UPDATE: The final version of the federal budget bill omitted a handful of provisions that had been included in earlier drafts. One would have penalized states that use their own money to provide coverage for undocumented immigrants, which would have cost New York almost $1 billion. Another would have banned Medicaid coverage for gender transitions. This post has been corrected accordingly.
The federal budget bill given final approval by the House of Representatives on Thursday will cost New York billions per year in health-care funds and is expected to reduce enrollment in its government-run health plans by hundreds of thousands.
Yet the impact likely need not be as catastrophic as state leaders and industry officials have portrayed.
New York’s health-care system commands an extraordinarily high level of funding from both the public and private sectors – and therefore is better positioned than most to weather a loss of support from Washington.
In fact, total government funding for New York’s health-care system has risen so rapidly in the new budget that it could forfeit $7 billion and still have more tax dollars to work with than it did in 2025.
Here is a summary of the so-called One Big Beautiful Bill’s major health-care provisions of importance to New York:
Excluding most non-naturalized immigrants from ACA tax credits and the Essential Plan
Fully undocumented immigrants were already excluded from federally funded health programs and subsidies.
The budget bill expands that rule to cover an additional group of legally present but non-naturalized immigrants – such as green-card holders who arrived fewer than five years ago, refugees applying for or granted asylum and people protected under Deferred Action for Childhood Arrivals, or DACA.
Under current law those people are eligible for tax credits under the Affordable Care Act and for enrollment in New York’s Essential Plan, a Medicaid-like program financed through the ACA. Their eligibility is now set to end on Jan. 1, 2027.
The Hochul administration has estimated that this change will cost the Essential Plan $7.6 billion in revenue and displace 730,000 of its 1.7 million enrollees.
Under a 2001 court ruling known as Aliessa v. Novello, the state is obliged to continue providing state-only Medicaid coverage for about 500,000 of those people with incomes below 138 percent of the poverty level. That is expected to cost the $2.7 billion.
This one provision – which technically involves the ACA, not Medicaid – has by far the most significant implications for New York, with a combined effect of lost revenue and increased expenses totaling more than $10 billion. However, the net loss to the health-care industry will be closer to $5 billion.
Notably, the per-person cost of state-only Medicaid coverage is expected to be much lower than under the status quo. This is because the Essential Plan, through a glitch in its funding formula, had been receiving more federal aid than needed to pay its expenses. State officials responded by increasing its reimbursements for hospitals to 225 percent of the normal Medicaid fees.
Immigrant enrollees above the poverty threshold will have few options for alternate coverage. New York has some of the highest commercial insurance costs in the country, making plans prohibitively expensive for lower-income consumers without access to ACA tax credits.
Imposing a work requirement for non-disabled adult recipients
The single biggest money-saving provision of the budget legislation says that non-disabled adults on Medicaid must demonstrate at least 80 hours per month of “community engagement” in order to keep their benefits. This can include paid employment, education programs, community volunteering and other activities.
The Hochul administration has estimated that 1.2 million people – or more than half of its non-disabled adult enrollment – will be pushed out of coverage by this rule. This appears to be an extrapolation based on how previous work requirements have been implemented in Republican-run states. It’s likely that New York could minimize those losses by making its compliance system as user-friendly as allowed by the law.
State officials have not estimated the budgetary impact – but any decline in coverage would result in a savings.
Based on the average cost of coverage for the non-disabled adult population, a 1.2 million decline in enrollment would translate to about $9 billion in Medicaid savings, including $7.6 billion for Washington and $1.4 billion for the state.
Restricting ‘provider taxes’
The federal legislation imposes tighter restrictions on so-called provider taxes, which are a gimmicky strategy for states to exploit Medicaid’s system of federal matching funds without putting up money of their own.
The most recent example in New York is a levy on managed care organizations, or MCOs, which specifically targets their revenue as Medicaid managed providers. Officials with the Centers for Medicare & Medicaid Services provisionally approved the tax at the end of the Biden administration, but recently warned that their authorization would run out in the near future.
The newly passed legislation would formalize that decision, which the Hochul administration has estimated would cost the state $1.6 billion in expected revenue. However, the state was likely to lose that money in the near future regardless of Congress’ action.
The state levies a number of other provider taxes that might be subject to new restrictions. However, the biggest of those taxes – a pair of surcharges originally imposed under the Health Care Reform Act of 1996 – have been shielded from regulatory action by a 1997 budget provision sponsored by then-Sen. Alfonse D’Amato. There no obvious sign that the newly passed legislation would repeal that so-called D’Amato amendment.
Out of $6.8 billion in provider tax revenue reported by the state in 2024, HCRA’s patient services surcharge accounted for $5.2 billion.
Penalizing states that cover undocumented immigrants
Although the federal government does not allow the use of federal Medicaid funding to cover undocumented immigrants, some states have opted to provide that coverage with their own money. New York, for example, recently made Medicaid coverage available for all residents over 65, regardless of citizenship status.
Under the budget package, states that provide any form of government-financed health coverage to undocumented immigrants would lose a portion of their federal Medicaid funding. In New York, this is expected to cost the state $924 million.
The state has the option of doing without that money – which is about 1 percent of its total federal health funding – or withdrawing the offer of coverage for the ineligible group.
Increasing administrative duties
The budget bill imposes several new administrative requirements on states, including enforcement of the work requirement and more frequent eligibility screenings.
The state has estimated that this will cost the state $564 million per year.
The legislation has a number of other provisions for which state officials have not yet issued estimates. One would prohibit the use of Medicaid funds to finance gender transitions. One would prohibit using Medicaid to reimburse an organization involved in performing abortions, Planned Parenthood being the most visible example.
State officials are likely to come under pressure to replace what Washington has denied.
The two major hospital organizations also have projected that their members face a financial hit of $8 billion a year, including lost funding from Medicaid and an increase in demand for charity care. However, they have a history of exaggerating their financial woes as they seek increased financial support from state government.
