Medicare Changes & Cuts - The Big Ugly Bill

All the promises not to cut Medicare or touch it were glossed over to the “senility chief” running our country, or maybe no one told him on purpose. As far as he knows, having never set eyes on this Big Ugly Bill, or know anything about what is actually in it, there were no cuts to Medicare. WRONG!

Worse is yet to come in the form of PAYGO where Medicare funding will be cut through required austerity should the full Federal budget exceed a certain threshold. The Big Ugly Bill exceeds this threshold and Medicare will be on the chopping block to the tune of $500,000,000 if Sequestration is requested by our “cognitive-in-chief.” Sequestration has been inconsistently applied in the past, so it is hard to say whether it will be applied this time, but if it is, according to the law, then it will gut Medicare some more.

The Republicans will deny it. They will tell us all that there were no cuts to Medicare. ‘What are you talking about? Nobody is touching Medicare.’ And yet they did and the loss of Medicare funding, whenever it happens will add to the other cuts and push the closure of health care facilities, including hospitals, nursing homes, clinics, providers, etc. to occur faster and over a larger swath of the population. Again, the measures in this bill are destructive and they will result in people dying.

PAY-AS-YOU-GO Law (2010)

What happens when the budget continues to increase the annual deficit and we continue to borrow money? The Pay-as-you-go law kicks in. This was taken from and explanation of the Pay-As-You-Go Law as to when it kicks in, how it kicks in, and what programs are impacted. Note that Social Security and the Postal Service are not included in the Austerity cuts required by this law. Medicare is open season.

“SEQUESTRATION

If the Office of Management and Budget determines that either the 5- or 10-year average cost is greater than zero when Congress adjourns, the president must sequester certain mandatory spending programs. In other words, those programs will face an across-the-board spending cut. The higher of the two averages determines the sequestered amount. Spending for each program is reduced by the same percentage for one year to offset the average projected deficit increase. Unless Congress acts to reduce or eliminate the projected deficit increase, there is another sequestration the following year.

Some programs are exempt from sequestration. Social Security and the postal service are exempt because they are classified as “off-budget” programs (although they are included in consideration of the unified budget). Moreover, numerous welfare and other safety net programs, such as Medicaid, the Supplemental Nutrition Assistance Program, and unemployment insurance, are also exempt. Medicare is subject to sequestration, but the spending reduction for Medicare is limited to 4 percent. If sequestration calls for an across-the-board reduction of more than 4 percent, the additional amount that would have come from Medicare is allocated proportionally to other programs.” - https://taxpolicycenter.org/briefing-book/what-paygo

What is Medicare? - https://www.singlecare.com/blog/what-is-medicare/

Medicare Savings Programs

This first part of Medicare cuts in the Big Ugly Bill is in reference to Medicare Savings Programs. (https://www.ssa.gov/open/materials/SSA-L448-2023-English.pdf) The Medicare Savings Program was set up to help low income seniors pay for premiums, deductibles, co-insurance, co-payments, and drug co-payments or deductibles. Certain parts of the Medicare Savings Program has been put on pause for the next 10 years and will not be available while the Big Ugly Bill budget is in force. The pause supposedly expires on 9/30/2034.

“The OBBBA prohibits the implementation of two finalized rules until October 1, 2034. The rules would have made it easier for very low-income Medicare enrollees to access Medicare Savings Programs (MSPs), which help cover premiums and cost-sharing for their Medicare benefits. This will disproportionately affect disabled people, as they are more likely to have lower incomes than nondisabled people. Second, the bill eliminates Medicare eligibility for people with lawful immigration status who have already paid into the program. Lastly, according to the CBO, absent future congressional action, the bill will trigger $490 billion in cuts to Medicare from 2027 to 2034 due to the Statutory Pay‑As‑You‑Go Act of 2010.” https://www.americanprogress.org/article/the-truth-about-the-one-big-beautiful-bill-acts-cuts-to-medicaid-and-medicare/

The following Sections 406.21 and several 435 Sections will not be implemented or enforced through 9/30/2034.

Essentially, sections 406.21 and the 435.x sections listed below that define different aspects of Medicare will NOT be implemented of enforced. I did not go into a great deal of detail on each one. If you are interested in reading all the details of what is NOT going to be done, I have included the links. Some of these sections are quite lengthy.

