At Least 310,000 Pennsylvanians Set to Lose Medicaid Under Massive New Federal Cuts

Please note: Your Medicaid coverage is not changing today. Most of the new rules described in this article don't start until October 2026 or later. When that happens, the changes will be significant and will affect hundreds of thousands of Pennsylvanians. Read on to learn more.

 

On July 4, President Trump signed the new federal budget into law, the so-called "One Big Beautiful Bill Act”, marking the biggest cuts to Medicaid since the program began 60 years ago.  It cuts nearly $1 trillion from federal Medicaid spending nationwide over the next 10 years, leaving states to fill the gap.  The results will be catastrophic.  In Pennsylvania alone, 310,000 people are set to lose their Medicaid coverage because of the law's new work reporting requirements and more frequent renewals for those in the Medicaid expansion category. This doesn’t even include the additional people who will lose coverage due to anticipated increased paperwork problems and/or processing delays.  Overall, the law will have a devastating impact on healthcare access and affordability across the natoion, and right here in the Commonwealth. 

Below are some of the most significant cuts to Medicaid contained in the new law:

 

Work Reporting Requirements
Starting January 2027 (could be extended)

Some adults will have to prove they work or do other approved activities for at least 80 hours every month to qualify for Medicaid and to renew their coverage.  The work reporting requirements apply to non-pregnant adults ages 18-64 who get Medicaid through Pennsylvania’s Medicaid expansion category. This accounts for about 750,000 people (1 in 4) on Medicaid in Pennsylvania.  

Who is Exempt?

Certain people in the Medicaid expansion category are exempt from the work reporting requirements, which means they don’t have to follow the new work reporting rules. However, even those who are exempt will need to prove they qualify for the exemption by submitting acceptable documentation, unless the CAO is able to make that determination on its own. Individuals exempt from the work reporting requirements include:

• Parents, guardians, or caregiver-relatives of children under 14 or a person with a disability.
• People getting Social Security Disability (SSD) or who have a disability that could make them eligible for SSD.
• Others with disabilities or special needs such as someone with a medically complex condition.
• People in substance use disorder treatment programs
• Veterans rated as having a total disability.
• People who are pregnant and those receiving postpartum Medicaid coverage (up to 1 year after the pregnancy ends).
   

What Counts as Work?

Besides working 80 hours per month, other activities that meet the work requirement include community service or participation in a work program for at least 80 hours per month, attending college or career and technical training at least half time, and having monthly income of at least $580 (the federal minimum wage—currently $7.25 per hour— multiplied by 80).

Those who Medicaid because they’re unable to meet these requirements will also be locked out of obtaining affordable health coverage through Pennie, Pennsylvania’s state-based ACA marketplace.

Pennsylvania's Department of Human Services (DHS), the state agency that runs our Medicaid program, estimates that increased staff needs to handle work requirements will cost the state $18 million dollars a year on top of substantial initial implementation costs. 

 

More Frequent Eligibility Renewals
Starting January 2027

All adults in the Medicaid expansion category will have to renew their Medicaid coverage every six months instead of once a year.  This means more paperwork and more chances of losing coverage due to missed deadlines or paperwork errors. For those subject to work reporting requirements, this will mean having to prove meeting work requirements or an exemption no less than twice a year. 

About 1.5 million eligible Pennsylvanians already lose Medicaid every year when they try to renew, mostly due to paperwork issues. While most get their coverage back eventually, these coverage gaps mean people can't get medical care when they need it and end up with medical debt.

 

Less Help with Past Medical Bills 
Starting January 2027

Right now, if you get approved for Medicaid, it can help pay medical bills from up to 3 months before you applied (if you would have been eligibility in those past months). This is known as “retroactive” coverage. The new law cuts this to just 1 month for people in the Medicaid expansion population, and 2 months for everyone else.  This change means more medical debt for those who got medical care before they could apply for Medicaid and threatens hospital stability as more services are provided without compensation.

 

Delayed Eligibility and Enrollment Rules 
Starting Immediately

In 2023 and 2024, the federal government issued two new rules designed to remove barriers to enrollment in and streamline eligibility and renewal for Medicaid, CHIP and Medicare Savings Programs were finalized.  The new law has put most of these helpful changes on hold until September 2034.

The good news: Senate Democrats were able to save some of the changes that were already in place, including one rule, implemented in Pennsylvania in July 2024, that made it so that people no longer have to first apply for every single program they might qualify for (e.g. early retirement benefits) just to get Medicaid.  The Senate also preserved rules related to CHIP enrollment for families seeking health insurance for their children.

