Republican Megabill Cuts Medicaid and Expands Care Tax Credits with Limited Impact

The recent Republican megabill signed into law on July 4, 2025, introduces significant changes affecting U.S. families seeking access to care services, with substantial implications for healthcare, child care, and paid family leave.

 It prioritizes tax cuts for corporations and wealthier demographics while reducing funding for essential programs serving nonwealthy families, particularly Medicaid and Supplemental Nutrition Assistance Program (SNAP). Over a decade, the legislation enacts nearly $1 trillion in cuts to Medicaid, a critical source of long-term care for older adults and disabled individuals, potentially jeopardizing home and community-based services (HCBS) and intensifying existing staffing shortages in such care sectors. These cuts threaten the availability and quality of care, with states likely reducing payments to care providers, which historically leads to diminished access to HCBS services and increased reliance on institutional care.

The home care workforce, predominantly women of color and immigrant women, faces exacerbated challenges due to reduced Medicaid support and increased income inequality, complicating recruitment and retention. Additionally, caregivers who rely on Medicaid for health coverage and support services may confront increased barriers due to new work requirements and coverage reductions. The bill also includes deep cuts to SNAP, affecting millions of seniors and low-income families reliant on food assistance. Despite the care challenges, the legislation only marginally addresses child care and paid leave issues, primarily through expanded tax credits (Sections 45S and 45F) for employers offering paid leave and child care benefits. However, these credits have historically shown minimal impact on expanding access, often benefiting corporations without significantly improving workers' access to care. The employer-based approach to care programs risks worsening inequities by limiting access primarily to higher-income workers while providing less stability for families facing job instability or employer policy reversals, as evidenced by recent corporate child care center closures.

Child care affordability and availability issues remain largely unaddressed, with many early childhood educators dependent on Medicaid and SNAP themselves, risking further financial precarity due to the bill's provisions. The legislation also reforms the Child Tax Credit (CTC), permanently increasing the value but limiting its refundable portion, which excludes many low-income families from the full benefit and introduces stricter eligibility requirements that will disqualify millions of children from receiving the credit. Additionally, the bill implements a one-time federal payment for newborns aimed at encouraging savings but structured in a way that favors wealthier families able to contribute more to these accounts.

Overall, this legislative package is projected to deepen economic disparities, reduce access to essential care services, and increase financial strain on middle- and low-income families, while providing substantial financial benefits to corporations and wealthier households. The law's approach reflects a preference for market-based, voluntary employer participation rather than comprehensive federal investment in care, with potential adverse effects on workforce stability, care accessibility, and socio-economic equity within the care economy.