This section is from Title 42 of the Code of Federal Regulations:

Section 405.21

Section 406.21 (c) - Essentially the enrollment period for Medicare Savings Program is canceled.

c) General enrollment period.

(1) Except as specified in paragraph (c)(4) of this section, the general enrollment period extends from January 1 to March 31 of each calendar year.

(2) General enrollment periods are for individuals who do not enroll during the special enrollment period, who failed to enroll during the initial enrollment period, or whose previous period of entitlement had terminated.

(3) If the individual enrolls or reenrolls during a general enrollment period—

(i) Before January 1, 2023, his or her entitlement begins on July 1 of the calendar year; or

(ii) On or after January 1, 2023, his or her entitlement begins on the first day of the month after the month of enrollment.

(4) During the period April 1 through September 30, 1981, the general enrollment period was any time after the end of the individual's initial enrollment period. Any eligible individual whose initial enrollment period has ended, or whose previous period of entitlement had terminated, could enroll or reenroll during that 6-month period.

(5) If an individual resides in a State that pays premium hospital insurance for Qualified Medicare Beneficiaries under § 406.32(g) and enrolls or reenrolls during a general enrollment period after January 1, 2023, QMB coverage is effective the month entitlement begins (if the individual is determined eligible for QMB before the month following the month of enrollment), or a month later than the month entitlement begins (if the individual is determined eligible for QMB the month entitlement begins or later).

Section 435 - PART 435—ELIGIBILITY IN THE STATES, DISTRICT OF COLUMBIA, THE NORTHERN MARIANA ISLANDS, AND AMERICAN SAMOA

Section 435.4 – Essentially this section defines who would be eligible for Health Assistance Services.

This is a significantly long section, so I’m going to put the link in here for you if you want to read it. https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-C/part-435/subpart-A

Section 435 – These are long sections if you want to read each entire section: https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-C/part-435

435.601 Application of financial eligibility methodologies.

(a) Definitions. For purposes of this section, cash assistance financial methodologies refers to the income and resources methodologies of the AFDC, SSI, or State supplement programs, or, for aged, blind, and disabled individuals in States that use more restrictive criteria than SSI, the methodologies established in accordance with the requirements of §§ 435.121 and 435.230.

435.911 Determination of eligibility.

(a) This section implements sections 1902(a)(4), (a)(8), (a)(10)(A), (a)(19), and (e)(14) and section 1943 of the Act.

(b)

(1) Except as provided in paragraph (b)(2) of this section, applicable modified adjusted gross income standard means 133 percent of the Federal poverty level or, if higher -

435.952 Use of information and requests of additional information from individuals.

(a) The agency must promptly evaluate information received or obtained by it in accordance with regulations under § 435.940 through § 435.960 of this subpart to determine whether such information may affect the eligibility of an individual or the benefits to which he or she is entitled.

From H.R.1 – There seems to be some funding left in the account and will be run to zero. It is very little in an amount.

(b) Implementation Funding.--For the purposes of carrying out the

provisions of this section and section 71102, there are appropriated,

out of any monies in the Treasury not otherwise appropriated, to the

Administrator of the Centers for Medicare & Medicaid Services,

$1,000,000 for fiscal year 2026, to remain available until expended.

Physicians Reimbursement Changes

The Big Ugly Bill changes the rates at which Physicians get reimbursements from Medicare. I am just starting with Medicare after my next birthday so I have been lining up providers that will take Medicare and Medicare Advantage programs for insurance. Not all physicians will accept Medicare because of the low reimbursements and not all physicians will take certain Advantage plans because of the difficulties in working with insurance companies. So, make sure that any changes do not impact the care providers you have selected.

The final version of the Big Ugly Bill “Provides a temporary one-year increase of 2.5% to the Physician Fee Schedule conversion factor for all services furnished between January 1, 2026 and January 1, 2027.” https://www.kff.org/tracking-the-medicare-provisions-in-the-2025-budget-bill/ So the incentives for providers have been eliminated and even the 2.5% increase is only for 12 months. It was not made clear what will happen after 2027.