 

Restrictions on Immigrant Access to Medicaid
Starting October 1, 2026

Starting October 1, 2026, many immigrants who can get Medicaid today will lose that coverage, including refugees, people seeking asylum, survivors of human trafficking or domestic violence, and many other people who are here legally.

Only the following people will still be able to qualify for Medicaid under the new law:

• U.S. citizens
• Green card holders (lawful permanent residents)
• Certain people from Haiti and Cuba, and
• Migrants from Micronesia, Palau and the Marshall Islands. 
• Exception: Most pregnant individuals and children under 21 who are considered lawfully present can still get Medicaid and CHIP coverage.
   

Immigrants who lose coverage due to the new law also won’t be able to get subsidized health insurance through Pennie starting in January 2027.

Pennsylvania does have a small state-funded Medicaid eligibility category that is available to people who are lawfully present immigrants if they are ineligible for federally-funded Medicaid.  However, the income and resource limits are quite low compared to other Medicaid categories.

 

Restricting States' Abilities Their Medicaid Programs

The new law doesn’t just change who can get Medicaid. It also makes it much harder for states to pay for the program.  This will create significant barriers to accessing care—hospitals may close, doctors and other providers may become harder to find (especially in rural areas), and people may need to travel further for care.  In Pennsylvania alone, DHS estimates that federal funding cuts combined with more people losing insurance will threaten the closure of at least 25 rural hospitals across our state. 

Medicaid is funded jointly by federal and state governments. The federal government pays a portion of costs, and the state pays a portion. The new law both reduces the federal Medicaid dollars going to states and places significant restrictions on how states can raise money to cover their share of the costs of Medicaid.
 

Restrictions Provider Taxes

All states (except Alaska) raise money to pay for Medicaid by charging taxes to healthcare providers like hospitals and nursing homes. These are called "provider taxes." The new law creates strict rules about these provider taxes, including:

• States cannot create any new provider taxes.
• States cannot raise the taxes they already have.
• In states like Pennsylvania that expanded Medicaid, the maximum tax rate will be lowered from 6% to 3.5% over four years starting in October 2027, Nursing facilities and intermediate care facilities are exempted from having the rate lowered.
   

These restrictions, according to estimates from DHS, will result in the loss of $20 billion from Pennsylvania’s Medicaid budget over 10 years. How Pennsylvania will make up this deep cut to the program’s funding is unknown.  If the money cannot be found outside the Medicaid program, then Pennsylvania will be faced with the terrible prospect of having to consider making up the revenue losses with further cuts to Medicaid eligibility or services. 

 

Restrictions on How Much Medicaid Providers Can Be Paid

Many states, including Pennsylvania, make what are known as “state-directed payments” to Medicaid managed care plans that are passed on to specific provider types. This helps increase how much Medicaid providers are paid for treating patients, which helps ensure that providers want to accept Medicaid patients, hospitals and nursing homes can stay open, and people who rely on Medicaid can find healthcare.

The new law limits how much extra money states can send to providers as state-directed payments. Starting immediately, any new payments cannot be more than what Medicare would pay. Existing state-directed payments that were approved by CMS prior to May 1, 2025, as well as payments to rural hospitals, are grandfathered in until January 1, 2028. At that time, these payments will be incrementally reduced until they match Medicare rates.

 

Targeted Attack: Defunding Planned Parenthood

The new law says Medicaid cannot pay for any services at healthcare providers that perform abortions and received a specified amount of Medicaid funds in the past. This provision targets and defunds Planned Parenthood.  However, Planned Parenthoods provide far more services than abortion. They provide birth control and family planning help, cancer screenings, STI testing and treatment, and preventive care like regular checkups. In many communities, Planned Parenthood is the main place people access healthcare – including preventative care.

The provision defunding Planned Parenthoods went into effect immediately with the signing of the new law and lasts one year. It is estimated to impact 200 clinics in 24 states, including Pennsylvania.  Planned Parenthood has sued, and on July 28, a federal court blocked the federal government from enforcing the provision while the lawsuit proceeds.  A second lawsuit was filed on July 29th by Pennsylvania Governor Shapiro and other Democrat led states and the District of Columbia. 

 

What Happens Next?

The changes will not happen all at once. Different parts of the law will take effect over several years. PHLP will keep watching these changes closely and work with our state and community partners to try to mitigate their impact. We will let you know when new requirements begin and how they might affect you.

For a review of the full scope of cuts to Medicaid as well as to the Children’s Health Insurance Program, Medicare and the Affordable Care Act, we recommend this explainer by the Georgetown Center for Children and Families or this one by KFF. 

PHLP is committed to keeping Pennsylvanians informed about what's happening and how it affects families across our state. Sign up for our newsletter to get updates as more information becomes available.