INSIDE THE ISSUE

> House Passes Bill
> Senate Passes Budget
> Pharma Rebuffed in Court

MONDAY REPORT

House Bill Would Cut Medicare and Medicaid Severely

The U.S. House of Representatives last Thursday passed H.R. 1 – a sweeping bill that helps fulfill President Trump’s tax, border security, and healthcare agenda.

According to the Congressional Budget Office, the “One Big Beautiful Bill Act” (its actual name) will increase the deficit by $2.3 trillion over 10 years, and will force under current law a “sequester,” or mandatory reduction, in other spending programs, including Medicare.

The CBO says Medicare will be cut by $490 billion over the next 10 years, with the cuts beginning in 2026.

“House Republicans just voted to rip healthcare away from nearly 14 million Americans, cut $500 billion from Medicare, take jobs and manufacturing out of their own districts, and hand billions to the ultra-wealthy,” Ways and Means Committee Ranking Member Richard Neal (D-Mass.) said following the House’s marathon overnight session and early morning vote.

The bill does not include an extension of enhanced premium tax credits for subsidized insurance in the state’s health insurance exchange and makes undocumented people ineligible for Affordable Care Act (ACA) credits.

It requires states to redetermine Medicaid eligibility once every six months for beneficiaries enrolled through the ACA Medicaid expansion eligibility pathway. Such redetermination processes often result in qualified individuals being removed from the program solely due to enrollees’ failure to complete the detailed eligibility paperwork in a timely manner, often because they are unaware of their eligibility redetermination is underway. New work requirements will make it more difficult for certain eligible beneficiaries to first apply for MassHealth and maintain coverage once enrolled. And all of these new verifications will increase state and healthcare providers’ administrative expenses in supporting beneficiaries with these new eligibility processes.

The bill reduces the Federal Matching Assistance Percentage from 90% to 80% for states that use state Medicaid funds to cover undocumented immigrants and certain lawfully present immigrants. Massachusetts provides coverage to children regardless of citizenship status through the Children’s Medical Security Program and also provides state-funded coverage to certain low-income immigrants that may be subject to the proposed restriction; potential federal funding losses due to this provision could be significant.

The House bill prohibits states from receiving federal matching funds for services rendered by providers that provide abortions (other than Hyde Amendment exceptions) and receive more than $1 million in Medicaid payments in 2024. This applies to not-for-profit, essential community providers primarily engaged in family planning services, reproductive health, and related medical care.

In Massachusetts, the current hospital-MassHealth-federal financing arrangements relating to provider taxes appear to be unaffected – for now. But any further adjustments to future spending, including the next iteration of the MassHealth waiver in 2027, would be severely limited. That, in turn, would place new pressures on financing care delivered to MassHealth patients. The state’s healthcare-related tax on health insurers would need to be modified per the House bill (and a related Centers for Medicare and Medicaid Services proposed rule). The insurer tax is an important component in the funding of the Health Safety Net program, which is experiencing historic deficiencies.

Many of the changes to Medicaid contained in the bill are effective on passage, meaning that states and providers would have little time to construct and finance the new reporting and tracking mechanisms. The final House bill also advanced the timeline of certain provisions that had been proposed to start in later years, such as the new work requirements and six-month ACA population redeterminations, which are called for to begin no later than December 31, 2026.

The American Hospital Association noted that the bill’s “Medicaid legislative proposals severely restrict the use of legitimate state funding resources and supplemental payment programs, including provider taxes and state directed payments, under the guise of eliminating waste, fraud and abuse. We reject this notion as these critical, legitimate and well-established Medicaid financing programs are essential to offset decades of chronic underpayments of the cost of care provided to Medicaid patients.”

The AHA estimated the new policies will remove $700 billion in federal support for the Medicaid program over 10 years “and will displace healthcare coverage for millions of Americans, moving them from insured to uninsured status.”

The U.S. Senate has announced it is crafting its own separate and distinct bill to deal with some of the issues raised in the House legislation.

Senate Wraps Up FY26 Budget Debate; Hope Remains for HSN Relief

The Massachusetts Senate passed a $61.4 billion state budget plan for fiscal year 2026 last Thursday by a 38-2 vote. The budget is slightly less than the $61.5 billion budget the Massachusetts House passed on April 30. A conference committee will now meet to create a compromise budget to send to Governor Maura Healey.

A 23-page amendment was added to the Senate budget that would allow the Health Policy Commission to regulate prescription drug prices in the state.

The Senate did not pass an MHA-endorsed amendment from Rep. Barry Finegold (D-Andover) that would have transferred $230 million from the Commonwealth Care Trust Fund to the Health Safety Net program. The Commonwealth Care Trust Fund currently has an unexpended funding balance of $478 million. A similar amendment from Sen. Bill Driscoll (D-Milton) that would have required insurers to share more in the safety net shortfall and the state to contribute more to its funding also failed. However, the Senate Chair of the Joint Committee on Health Care Financing Cindy Friedman (D-Arlington) said that while the amendments did not pass “at this particular moment in time for reasonable reasons,” the intent behind them was correct.

“These are two amendments that address a very, very, very important issue – and that is how we fund hospitals and community health centers that provide healthcare to patients that are underinsured or uninsured,” Friedman said. “This is a number that has been rising significantly, and has put our hospitals and community health centers in a very precarious financial situation … And I would like to just make the statement that we are very aware of this problem. It is very serious. We take it seriously, and the Senate is committed to finding a solution that supports our hospitals and community health centers and that makes the program sustainable over time.”

Pharma’s 340B Financing Scheme Derailed by Federal Court

The pharmaceutical industry’s ongoing effort to destabilize the 340B drug pricing program was struck a blow by a U.S. District Court this month, which ruled that big pharma cannot unilaterally implement a rebate model.

Under 340B, which was created to assist providers serving low-income patients, hospitals purchase drugs and replenish the supplies of them at discount. Bristol Myers Squibb, Eli Lilly, and Novartis all attempted to force 340B purchasers to pay full price up front, and then get the benefits of the program by filing for rebates.

Providers argued that the rebate model would add on another layer of administrative burden for hospitals and it would, in effect, force cash-strapped providers to front profitable pharmaceutical companies money that would eventually be refunded.

While those considerations were raised in court, the procedural issue is whether the drug companies can rewrite on their own how the 33-year-old 340B drug program operates. Both the Biden and Trump administrations filed briefs in the case saying that only U.S. Health & Human Services can make such a determination on rebates. Judge Dabney Friedrich of the U.S. District Court for the District of Columbia agreed with the government and struck down the rebate plan – for now. U.S. HHS said it would make a determination about rebates shortly.

In Massachusetts, in 2023, prescription drug spending increased by a full 10%, representing the fastest-growing cost component of the state’s healthcare system.

John LoDico, Editor