After 28 hours of deliberation including a marathon Rules Committee meeting that saw more than 500 proposed Democratic amendments, the House of Representatives, early in the morning of May 22, passed the One Big Beautiful Bill Act (H.R. 1) (the Reconciliation bill).

The bill in its final form is certainly big, clocking in at over 1000 pages long and including a 42 page “manager’s amendment” with detailed editing instructions for changes that were needed to pass the bill both through the Rules Committee and through the full House. But is it beautiful? That, as the say, is in the eye of the beholder.

The bill impacts virtually every constituent of the health care industry – providers, payors, manufacturers, and patients. The bill now goes to the Senate, which has adjourned but will reconvene for legislative business on June 2 and will only need a majority to pass it since it is being considered under the rubric of Budget Reconciliation. According to Senate majority leader John Thune (R. SD), the Senate deliberations on the bill will likely see some changes. But with recognition that the bill passed the House by the narrowest of margins 215-214, making any changes to the bill is dangerous to its eventual passage.

In this post, the first in a series, we review the basics of many of the health care impacts of the bill in its current form. We will develop these items with further background and detail in additional posts in the coming weeks as we watch the Senate’s attempts to “reconcile” its priorities with the contents of this bill.

Medicaid and CHIP Eligibility and Coverage Changes

This is the section of the bill that has gotten the most attention since the budget resolution was passed earlier this year with a target of $880 billion in savings from jurisdiction of the House Energy and Commerce Committee, the committee that controls Medicare and Medicaid. Here are the major points from the bill.

• Requires “Community engagement” for enrollment in Medicaid. This means that individuals who are capable must either have 80 hours of work or a work program in a given month, or 80 hours of community service, or be enrolled at least half-time in an educational program, or some combination of those. This requirement was originally scheduled to take effect in January 2029 but has been moved up to December 31, 2026.
• Requires eligibility evaluations every 6 months for certain Medicaid enrollees,
• Places a moratorium on the implementation of recent eligibility rules that were promulgated by the Biden Administration.
• Reduces by 10% the Federal Medical Assistance Percentage (FMAP) expansion for states that permit Medicaid coverage for undocumented individuals.
• Restricts retroactive coverage under Medicaid and Children’s Health Insurance Program (CHIP) to one month instead of the current three months.
• Requires Medicaid Demonstration projects to be budget-neutral.
• Delays DSH reductions that were scheduled to take place in 2026 until 2029.
• Establishes a statutory restriction on the waiver of the uniform tax requirement for states trying to implement provider taxes to fund their contributions to Medicaid. For more on this topic and a recent proposed rule on the waiver formulae, see this blog post from last week.

Nursing Home and Long Term Care Facility Minimum Staffing Rule

The bill prohibits HHS from enforcing the Biden administration’s minimum staffing rule for nursing homes and long-term care facilities until 2035. This rule requires those facilities to have nursing staff on site 24/7 and to have a much larger ratio of staff hours than was previously required. Many in the long-term care sector said that application of the rule’s provisions would cause closures of facilities around the country. In April, a federal judge in Texas struck down the rule on the grounds it was inconsistent with the Medicare and Medicaid statutes.

Abortion and Gender Affirming Care

The bill prohibits the use of cost-sharing reduction payments to a qualified health plan that includes abortion coverage unless that coverage is limited to an abortion necessary to save the life of the mother or in cases of rape and incest. Additionally, the bill prohibits coverage of Gender Transition Procedures, including use of puberty blockers or hormone therapies by either CHIP or Medicaid.

Both of these provisions, which only impact Medicaid and CHIP in the bill, seem to be first steps toward Federal bans on both abortion and gender affirming care. During the House Rules Committee Meeting, Rep. Teresa Leger Fernandez (D. NM) indicated that she thought the abortion provision was the beginnings of “a nationwide ban on abortion.”

Regulation of Pharmacy Benefit Managers

Pharmacy Benefit Managers (PBMs) have been a target of much recent proposed legislation and Congressional hearings. The Biden administration pressured what they saw as “drug middlemen” with various different regulations and enforcement actions. This bill seeks to tackle spread pricing by PBMs through transparent pass-through pricing. The bill also restricts PBMs from any remuneration outside of bona fide service fees. That can include incentive payments and rebates and discounts used to lower costs as long as those savings are passed through to the plan sponsor.

PBMs would also be required to provide increased transparency into both their costs and the total amount they retain with regard to covered Part D drugs. They would also be required to provide written explanations of any contracts that they have entered into with drug manufacturers for rebates, discounts, or payments directly related to formulary placement, coverage or utilization management conditions.

Physician Fee Schedule

The bill would eliminate the two-track conversion factor that was established for 2026. That provision was supposed to provide Alternate Payment Model participants with a different conversion factor when calculating reimbursement under the Fee Schedule.

The bill also tries to solve what has been a recurring problem in Medicare reimbursement: the payment reductions that have frequently had to be addressed by increasing the conversion factor on an ad hoc basis. This bill tries to fix that by updating the 2026 conversion factor by 75% of the Secretary’s increase of the Medicare Economic Index (MEI), a calculation of the cost inflation year to year for physician practices. Starting in 2027, the conversion factor would be updated annually by 10% of the MEI.

However, what this bill doesn’t address is the coming 4% reduction that its provisions would implement on Medicare. Under the Statutory Pay-As-You-Go Law (Statutory PAYGO), any law that increases the federal deficit and impacts payments under the Physician Fee Schedule will trigger the Statutory PAYGO sequestration for Medicare payments. The sequestration is currently capped at 4% of Medicare payments. As this bill is expected to add more than $2 trillion to the deficit and there are changes to the Fee Schedule, it would trigger the full 4% Statutory PAYGO sequestration, which might overwhelm the increases to the Fee Schedule conversion factor included in the bill.

Deregulation and Litigation Reforms

While not directly health related, the bill also addresses a number of regulation and litigation topics that could significantly impact health care entities. First, it provides $100 million to the Office of Management and Budget (OMB) to “pay expenses associated with improving regulatory processes and analyzing and reviewing rules.” This is in place of the original proposal that would have created a Congressional approval requirement for most regulations and would have sunset regulations that didn’t obtain Congressional Approval within five years.

Even as the OMB review that is left in the bill could lead to large scale regulatory changes, the ability to challenge those regulations is also looking at stark changes should this bill pass unchanged through the Senate. The bill contains a restriction on contempt citations for injunctions unless the party seeking the injunction has offered sufficient security to the court pursuant to Federal Rule of Civil Procedure 65(c). This could mean that a party seeking an injunction could be required to pay the court enough to cover the costs and damages for the party if the injunction is later struck down. If the court doesn’t require this payment or the payment is insufficient, then the court would lose the authority to enforce its injunction.

These are some of the most major health care related impacts of the House Reconciliation bill. The bill also includes other provisions such as changes to ACA market reforms to allow previously banned high-deductible plans, as well as removing Deferred Action for Childhood Arrival recipients from the pool of legally present individuals who can purchase insurance on the ACA exchanges. The bill also includes tax deductions for companies to perform domestic research and experimentation, which is likely related to recent efforts to onshore drug and medical research, which we explored in a blog post earlier.

There will be more to this as the bill takes shape, and recent comments by some Senators, including Ron Johnson (R. WI) and Rand Paul (R. KY) indicate that the final form of this bill will be very different from its current form. Reed Smith will continue to follow developments involving the Reconciliation bill and its impact on the health care industry. Stay tuned for future posts providing more detailed analysis of the provisions of the bill. If you have questions about this bill or any other pending legislation. Please don’t hesitate to contact the authors of this post or the health care lawyers at Reed Smith.