The Washtenaw Health Initiative along with our stakeholder organizations have spent recent months tracking the potential impacts of the One Big Beautiful Bill Act – the name given to the 2025 Federal Budget Reconciliation Bill. The Act, signed into law by President Trump on July 4, 2025, includes large reductions in spending and key changes to health and social care programs including Medicaid, the Affordable Care Act insurance exchanges, and food and nutrition programs such as the Supplemental Nutrition Assistance Program (SNAP). These changes will have major consequences for Michigan residents and the health and social service providers that serve them.
While states now know what to expect regarding federal funding cuts and policy changes, how states will manage the loss in funding and implement policy changes required under the Act remains uncertain. In Michigan, elected officials and agency leaders must now decide how to respond. Potential actions could include replacing lost federal funding with state dollars, restructuring critical services, and scaling back or ending programs that thousands of people rely on every day.
Here is a closer look at where the reductions will take place.
Changes to Medicaid and the Health Insurance Marketplace
One of the most significant parts of the One Big Beautiful Bill Act is the major change it brings to Medicaid. One of the biggest changes is the introduction of work requirements along with changing the frequency of the medicaid redetermination process to twice a year, which could disproportionately impact people who are already facing challenging situations.
Called “community engagement requirements” in the bill, beneficiaries will need to provide proof of working, volunteering, or completing education for at least 80 hours per month. While proponents of these provisions posit cost savings through reducing Medicaid fraud and encouraging adults to return to the workforce, opponents argue that these rules will result in people otherwise eligible being disenrolled over procedural errors.
The bill also implemented changes to provider tax rules. Medicaid is funded by both state and federal funds, with states having flexibility in how to finance their share of Medicaid costs. All states with the exception of Alaska use what is called a “provider tax” or taxes on healthcare providers like hospitals and long-term care facilities. These taxes are a percentage of the provider’s net patient revenues.
The revenue generated allows states to receive matching dollars from the federal government which are ultimately used to reimburse providers for Medicaid services. In many cases, these taxes are leveraged to increase Medicaid reimbursement rates to providers.
Under new rules, states are not permitted to enact new provider taxes or increase existing taxes for all states. Additionally beginning in 2028, the rules will gradually reduce the “safe harbor limit” from the current 6% to 3.5% over the course of 5 years through .5% annual decreases for states who expanded Medicaid eligibility, like Michigan.
Safe harbor limits are a part of the “hold harmless” rule that prohibits states from guaranteeing that healthcare providers will be reimbursed for the full amount of the provider tax they pay through Medicaid reimbursement. If a state’s provider tax is below the safe harbor limit, the hold harmless rule does not apply. If it is above that threshold, a state may be subject to a deduction in federal matching funds if 75% of the providers being taxed receive 75% or more of their taxes back from Medicaid reimbursement.
A decrease to the safe harbor limit effectively reduces the amount of funds states can generate from these taxes to cover their share of Medicaid and can directly impact the amount of federal matching funds they receive. To overcome these shortfalls, states will have to find other ways to generate lost provider tax revenue.
Additionally, the bill makes changes to eligibility criteria for the Affordable Care Act marketplace subsidies, likely resulting in significant increases in the cost of marketplace plans for some individuals. Under the new law, enhanced subsidies are set to expire, making premiums grow in some cases by 25-100%. Many middle-income individuals and families may struggle with affordability of marketplace plans due to the elimination of expanded subsidy thresholds, making marketplace plans unaffordable for many.
Additionally, the bill removes the limit on repayments for the advance premium tax credits. When enrolling in a marketplace plan, enrollees may qualify for tax credits to offset premium costs. In the past, if an enrollee ended up making more money than originally estimated, they were responsible for paying back the tax credits up to a cap that was defined based on income. Under the new bill, there is no cap on these repayments meaning enrollees would be responsible for paying back the full amount of any excess payments they received.
Individuals in their fifties and sixties may see the most significant increases in pricing due to age-based pricing of plan options. Without additional policy action, a significant portion of these consumers may go without insurance, or be forced to search for alternative and less comprehensive options.
Changes to SNAP
While cuts to many grant funded social services have already happened, the recently passed bill further reduces spending on the Supplemental Nutrition Assistance Program, or SNAP. Much like changes to Medicaid, one change to SNAP focused on implementing national changes to work requirements for those utilizing the program. For example, SNAP beneficiaries 55 and over were previously exempt from these requirements, but the Act increased the age to 65.
Additionally, under prior law, parents with children under the age of 18 were also exempt from SNAP work requirements. The bill lowered this age requirement to 14, meaning adults with dependents aged 14-18 would have to comply and provide proof of working at least 20 hours per week.
One last critical change aims to require states to pick up some of the cost of the SNAP program. States who have payment error rates over 6%, meaning they overpaid or underpaid benefits to beneficiaries, would see reductions in federal funding for the program. Considering the average error rate was 10.93%, many states stand to lose federal funds.