Drug Price Negotiations

The Big Ugly Bill expanded the definition of “orphan” drugs so that more drugs would be off the “selection” list to be part of Medicare’s drug negotiation with the pharmaceutical companies. Orphan drugs were those drugs that only addressed 1 disease – (1 disease only). The Big Ugly Bill has now redefined orphan drugs as those that “include drugs designated for one or more rare diseases or conditions and where the only approved indication or indications are for one or more rare diseases or conditions.” Changing the definition allows the pharmaceutical companies to keep more drugs at the higher prices so they can continue to pull in high profits on a larger number of drugs at the taxpayers’ and patients’ expense.

The bill further limits the list of drugs that can be negotiated for better pricing for Medicare beneficiaries because of the time the drugs are on the market. Whatever few drugs do meet the new definitions will not be available at the new negotiated price, whatever that turns out to be, until 2028. It is estimated that this change and protection of the pharmaceutical companies over Medicare recipients will cost tax payers an additional $5 Billion dollars over 10 years, or $500 million dollars per year in increased drug costs.

One of the reasons given regarding the high cost of drugs, especially the out of pocket cost for the consumer, has been this process of a middle person called a Pharmacy Benefit Manager. In the pharmacy run by Mark Cuban, there are no PBMs as they negotiate the prices directly with the pharmaceutical manufacturers. The final Big Ugly Bill took out any accountability and transparency required of PBMs in what looks like a scam, or a kickback to a PBM who is not needed, but makes a significant amount of money between the manufacturer and the pharmacy. AND – we all are paying for it either through our taxes or co-pays or both. So, do not count on the price of any medications going down any time soon and if you are someone with a rare disease and your drugs are astronomical in price, they are likely to remain that way. For anyone else, the prices for any drugs that actually are negotiated to a lower price are not going to come down until at least, (at least) 2028.

Rural Hospitals

The final Big Ugly Bill has set aside $50 Billion dollars in a fund to assist States in keeping open Rural hospitals. If evenly divided, that would be $1 Billion per State to keep hospitals open in rural areas.

In the State where I live, there are over 30, nearly 40 rural hospitals serving over 1 million nearly 1.5 million people. To keep all of the rural hospitals open across our state would require an estimated $5 Billion per year. $50 Billion was never going to cut it.

With the cuts to Medicare, Medicaid & Chip (which I will cover separately), plus the paltry pittance in the “fund,” each hospital would only get $27 million to operate, which is only 17% of their entire budget requirements. What it really means is that rural hospitals will continue to close so that there will be one or two hospitals to service those 1.5 million people spread over 2/3’s of our State. It is going to be devastating and people will die.

Nursing Home Staffing Levels

The Biden Administration had passed a rule that required nursing homes to have minimum staffing levels to improve care. The Big Ugly Bill “Prohibits the Secretary of Health and Human Services from implementing, administering, or enforcing the minimum staffing levels required by the final rule until October 1, 2034.”

With the reduction in funding of all facilities, nursing homes will close, so I guess they do not need a minimum staff if they cannot remain open anyway. Our elderly who need long term care and their families will have to find other ways to provide care for their parents/grandparents, or pay costs that will be astronomical with no assistance from the government.

Health Provisions in the 2025 Federal Budget Reconciliation Bill

https://www.kff.org/tracking-the-medicare-provisions-in-the-2025-budget-bill/

People are being removed from Medicare eligibility and the Medicare Savings Program.

Who is eligible: “Restricts Medicare eligibility to U.S. citizens, green card holders, certain immigrants from Cuba, and people residing under the Compacts of Free Association.”

Who is being cut: “Eliminates Medicare eligibility for people not included in the above groups, such as those with temporary protected status and refugees and asylees and certain immigrants from Haiti.”

When Does It Cut: “Terminates Medicare benefits no later than 18 months from enactment of the legislation for anyone who is currently receiving benefits but no longer eligible under these changes.”

Effective Date: Upon enactment of the law – which is now.

Reinstatement Date: October 1, 2034 (2035 Fiscal Year)

Other Provisions That Were Considered In the House Version

These two items were removed from the Senate Version of the Big Ugly Bill but as noted. Expansion of the HSAs for Medicare recipients and use of Artificial Intelligence to comb data for improper Medicare payments. There is one small section on HSAs as they apply to Bronze And Catastrophic Plans.

