should monitor state responses to H.R. 1, as local implementation will vary. Engaging with state agencies and actively monitoring potential disruptions will be critical to mitigating impacts on dually eligible individuals and ensuring continued access to essential healthcare services.