Medicaid Changes Would Have a Major Impact on O&P Care

One of President Trump's signature goals is to extend the tax provisions he signed into law in his first term. As of this writing, the House and Senate are considering a budget reconciliation bill to achieve this goal, a legislative process that allows the Senate to pass certain legislation by a simple majority, rather than the usual 60-vote threshold required to pass legislation. 1 To help offset the cost of several trillions of dollars in tax cuts over the next ten years, Congress is debating ways to reduce federal spending on other programs, particularly the Medicaid program. Earlier this year, Congress passed a joint budget resolution that called for $880 billion in spending reductions over ten years on programs such as Medicaid, the Children's Health Insurance Program (CHIP), and the Affordable Care Act (ACA). The House Energy and Commerce Committee released a draft bill on May 11 that was marked up and passed along party lines (30-24) by the full committee on May 14. 2.3 The House subsequently passed the bill by a razor-thin margin vote, 215 to 214, in the early morning hours of May 23. the ACA in 2010. In fact, the Congressional Budget Office (CBO) estimates that the House bill would lead to over 13 million people losing their healthcare coverage by 2034. (Incidentally, the omission of enhanced ACA tax credits, which expire at the end of 2025, is expected to result in an additional 8.4 million people losing health insurance.) This article summarizes some of the key Medicaid proposals included in the House reconciliation bill, the estimated cost savings of these provisions, and how these policies may impact individuals with limb loss and limb impairment, as well as the providers who serve them. The Senate is currently debating the reconciliation bill and many changes to the Medicaid provisions are expected. Medicaid and Its Impact on Americans With Disabilities The Medicaid program was created in 1965 in the same legislation that created the Medicare program. While Medicare is a federal program, Medicaid is run as a joint state-federal program where the federal government matches funds contributed by the state at varying percentages. Medicaid is the largest single healthcare payer in the country. While Medicare covers approximately 66 million beneficiaries, Medicaid covers approximately 71 million individuals in the United States. (As of 2023, CHIP covered an additional 7.3 million individuals.) Traditional Medicaid eligibility categories include low-income children, pregnant mothers, frail seniors, individuals with significant disabilities, and other low-income populations. The ACA expanded eligibility to working age, nondisabled, low-income individuals at the states' option. To date, 41 states and the District of Columbia have adopted Medicaid expansion under the ACA. As a result, more than 20 million people have gained Medicaid coverage through this expansion. Medicaid covers nearly half (44 percent) of nonelderly, noninstitutionalized adults with disabilities. While approximately 37 percent of working-age adults (ages 19-64) with disabilities on Medicaid are employed, about two thirds of the expanded Medicaid population are employed. Additionally, about 8 percent of working-age adults with disabilities are dually eligible for both Medicaid and Medicare. In these instances, Medicaid covers the copayments, deductibles, and other costs that Medicare does not otherwise cover. Medicaid is considered the payer of last resort, meaning it only pays for covered services after all other third-party payers have fulfilled their payment obligations, and often pays for healthcare services when there is no other option. Medicaid's Treatment of O&P Federal Medicaid law distinguishes between mandatory and “optional” benefits for which the federal government will provide funding to match contributions by the states. Examples of mandatory benefits include hospital services and nursing home care. For children up to age 21, the Early Periodic Screening, Diagnosis, and Treatment (EPSDT) program under Medicaid creates a relatively comprehensive floor of benefit coverage for children who qualify under the program. Some children who age out of EPSDT but who remain eligible for Medicaid as adults may lose benefits previously covered under EPSDT. Optional benefits, which states may choose to cover, encompass services such as O&P care. The percentage of Medicaid patients an O&P provider accepts depends on a variety of factors, including the socioeconomic status of the state and local area where the provider practices. While Medicaid payment rates are notoriously low in many states, there are exceptions, and progress has been made in some states to correct long-standing reimbursement deficiencies. The large increase in Medicaid-covered beneficiaries since the enactment of the ACA has contributed to more individuals with limb loss and limb impairment being able to access O&P care. If the Medicaid rolls are significantly reduced due to the Medicaid provisions in the House-passed reconciliation package—whatever specific policies are implemented to cause this reduction in coverage—millions of people may lose critical access to healthcare coverage, including O&P care. Key Medicaid Policies Included in the House Bill Work Requirements Work requirements do not make much sense for people who are frail, elderly, or for low-income children, and those with significant disabilities, but sound completely reasonable for the nondisabled low-income population in the expanded program. In fact, the House-passed bill imposes nationwide Medicaid work requirements for recipients ages 19-64, effective in 2027. However, the bill specifies several exemptions to these requirements, including individuals with disabilities, pregnant women, caregivers, and recently incarcerated individuals. While tying healthcare benefits to an agreement to work, volunteer, or at least attempt to search for employment sounds like a win-win proposition, experience in two states has demonstrated that work requirement is a very effective way for states to purge individuals from the Medicaid rolls to save money. For instance, the CBO estimates that 10.3 million people could lose Medicaid coverage by 2034 due to the implementation of this policy alone. Both Georgia and Arkansas received special permission from the federal government to implement work requirements in the recent past. In Arkansas, for example, imposition of work requirements resulted in over 18,000 people losing coverage, most of whom were either working or qualified for exemptions from the requirements. The reporting process was a major driver of coverage losses: Many Medicaid enrollees who were subject to the work requirements found the reporting process confusing or inaccessible, and nearly a third of the target population was unaware of the policy altogether. Another complicating factor is the lack of resources states have to accurately track