Historic Medicaid Cuts Coming to Pennsylvania: 310,000 Could Lose Coverage

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 that makes the biggest cuts to Medicaid since the program began 60 years ago.  The new law cuts nearly $1 trillion from federal Medicaid spending nationwide over the next 10 years.  In Pennsylvania alone, 310,000 people are expected to lose their Medicaid coverage because of 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 Commonwealth. Below is a look at some of the most significant cuts contained in the new law. 

 

Changes to Eligibility and Enrollment

 

Work Reporting Requirements
Starting January 2027 (may 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.  Work requirements begin January 2027, but states may be able to get a two-year extension on implementation. 

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 a disability members
• 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, a substance use disorder, or a disability that interferes with performing daily tasks
• Veterans rated as having a total disability.
• People who are pregnant and people getting postpartum Medicaid coverage (up to 1 year after the pregnancy ends).
   

In addition to 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, or having monthly income of at least $580 (the federal minimum wage—currently $7.25 per hour— multiplied by 80).

Those who lose 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.

The Department of Human Services (DHS) 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! 

Currently, 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.

 

Delaying Eligibility and Enrollment Rules 
Starting Immediately

In 2023 and 2024, a pair of federal 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 blocks implementation of portions of those rules until September 2034.

There is some good news, however. While the original version of the law would have blocked the eligibility and enrollment rules entirely, due to a procedure available in the Senate, those portions of the rules that had already gone into effect were allowed to stand.  Many rules related to CHIP enrollment were preserved using this procedure, as were changes in regulations that meant people no longer needed to apply for all available benefits (like early retirement) in order to qualify for Medicaid, CHIP, and the Medicare Savings Program, which Pennsylvania implemented in July 2024.

 

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 groups 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
• Immigrants from Micronesia, Palau and the Marshall Islands.
• Exception: 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 still 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.

 

Decreasing Access to Care

The new law doesn’t just change who can get Medicaid. It also makes it much harder for states to pay for the program, which will result in barriers to accessing care: hospitals may close; it may be harder to find doctors and other providers especially in rural areas; and people may need to travel further to get care.  In Pennsylvania, DHS estimates that the cuts described below combined more people becoming uninsured will threaten the closure of 25 rural hospitals across our state. 

 

Restrictions on Funding Medicaid with Provider Taxes

The new law places significant restrictions on how states can raise money to cover their share of the costs of Medicaid.  Medicaid is paid for by both the federal government and individual states like Pennsylvania. Each state has to pay its share of the costs. All states (except Alaska) raise money to pay for their share of Medicaid by charging taxes to healthcare providers like hospitals and nursing faciliites.

These "provider taxes" are severely restricted under the new law: 

• 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 2028
   

These restrictions mean states will lose about $20 billion over 10 years— money that would have helped pay for Medicaid services. Pennsylvania doesn't know yet how it will make up for this huge loss of money. It may have to cut Medicaid services, remove people from Medicaid, or find other ways to pay (which is difficult when the state budget is already so tight).

 

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. 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.

 

Defunding of 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 effectively targets and defunds Planned Parenthood.  However, Planned Parenthood provides 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 can 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. As noted above, 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 (CCF). 

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.