The federal government is also reducing the percentage of SNAP administrative costs funded by federal dollars. Currently, the federal government covers 50% of that cost, but that will be reduced to 25% in fiscal year 2027, leaving the states to incur additional costs to their budgets. This reduction in funds to operate the program along with potential cuts of federal funds for the actual benefits, combined with more beneficiaries requiring verification of work requirements, applicants may face longer wait time to process and reverify their applications.
What could we see in Michigan?
Since the Bill has passed, Michigan will have to decide on how to respond to the federal cuts that directly affect our state budget. While the bill will have direct impacts to those who lose Medicaid coverage or see loss or reduction in SNAP benefits, the budgetary effects will also probably affect those who don’t receive any of these benefits.
Effects on the State Budget
Estimates say Michigan stands to lose $2-3 billion annually in federal Medicaid and SNAP funding along with increased administrative costs related to implementation of many of the provisions of the bill. This substantial reduction in funding will leave the state with two main options, make cuts to state funded services and programs, or find other ways to raise money.
Backfilling could mean using funds from other areas of the budget in order to maintain current safety-net programs like Medicaid and SNAP. These areas could include cuts to public safety, education, transportation, and infrastructure. For example, to preserve funding for Medicaid, Michigan may need to delay road repairs, water infrastructure such as replacing lead water services lines, reduce funding for local first responders, police and fire departments, or cut back on K-12 educational programs. These funding redirections are difficult decisions to make and will have a broader impact outside of the program targeted in the federal bill.
As state funding is redirected to backfill federal cuts, local governments may receive less support for essential services like public safety, infrastructure, and education. To maintain these services, many counties and cities may be forced to consider raising local property taxes or other levies to make up the difference. For communities already facing economic strain, this could place an even greater burden on residents and small businesses, while deepening regional disparities between wealthier and lower-income areas. Ultimately, the cost of federal disinvestment may land on the backs of local taxpayers.
Reduced Health Coverage and Access to Care
The new federal law introducing work requirements will probably result in significant coverage losses in Michigan. More than 700,000 residents could lose coverage due to paperwork errors, missed deadlines, or due to challenges with navigating the reporting systems.
Michigan has considered Medicaid work requirements before. Governor Rick Snyder signed Medicaid work requirements into law. Michigan and several other states were pursuing this work requirement and ultimately the implementation of the requirement never happened because a federal court blocked the requirement, and the pandemic began shortly after.
Loss of coverage means health systems will be directly impacted by increases in uncompensated care, which will hit rural health providers the most. Hospitals and providers in rural areas rely on higher percentages of Medicaid reimbursement to stay open. In the loss of this reimbursement, these providers may face closure leaving the areas they serve void of adequate access to health care services.
While rural hospitals will see the most immediate effects, other hospitals will still experience the effects of increased rates of uncompensated care. These costs are shifted to those who can pay, primarily through higher prices billed to private insurance plans, especially those offered through employers. Faced with higher health care costs, many employers are faced with the decision to absorb those costs, or pass them onto employees through higher deductibles and co-payments, or through reduced coverage.
Impacts to Social Services
While the bill directly targets SNAP benefits, with over 211,000 Michigan households losing at least $25 a month and up to 71,000 losing SNAP benefits entirely, the ripple effects extend far beyond the individuals losing benefits. These changes come after prior reductions in federal grant funding for essential health and human services, further compounding the burden on Michigan’s social service providers and CBOs.
As more individuals and families lose access to food assistance, they turn to local non-profits, food pantries, and emergency support programs to meet basic needs. These organizations will now face even greater demand, with fewer resources.
Next Steps on Michigan’s State Budget
With major federal cuts on the way, Michigan lawmakers now face difficult decisions about how to balance the state budget. The Legislature missed its July 1 target deadline, and negotiations are ongoing.
The next key date is October 1, when the new fiscal year begins. By then, a final budget must be approved to avoid disruptions to essential services.Lawmakers will need to decide how to offset losses in federal funds.
Policy Analysis and Bill-Tracking Resources
WHI partners looking to stay informed on these issues can do so by using the resources below, which provide both legislative tracking tools and policy analysis support:
Real-Time Bill Tracking
GovTrack.us
A nonpartisan site that allows users to follow specific bills, like H.R.1, and receive email alerts on changes, votes, and actions.
https://www.govtrack.us
Congress.gov
The official U.S. legislative website, with up-to-date information on the bill’s text, status, amendments, and vote history. Users can subscribe for alerts.
https://www.congress.gov
Policy Analysis Tools
Protect MI Care
A Michigan-based coalition that offers advocacy toolkits and direct connections to lawmakers to support Medicaid access.
https://protectmicare.com
Michigan League for Public Policy (MLPP)
Offers state-focused policy briefs and legislative updates on Medicaid and safety net programs.
https://mlpp.org
Kaiser Family Foundation (KFF)
A national leader in health policy research, including Medicaid and coverage access issues.
https://kff.org