Email FacebookTwitterMenu burgerClose thin

Trump Medicaid Changes: Requirements and Coverage

SmartAsset maintains strict editorial integrity. It doesn’t provide legal, tax, accounting or financial advice and isn’t a financial planner, broker, lawyer or tax adviser. Consult with your own advisers for guidance. Opinions, analyses, reviews or recommendations expressed in this post are only the author’s and for informational purposes. This post may contain links from advertisers, and we may receive compensation for marketing their products or services or if users purchase products or services. | Marketing Disclosure
Share

President Trump’s “One Big Beautiful Bill Act,” signed into law on July 4, 2025, reshapes Medicaid through a combination of federal funding cuts, new eligibility rules and a nationwide work requirement. The legislation is projected to reduce Medicaid spending by $1 trillion over the next decade and could result in coverage losses for 10 million Americans by 2034. These changes affect not only enrollees, but also hospitals, state budgets and insurance markets—introducing structural shifts that will play out over several years.

If you need help planning for medical expenses in retirement, consider working with a financial advisor.

Federal Spending Cuts and Projected Coverage Losses

At the heart of the law is a reduction of roughly $1 trillion in federal Medicaid funding over 10 years. These cuts target several aspects of the program, including support for expansion populations, provider taxes, retroactive coverage and administrative funding. By capping or eliminating tools that states use to finance Medicaid—such as intergovernmental transfers and supplemental payments—the bill pushes more financial responsibility onto state governments. The result is a patchwork effect, where the degree of disruption will vary depending on a state’s reliance on federal funds.

The Congressional Budget Office initially projected that 11.8 million people could lose health insurance by 2034. However, the nonpartisan agency has since revised that number to 10 million after a provision was eliminated. The number includes both direct losses—such as individuals no longer qualifying under the new rules—and indirect losses caused by states tightening eligibility or reversing their Medicaid expansion altogether. California may see more than $28 billion in reduced funding, with millions potentially affected. In Illinois, nearly 330,000 residents could lose coverage. States will have the option to respond with their own policy changes, but many may lack the resources to fully offset the federal rollback.

Work Requirements and Administrative Barriers

While it’s unclear how many people will lose coverage specifically due to the new work requirements and administrative challenges, the CBO previously estimated that similar provisions in the House version of the bill would have left about 7.8 million people uninsured by 2034.

Some may transition to ACA marketplace plans, but those come with higher premiums and fewer benefits. Others may forgo coverage entirely, especially if they face inconsistent employment or caregiving responsibilities that complicate compliance.

National Work Mandate Begins in 2027

The legislation introduces a new federal work requirement for Medicaid enrollees aged 19 to 64 who are considered able-bodied and not disabled. Starting in 2027, these individuals must complete 80 hours per month of qualifying activities—such as work, job training, education or caregiving—to maintain coverage.

States Must Track and Enforce Compliance

States are responsible for implementing biannual compliance checks beginning in late 2026. This includes developing systems to log hours, process exemptions and notify beneficiaries. Many states have expressed concern over the cost and complexity of managing such systems at scale.

Risks of Losing Coverage Due to Paperwork

Past attempts to implement similar rules have shown that administrative complexity—not noncompliance—is the primary driver of disenrollment. In Arkansas, for example, more than 18,000 people lost Medicaid coverage largely due to missed deadlines or reporting errors related to the state’s work requirement. Under the new law, millions could face the same outcome.

ACA Marketplace Alternatives Offer Limited Relief

Some individuals who lose Medicaid may qualify for subsidized plans through the ACA marketplace. However, those plans often carry higher premiums and deductibles. For many with unstable incomes or caregiving duties, maintaining continuous coverage will become significantly more difficult.

Effects on Hospitals, Insurers and State Budgets

The financial consequences of the Trump Medicaid changes extend well beyond individual enrollees. Hospitals, particularly those in rural or low-income areas, are preparing for increased levels of uncompensated care. While the legislation includes $50 billion in rural hospital aid, that support is unlikely to make up for an estimated $155 billion in rural Medicaid cuts. Some clinics have already announced closures in anticipation of lower reimbursements. In states like Nebraska and Kentucky, local providers are scaling back services, warning of reduced capacity and longer wait times.

Insurers that manage Medicaid plans—such as Centene, Molina and UnitedHealthcare—are also reassessing their participation. The added administrative burden of enforcing work requirements could make some markets unprofitable. If insurers begin to withdraw, enrollees may be left with fewer options or higher out-of-pocket costs. Hospitals, meanwhile, may shift the burden of unpaid care to private insurers, driving up premiums even for individuals who aren’t directly affected by Medicaid changes.

State governments face a separate set of challenges. With less federal money coming in and more administrative work to do, state Medicaid agencies must upgrade IT systems, hire additional staff and build communication channels to manage the new rules. Many are already signaling that they lack the funding or infrastructure to do so efficiently. This may lead to delays, inconsistent enforcement or greater reliance on contractors—each with its own risks.

Legal Pushback and Policy Uncertainty

The legality of nationwide Medicaid work requirements remains unresolved. In 2020 and 2021, federal courts blocked several state-level programs, ruling that the work requirements were inconsistent with Medicaid’s core mission to provide medical assistance. Whether the current law survives legal scrutiny will likely depend on how it is implemented, how exemptions are handled and whether courts view the policy as burdensome or arbitrary.

In the meantime, advocacy groups and several state attorneys general are preparing lawsuits to challenge the new mandates. Critics argue that the law will disproportionately affect low-income families, people with disabilities and rural residents who may not qualify for formal exemptions but still face substantial barriers to work. Proponents of the bill say the new rules will encourage labor force participation and reduce dependency on government benefits, but evidence from earlier pilots is mixed at best.

What happens next may depend on a combination of court rulings, state policy choices and administrative preparedness. Some states may attempt to ease implementation by broadening exemptions or phasing in new systems gradually. Others may adopt more aggressive timelines, increasing the risk of coverage disruptions. For Medicaid recipients, the ability to stay insured may come down to a simple matter of paperwork, deadlines and whether a state’s system works as intended.

Bottom Line

The effects of the One Big Beautiful Bill Act and its implications for Medicaid will unfold unevenly across states, shaped by policy decisions, administrative capacity and unresolved legal challenges. Some individuals may secure alternative coverage, while others could lose access due to new reporting rules or procedural delays. In the years ahead, changes in enrollment, funding and service delivery may reflect not only the letter of the law but also how states choose to implement it.

Tips for Medical Expense Planning

  • A financial advisor can help you project future medical expenses, identify the best accounts for saving, and coordinate health-related planning with retirement, insurance and estate strategies. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Health savings accounts (HSAs) and flexible spending accounts (FSAs) can lower your taxable income while helping you save specifically for healthcare costs. HSAs in particular offer triple tax advantages—contributions are tax-deductible, earnings grow tax-free, and withdrawals are tax-free when used for qualified medical expenses.

Photo credit: ©iStock.com/zimmytws, ©iStock.com/Jacob Wackerhausen, ©iStock.com/PeopleImages