Sweeping Legislation Poised to Cut Billions from Medicare and Medicaid
A significant legislative package, dubbed the “Big Beautiful Bill” by its proponents, passed the House of Representatives on July 3, 2025, and is set to be signed into law by President Donald Trump on July 4. This comprehensive bill, spanning over 900 pages, aims to fund a continuation of 2017 tax cuts, increase immigration enforcement, and bolster military and border security. However, its passage has raised alarms due to substantial projected cuts to critical public safety net programs: Medicaid and Medicare.
Medicaid Faces Trillion-Dollar Reduction
The most immediate and largest impact of the bill is directed at Medicaid, the joint federal and state program that provides health coverage to low-income individuals, families, children, pregnant women, the elderly, and people with disabilities. According to recent estimates from the nonpartisan Congressional Budget Office (CBO), the legislation is projected to cut approximately $1 trillion from Medicaid over the next decade. The Senate’s version of the bill alone could result in 11.8 million Americans losing their health insurance coverage by 2034, as reported by USA Today.
Medicare Also Targeted for Significant Cuts
Beyond Medicaid, the legislation is also expected to trigger nearly half a trillion dollars in cuts to Medicare, the federal health insurance program primarily for individuals aged 65 or older, and some younger people with specific disabilities or medical conditions. These cuts are not direct line-item reductions within the bill itself but are mandated by the Statutory Pay-As-You-Go (PAYGO) Act of 2010. The PAYGO Act requires automatic sequestration cuts across federal programs when legislation increases the deficit. The Senate version of the “Big Beautiful Bill” is estimated to add roughly $3.3 trillion to the national debt over the next ten years, necessitating these automatic reductions.
The CBO has confirmed that the Office of Management and Budget (OMB) will be required to issue an order reducing spending by $330 billion by January 2026. While many accounts are exempt from sequestration, including Social Security, Medicare is not. The cuts to Medicare are capped at 4 percent of the program’s budget, amounting to an estimated $45 billion in fiscal year 2026 and increasing to $75 billion by 2034, totaling $490 billion over ten years. These Medicare cuts are set to begin in the next fiscal year, starting in October.
Additionally, the bill includes other changes to Medicare, such as altering the enrollment process for the Medicare Savings Program. This program assists low-income seniors, many of whom are also eligible for Medicaid, with prescription costs. These changes could lead to over 1.3 million poor seniors losing access to this vital assistance, potentially incurring thousands of dollars in new out-of-pocket expenses and impacting their access to necessary medications.
Understanding Medicare and Medicaid
It is crucial to distinguish between these two foundational healthcare programs. Medicare, established on July 30, 1965, is a federal program covering over 68 million Americans. It consists of Part A (hospital insurance) and Part B (medical insurance), with most enrollees paying premiums, deductibles, and copayments. There is no annual limit on out-of-pocket costs, leading many to opt for supplemental “Medigap” plans or Part D for prescription drugs.
Medicaid, also established in 1965, is a joint federal and state initiative. It is state-administered, meaning eligibility rules and covered benefits vary by state. Medicaid provides benefits not typically covered by Medicare, such as nursing home care beyond Medicare’s 100-day limit and personal care services. Generally, Medicaid recipients pay little to nothing for covered medical expenses, though small co-payments may apply for some services.
Approximately 12 million individuals are “dually eligible,” meaning they are enrolled in both Medicare and Medicaid. For these individuals, Medicare pays first for covered services, with Medicaid acting as the payer of last resort, often covering Medicare premiums, deductibles, coinsurance, and copayments, as well as additional services like eyeglasses and hearing aids.
Potential Ramifications
The combined impact of these cuts is projected to severely strain the U.S. healthcare system. Experts warn of at least 17 million people losing their insurance coverage, higher costs for those who retain it, and potential “serious damage to access to doctors and hospitals, fewer providers able to survive, [and] higher premiums for seniors,” according to The American Prospect. Despite some House Republicans expressing concerns over the Medicaid cuts, the bill ultimately passed with near party-line support, setting the stage for significant changes to America’s healthcare landscape.