Summary of some of the changes:

· “Limits Certain Noncitizen Access to Federal Health Services. Prevents certain noncitizens from receiving premium tax credits to reduce the cost under Medicare.

· Temporary "Doc Fix." Includes a temporary "doc fix" with a 2.5 percent increase under the Medicare Physician Fee Schedule for 2026. This increase is a one-time adjustment as in not being implemented as an inflationary adjustment.

· Exemption of Orphan Drugs from Medicare Drug Price Negotiation. The Inflation Reduction Act (IRA) exempted orphan drugs – medicines designed to treat rare diseases – from being subject to the Medicare Drug Price Negotiation Program if the drug was intended to treat only a single indication or condition. H.R. 1 expands the exemption to include orphan drugs approved for more than one rare disease starting in 2028. The language also extends the time that orphan drugs may be exempt from Medicare Negotiation if a nonrare disease indication is added to a drug.”

https://www.hklaw.com/-/media/files/insights/publications/2025/07/onebigbeautifulbillcomprehensiveanalysis.pdf

“Medicare: Despite President Donald Trump’s repeated promises not to cut Medicare, Medicare enrollees with low incomes would be hit hardest of all. An older couple on Medicare living on an annual income of only $21,000 could face an additional $8,340 in health care costs each year as a result of the House-passed bill.” https://www.americanprogress.org/article/house-republicans-big-beautiful-bill-would-make-health-care-more-expensive-for-americans-with-medicare-and-other-insurance/

Encouraging Words on Medicare

Remember that nothing is permanent. Legislation can be altered or repealed. So while they cut Medicare benefits, payments to physicians, nursing home staffing levels and negotiated drug pricing, a change in administration could restore these sections at any time. Keep pounding on Congress at your displeasure at what they have done and how it will impact you or someone in your family, or even someone you may know.

Research & Additional Reading:

What is PAYGO? - https://taxpolicycenter.org/briefing-book/what-paygo

Big Ugly Bill - https://www.congress.gov/bill/119th-congress/house-bill/1/text

88 Fed Reg 65230 - https://www.ecfr.gov/current/title-42/chapter-IV

88 Fed Reg 65230, Sec. 406.21 - https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-B/part-406/subpart-C/section-406.21

88 Fed Reg 65230, Sec. 435 - https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-C/part-435?toc=1

Health Provisions in the 2025 Federal Budget Reconciliation Bill - https://www.kff.org/tracking-the-medicare-provisions-in-the-2025-budget-bill/

The One Big Ugly Bill Act: Comprehensive Holland & Knight Analysis - https://www.hklaw.com/-/media/files/insights/publications/2025/07/onebigbeautifulbillcomprehensiveanalysis.pdf

Federal Rule on Medicare Savings Programs Will Cut Red Tape for Older Adults and People With Disabilities (May 23, 2024) - https://www.cbpp.org/sites/default/files/5-3-24health.pdf

House Republicans’ Big, ‘Ugly’ Bill Would Make Health Care More Expensive for Americans With Medicare and Other Insurance – (June 2025) - https://www.americanprogress.org/article/house-republicans-big-beautiful-bill-would-make-health-care-more-expensive-for-americans-with-medicare-and-other-insurance/

Streamlining Medicaid; Medicare Savings Program Eligibility Determination and Enrollment - A Rule by the Centers for Medicare & Medicaid Services on 09/21/2023 - https://www.federalregister.gov/documents/2023/09/21/2023-20382/streamlining-medicaid-medicare-savings-program-eligibility-determination-and-enrollment

42 CFR Parts 406 and 435 [CMS–2421–F] RIN 0938–AU00 - https://www.govinfo.gov/content/pkg/FR-2023-09-21/pdf/2023-20382.pdf

Final House Vote on Devastating Health and Food Assistance Cuts - https://www.medicarerights.org/medicare-watch/2025/07/03/final-house-vote-looms-on-devastating-health-and-food-assistance-cuts

Broken Promises: Republicans’ Budget Reconciliation Bill Would Cut Medicare - https://www.medicarerights.org/medicare-watch/2025/05/22/broken-promises-republicans-budget-reconciliation-bill-would-cut-medicare

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