By Brendan Salyards | Manager, Economic Initiatives & Analysis
What new laws and budget decisions mean for Medicaid, ACA coverage, and prescription drug prices
The 119th Congress recently enacted several federal decisions that are changing how people get health coverage, how much they pay for insurance, and how prescription drugs are priced. These changes affect Medicaid, Affordable Care Act (ACA) marketplace plans, and some Medicare services, with different impacts depending on income, location, and health needs.
Below is a high-level overview of the most significant changes, with references provided for readers who want more detail.
The One Big Beautiful Bill Act of 2025 (PL 119-21)
Most of the health care provisions in PL 119-21 focus on Medicaid and are designed to reduce federal spending to offset tax cuts included elsewhere in the law.
Key provisions include:
- New Medicaid work requirement: Beginning January 1, 2027, able-bodied adults ages 19–64 without children under age 13 must work or participate in approved job training programs for at least 80 hours per monthto maintain Medicaid coverage. The Secretary of Health and Human Services may delay implementation until January 1, 2029.
- New cost-sharing requirements: The law establishes a $35 copay for most Medicaid medical services. Exemptions apply to primary care, mental health and substance use services, Federally Qualified Health Centers (FQHCs), and rural hospitals.
- Support for rural hospitals: To help offset the impact of these changes, the law provides $50 billion over four years for rural hospitals.
Together, these Medicaid changes are projected to reduce federal spending by $990 Billion over 10 years (Euhus, et. al, 2025).
Expiration of Enhanced ACA Subsidies
What: The American Rescue Plan Act of 2021 provided for an increase in the amount of the Premium Tax Credit originally created under the Patient Protection and Affordable Care Act of 2010, which allowed households between 100% and 150% of the federal poverty limit (FPL) to receive health-insurance without a premium, and allowed households above 400% of the FPL to participate in the program which capped the percentage of total income that a household would have to pay for health insurance premiums.
When: These subsidies were extended by the Inflation Reduction Act of 2022, but under the legislation were set to sunset at the end of 2025. Senate Democrats refused to pass a continuing resolution for Fiscal Year 2026, with the goal of negotiating an extension of the subsidies. After a 43-day shutdown of the Federal Government, a temporary funding deal included the promise of a Seante vote to extend the enhanced subsidies, however, negotiations faltered despite the House passing a bill that would have extended the enhanced subsidies for three years. As of the time of writing, negotiations led by Senator Bernie Moreno (R-OH) to extend the ACA subsidies had stalled, such that Senator Moreno characterized them as “effectively over” (Kalra, 2026).
The enhanced ACA premium subsidies—originally expanded under prior legislation—have expired. According to the Congressional Budget Office, extending these subsidies would have cost approximately $335 billion over 10 years and would have resulted in about 3.4 million additional people having health insurance each year (Swagel, 2024).
Without the enhanced subsidies:
- Some individuals and families are expected to remain enrolled in marketplace plans.
- However, monthly premiums increased significantlyfor many households that previously qualified for the expanded tax credits—in some cases more than doubling (Luken et al., 2025).
Health Care Changes Included in the 2026 Federal Budget
Some of the White House’s health care proposals were enacted through the federal budget for 2026 rather than as separate laws. These changes focus mainly on prescription drug costs and access to care.
- Lower drug prices: The government formalized pricing agreements with drug companies and expanded access to over-the-counter medications, with the goal of making prescriptions more affordable.
- More oversight of drug middlemen: New rules increase transparency for pharmacy benefit managers (PBMs) and limit their ability to profit from drug rebates that can drive up prices for consumers.
- Expanded telehealth access:
Medicare coverage for telehealth visits was extended, especially for patients served by rural and community health clinics.
A separate proposal to replace ACA subsidies with direct contributions to Health Savings Accounts was not included but may be considered in future legislation. (Read more: bit.ly/4rdzDqO)
According to the Congressional Budget Office, these changes are expected to save the federal government about $4 billion over 10 years. Supporters say the reforms could also help reduce prescription drug costs for consumers, though the full impact remains unclear. These efforts build on TrumpRX.gov, a new platform that allows consumers to purchase certain prescription drugs directly.
Citations:
Congressional Budget Office Cost Estimate – H.R. 7148, Consolidated Appropriations Act, 2026
(2026) CBO.gov. Available at: https://www.cbo.gov/system/files/2026-01/hr7148-CAA-2026.pdf (Accessed: 03 February 2026).
Euhus, R. et al. (2025) Allocating CBO’s estimates of federal Medicaid spending reductions
across the states: Enacted reconciliation package, KFF. Available at:
https://www.kff.org/medicaid/allocating-cbos-estimates-of-federal-medicaid-spending-
reductions-across-the-states-enacted-reconciliation-package/ (Accessed: 03 February 2026).
H.R.7148 – 119th Congress (2025-2026): Consolidated Appropriations Act, 2026. (2026,
January 30). https://www.congress.gov/bill/119th-congress/house-bill/7148
Kalra, A. (2026). ACA Tax Credit Negotiations Have Stalled. Senators Can’t Even Agree on a
Reason Why. NOTUS.org. Retrieved from https://www.notus.org/congress/aca-republicans-democrats-abortion-health-care (Accessed: 06 February 2026).
Lim, D. and Chu, A. (2026) Congress is about to overhaul the drug market. Consumers may
never feel it., Politico.com. Available at:
https://www.politico.com/news/2026/02/02/prescription-drug-costs-pharmacy-benefit-managers-00761503 (Accessed: 03 February 2026).
Lukens, G. and Zhang, E. (2025) Health Insurance Premium Spikes Imminent as Tax Credit \
Enhancements Set to Expire, CBPP.org. Available at: https://www.cbpp.org/research/health/health-insurance-premium-spikes-imminent-as-tax-credit-enhancements-set-to-expire (Accessed: 03 February 2026).
Swagel, P.L. (2024) Letter to Chairman Arrington and Chairman Smith Concerning Premium Tax
Credits Available at: https://www.cbo.gov/system/files/2024-06/60437-Arrington-Smith-Letter.pdf (Accessed: 03 February 2026).
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