Health Care Provisions in the One Big Beautiful Bill: Summary and Analysis

On May 22, the House of Representatives passed the One Big Beautiful Bill (OBBB). The bill contains more than 40 health policy reforms aimed at restoring fiscal discipline and program integrity to federal health care programs while expanding consumer control. The legislation now heads to the Senate. The next six weeks of debate will be one of the most important periods for health care in our nation’s history.

The health policy provisions in the bill are projected to reduce federal Medicaid and Affordable Care Act (ACA) subsidy spending by approximately $1.25 trillion over the next decade (including the full budgetary effect of codifying two proposed Trump administration rules), largely based on analysis from the Congressional Budget Office. Although this is a sizeable reduction, it must be understood in context: the 2025-2034 baseline for federal Medicaid and ACA subsidy spending increased by $1.8 trillion under the Biden administration. Since 2021, federal policies have dramatically expanded Medicaid and subsidized exchange enrollment, weakened eligibility verification, and increased insurer subsidies through the ACA. These changes fueled unsustainable spending growth, including a massive surge in improper payments and widespread enrollment fraud.

The OBBB represents a course correction—one that reduces waste, fraud, and abuse; promotes work over dependency; improves the efficiency of the ACA; and empowers patients with greater control over their health care spending through more flexible health savings account (HSA) policy and individual coverage health reimbursement arrangements (ICHRAs).

We have just released a summary and analysis of the more than 40 health-related reforms in OBBB. You can access that here.

Key Themes of the OBBB’s Health Reforms

• Reducing Medicaid Waste, Fraud, Abuse, and Curbing Corporate Welfare
  The bill cracks down on Medicaid money-laundering schemes; institutes community engagement requirements for able-bodied adults; and enhances integrity through better eligibility enforcement.
• Restoring ACA Program Integrity
  The bill reverses the Biden administration’s “enroll-at-any-cost” approach by reestablishing essential checks on income and eligibility and tightening exchange plan enrollment periods.
• Expanding Health Freedom
  The bill codifies and enhances ICHRAs and significantly expands the flexibility and reach of HSAs.

Major Medicaid Reforms

1. Reducing Medicaid Money Laundering

OBBB targets states’ abuse of provider taxes and state-directed payments—mechanisms that allow states to inflate federal matching dollars without real state contributions:

• Provider tax rates are frozen with no new ones permitted.
• New SDPs are capped at 100% of Medicare rates in Medicaid expansion states and 110% in non-expansion states. In many states, Medicaid payments rates are now well above Medicare rates—sometimes more than double. More than 80% of American voters support reforms that limit Medicaid payments to no more than Medicare rates.
• The bill codifies stricter standards for uniformity and redistribution, targeting schemes like California’s use of a managed care provider tax to extract federal funds to cover unauthorized immigrants.

These reforms directly address what Paragon has documented as Medicaid’s “legalized money laundering”—a scheme that fuels corporate welfare and allows states to obtain massive federal funding without a commensurate increase in state spending.

2. Community-Engagement Requirements

The bill requires working-age, able-bodied adults without dependents to work, study, or volunteer for at least 80 hours per month to retain Medicaid coverage. This provision restores Medicaid’s role as a safety-net program, not a permanent welfare option for able-bodied individuals. Nearly 80% of American voters support implementing work requirements for able-bodied, working-age adults in Medicaid.

3. Verifying Eligibility and Reducing Improper Payments

• Largely due to the large number of ineligible enrollees, federal improper payments in Medicaid likely exceed $100 billion a year. To address improper payments and eligibility abuses, the bill:
• Requires semiannual eligibility redeterminations for ACA Medicaid expansion enrollees;
• Implements real-time address verification to detect dual enrollment across states; and
• Limits HHS’s discretion to waive penalties for excessive improper payments and strengthens Section 1115 waiver budget neutrality requirements.

These measures address core structural flaws—namely, the lack of state accountability and the misalignment of federal incentives that reward overspending.

ACA Exchange Program Integrity Reforms

The ACA exchanges became a magnet for fraud under the Biden administration’s deliberate rollback of guardrails. The OBBB would reverse these changes and increase program integrity:

• Requires pre-enrollment verification of income and eligibility;
• Replaces passive re-enrollment with active confirmation of plan choice and eligibility;
• Eliminates Special Enrollment Periods (SEPs) tied to self-attested income between 100–150% of the federal poverty level; and
• Eliminates repayment caps for advance premium credits when income is misreported.

These provisions respond to Paragon research, validated by the Centers for Medicare and Medicaid Services, showing that 4 to 5 million individuals are improperly enrolled in the exchanges annually, costing taxpayers $15–$26 billion in 2024 alone. Unscrupulous brokers and enrollees often game the system by misstating applicant information, with limited risk of enforcement or recapture of misallocated subsidies. This bill restores accountability to a subsidy system that has become riddled with abuse.

The OBBB also contains an appropriation for the ACA cost-sharing reduction (CSR) program, a policy I have strongly endorsed. A CSR appropriation will result in both lower premiums for silver plans and lower deficits.

CHOICE Arrangements: Codifying and Expanding ICHRAs

The bill codifies and enhances Individual Coverage Health Reimbursement Arrangements (ICHRAs), first authorized under the Trump administration in 2019, and rebrands them as CHOICE Arrangements (Custom Health Option and Individual Care Expense Arrangements). These allow employers to provide tax-free contributions for employees to purchase ACA-compliant individual market coverage—offering an alternative to traditional group health insurance. CHOICE Arrangements will be especially beneficial to small employers who want to contribute towards health care coverage for their employees.

The OBBB:

• Codifies the ICHRA rule and rebrands it as a CHOICE Arrangement;
• Allows workers to use pre-tax dollars to cover their share of premiums;
• Provides a two-year tax credit for small businesses (fewer than 50 employees) adopting CHOICE Arrangements—$100 per employee/month in year one and $50 in year two; and
• Allows small employers to offer both a group plan and CHOICE arrangement to the same class of employees, increasing flexibility.

HSA Reforms: Putting Patients in Charge

The OBBB also includes 10 major HSA reforms that expand eligibility and increase consumer flexibility. Key changes include:

• Allowing working seniors on Medicare Part A to continue contributing to HSAs;
• Making Direct Primary Care (DPC) arrangements HSA-compatible (up to $150/month individual, $300/month family);
• Permitting conversion of unused FSA/HRA funds into HSAs;
• Allowing HSA use for fitness and exercise programs (up to $500 per individual and $1,000 per family annually); and
• Doubling HSA contribution limits for individuals earning under $75,000 ($150,000 for families).

Together, these provisions give Americans—especially working-class families—more power to save, spend, and plan for their care in a tax-advantaged, patient-centered way.

Moving Forward

The health policy provisions in the One Big Beautiful Bill Act represent a fiscally responsible effort to restore integrity to Medicaid and the ACA by addressing the irresponsible growth, waste, fraud, and abuse that accelerated under the Biden administration. Through targeted reforms—community engagement requirements, anti-fraud enforcement, financing integrity, and pro-patient tools like CHOICE Arrangements and HSAs—the bill would reduce federal health care spending by $1.25 trillion over the next decade, while prioritizing those who truly need support.

As the Senate takes up the legislation, it should retain these vital health reforms and consider additional measures to ensure that federal programs support patients, not bureaucracy—and reward work, not waste—while protecting taxpayers and prioritizing the truly needy. In particular, the Senate should look at further reducing state Medicaid money-laundering tactics, take steps to protect Medicaid for the most vulnerable rather than the ACA expansion enrollees, and add the HSA option to give low-income exchange enrollees more control over their health care.