Update on Budget Reconciliation

On July 4, President Trump signed into law congressional Republicans’ budget reconciliation legislation popularly referred to as the “One Big Beautiful Bill Act.” In addition to permanently extending the 2017 tax cuts and boosting funds for border security and immigration, the bill overall reduces federal spending on state Medicaid programs.

HCAOA appreciates that the legislation takes steps to expand access to home and community-based services, although the legislation did not include HCAOA’s tax priorities as outlined in our May 28 Newsletter. HCAOA will continue to advocate for bipartisan financial relief policies to support caregiving families and home care workforce issues.
 
As enacted, the Act will:

• Incrementally reduce the provider tax cap from 6% percent under previous law to 3.5 percent in Medicaid expansion states, and prohibit states from establishing new provider taxes.
• Reduce the current payment limit for state directed payments from average commercial rate to 110% of the Medicare payment rate in expansion states and 100% of the Medicare payment rate in non-expansion states. For existing state directed payments, the limit will be reduced by 10 percent annually until the applicable payment rate is reached.
• Introduce new work requirements for adults without disabilities and who are not caregivers. The requirement is at least 80 work hours per month from December 2026.
• Require Medicaid expansion enrollees earning more than 100% of the federal poverty level to pay cost-sharing amounts up to $45 per service, excluding primary, prenatal, pediatric, emergency room care, or care provided by a federally qualified health center, community health center, certified community behavioral health clinic, or rural health clinic.
• Allow states to apply for standalone waivers, beginning July 1, 2028, to cover home- and community-based services without requiring institutional level of care determinations. Approved waivers start with a three-year term and can be renewed in five-year extension periods upon request of the state.
• Allow Americans ages 65 and older to claim an extra standard deduction ($2,000 for a single filer, $1,600 per qualifying spouse in a couple) on top of the standard deduction available to all taxpayers who don’t itemize. The reconciliation bill adds a 65-plus bonus deduction of $6,000, through the 2028 tax year.