Partnering for Impact:
How Social Service and Community-Based Organizations Can Navigate Change in the New Medicaid Landscape
The Evolving Medicaid Landscape
Federal and State Pressures and Opportunities
Statutory Changes to Medicaid and Other Health-Related Provisions
H.R. 1, the One Big Beautiful Bill Act, became public law on July 4, 2025.2 The law includes several health-related provisions, particularly related to Medicaid, that reshape how Medicaid operates and provides services. These changes will impact state Medicaid programs primarily through eligibility changes, the restructuring of some program finance mechanisms, and mandates aimed at reducing federal expenditures.
States must establish Medicaid community engagement requirements (also known as “work requirements”) for adults ages 19-64 enrolled through the Medicaid expansion (or “expansion-like”) eligibility category starting no later than January 1, 2027. The law excludes some expansion adults such as those who are pregnant or medically frail. Individuals subject to the requirement must demonstrate community engagement—defined as meeting conditions like working, participating in a work program, or performing community service for no fewer than 80 hours per month—to maintain their Medicaid enrollment.3
The law also mandates that, beginning October 1, 2028, states must impose cost-sharing greater than $0 (but not to exceed $35) for certain services furnished to Medicaid expansion enrollees whose family income exceeds the federal poverty level. The law prohibits states from imposing cost sharing on primary care, mental healthcare services, substance use disorder services, or services furnished by Federally qualified health centers, certified community behavioral health clinics, or rural health clinics.
The law tightens Medicaid financing flexibility through state-directed payments (SDPs) and provider taxes. SDPs are mandated payments MCOs must make for certain services or to certain providers in accordance with the state’s managed care contract.4 The law caps the total payment rate for a service made under an SDP to 100% of the published Medicare payment rate for states that have expanded Medicaid, and 110% for non-expansion states.
The law also imposes new constraints on states’ use of provider taxes, a long-standing financing mechanism used by nearly all states to help fund their share of Medicaid spending. These taxes, paid by healthcare providers like hospitals and nursing homes, are typically used to secure additional federal matching funds and support base payment rates to those same providers.5 By capping and gradually phasing out these arrangements, the law significantly reduces a key source of flexible state revenue for Medicaid.
The overall effect of the Medicaid policy changes, including but not limited to those discussed here, is projected to be $900 billion reduction in federal Medicaid spending over 10 years.6 These budgetary shortfalls may result in states reducing provider reimbursement rates, limiting eligibility, or cutting optional services.7
Despite these broad pressures, the new law also introduces specific opportunities for federal investment in states and some programmatic expansion.
The law establishes the Rural Health Transformation Program (RHTP), providing $50 billion in appropriations over fiscal years 2026 through 2030, to be allotted to states with approved plans to strengthen rural communities by improving healthcare access and quality. Only states may apply for and receive funding from the RHTP, but states may include subaward and partnership opportunities for other organizations, including SSOs/CBOs, in their plans.8 At the end of 2025, CMS awarded RHTP funding to all 50 states.9 Most states have posted the contents of their applications or provided application summaries so organizations can review them and identify potential opportunities for partnership.10
Furthermore, the law includes provisions for expanding Home and Community-Based Services (HCBS) coverage by allowing the Secretary to approve waivers, starting July 1, 2028, that offer HCBS to individuals who do not require an institutional level-of-care determination, provided the state meets strict requirements including cost neutrality. These specific funding streams and authorized flexibilities create “Federal-Level Opportunities” for organizations that can demonstrate value, improve outcomes, and align their work with the mandated goals of efficiency and chronic disease management.
In addition to recently passed legislation, the new administration is also shaping the current policy environment via regulatory updates and broader agency initiatives.
Make America Healthy Again
The growing Make America Healthy Again (MAHA) movement, led by the MAHA Commission within the Department of Health and Human Services (HHS), is working to reform America’s food, health, and scientific systems to identify the root causes of chronic disease and improve the health of Americans.11 The Commission’s recent release, the Make Our Children Healthy Again Strategy,12 presents a plan with over 120 initiatives to address childhood chronic disease.13 The Strategy highlights that 60% of Supplemental Nutrition Assistance Program (SNAP) participants received Medicaid in 2019, emphasizing that nutritional deficits funded through public programs like SNAP directly drive disease-related costs in the Medicaid system. Organizations that can help reduce the burden of poor nutrition and other negative psychosocial factors on childhood health through care coordination will be valuable partners moving forward.
Accordingly, even with CMS’s rescission of its Health-Related Social Needs (HRSN) guidance,* there is still an appetite to address factors like food and nutrition as well as psychosocial issues like mental health/substance use disorder.
* In March 2025, the Centers for Medicare & Medicaid Services (CMS) formally rescinded the November 2023 and December 2024 CMCS Informational Bulletins (CIBs) and the accompanying Framework of Coverage that governed Medicaid coverage of services to address health related social needs (HRSNs). Health-related social needs are the social and economic needs that affect individuals’ health outcomes and healthcare use, and include factors like lack of stable housing, access to healthy food, or healthcare. Through these documents, CMS created a new 1115 waiver opportunity for states to cover and receive federal funding for HRSN services. This rescission creates a tiered impact on states. Those with already approved Section 1115 demonstrations involving HRSNs can continue their programs until expiration, but any request to amend them may trigger a renegotiation under the new federal priorities. For states with pending HRSN proposals, the path to approval is now less certain.