employment status due to outdated information technology systems maintained by the state Medicaid programs. Frequency of Eligibility Redeterminations It is estimated that millions of Medicaid beneficiaries lost coverage in recent years during the unwinding of enhanced federal matching funds provided to states during the response to COVID-19. The House bill calls for more frequent eligibility redeterminations—increasing the review cycle from annually to every six months. This shift could significantly exacerbate coverage disruptions, worsen health outcomes, and increase administrative burdens. In California, for instance, over 54,000 people eligible for Medicaid were not enrolled due to system discrepancies. These individuals had been eligible for at least three months but were not shown as eligible in the state's system. Furthermore, in Kansas, halting redeterminations during a backlog resulted in nearly 35,000 individuals being affected as this pause in processing led to delays and potential coverage gaps for many residents. Medicaid Enrollment Changes During the Biden Administration, several regulations were finalized that allowed for a more simplified and streamlined process for Medicaid enrollment. The House bill would pause implementation of these regulations until 2035, resulting in federal savings of $162 billion over ten years due to anticipated decreased Medicaid enrollment. The bill also includes several new provisions that would require states to conduct more frequent reviews of the Medicaid rolls. Currently, state Medicaid programs are required to review their Medicaid rolls on a yearly basis to determine which individuals are no longer eligible due to death, salary increases, change of address, aging out of the program, and for other reasons. The bill would require a review every six months, the creation of a new federal platform that would collect beneficiaries' Social Security numbers, routine review of USPS mailing information to identify enrollee addresses, and quarterly review of the Death Master File to identify deceased enrollees. Instituting Individual Cost-Sharing Requirements for Medicaid Expansion States The House reconciliation bill would require states to impose cost sharing (ie, copays) for services for Medicaid Expansion individuals with an income over 100 percent of the federal poverty line. Currently, states have the option to charge a nominal amount for premiums or cost sharing, but it is not required. Under the reconciliation bill, beginning in October 2028 states would be required to impose cost sharing—up to $35 per service—for medical services provided to a Medicaid Expansion individual with an income exceeding 100 percent of the federal poverty line. The policy would allow exceptions for individuals who are receiving services such as primary care, prenatal care, pediatric care, mental health inpatient services, emergency services, and hospice care. The proposal also states that the total aggregate amount of cost sharing may not exceed 5 percent of total family income. Currently, the cost-sharing amount is nominal as determined by the Health and Human Services secretary through regulations. For many low-income individuals, implementing cost-sharing requirements could be a major barrier to care. The CBO estimates that this provision would result in $13 billion in federal savings over ten years. Impact on Provider Taxation Over the years, states have been permitted to use creative financing mechanisms to draw down additional federal funds to meet the Medicaid needs of their respective populations. The House bill seeks to restrict one such mechanism known as “provider taxes.” Many states finance portions of their Medicaid programs by taxing Medicaid providers not typically more than 6 percent of the providers' net revenues. The revenue generated through these taxes is then supplemented with federal matching funds, allowing states to reimburse providers at higher rates and effectively mitigate any financial impact of the tax on providers. This arrangement allows states to enhance their Medicaid funding while maintaining provider reimbursement levels. The reconciliation package would prevent the implementation of new provider taxes or increasing existing provider taxes upon enactment of the reconciliation bill. The bill would also prohibit taxing Medicaid businesses and Medicaid enrollees at a higher level than privately insured enrollees. On May 12, the Trump Administration released a proposed regulation on this same policy. Reductions in a state's ability to tax providers in this manner could lead to a reduction of Medicaid dollars at the state level. In fact, the CBO estimates that a full repeal of the provider tax provision would save the federal government $668 million over ten years. 4 These savings would primarily stem from reduced federal matching payments due to decreased state revenues from provider taxes. Shortening the Retroactive Coverage Window The reconciliation bill would amend the retroactive coverage statute for Medicaid and CHIP beneficiaries, including for pregnant women, from three months of retroactive coverage prior to Medicaid enrollment approval to only one month of retroactive coverage prior to enrollment approval, effective October 2026. Reducing Medicaid and CHIP retroactive coverage from three months to one month could leave many low-income individuals vulnerable to uncovered medical bills for care received before enrollment. This change could also strain hospitals, safety-net providers, and potentially O&P providers who may rely on retroactive payments to cover services for eligible but not-yet-enrolled patients. The CBO estimates that this provision would result in $6.4 billion in federal savings over ten years. Ending 5 Percent FMAP Increase Implemented During COVID-19 During COVID-19, under the American Rescue Plan Act, Medicaid Expansion states received an increase of 5 percent to their Federal Matching Assistance Percentage (FMAP)—the percentage of matching funds the federal government sends to the states. This was intended to encourage more states to implement Medicaid expansion and reduce the number of uninsured individuals who could qualify for Medicaid. The reconciliation package would end that 5 percent FMAP increase for Medicaid expansion states effective January 1, 2026. This policy, if implemented, could strain state budgets, potentially leading to cuts in Medicaid services or reduced provider payments. It may also reduce incentives for remaining states to expand Medicaid, leaving more low-income individuals without coverage. Next Steps in the Congressional Process The confluence of these policies—whether considered reasonable or not—translates into a massive reduction in funding for state Medicaid programs over the next decade. Unless the states are willing and financially able to significantly increase their levels of Medicaid spending over the next ten years, millions of individuals are expected to lose access to healthcare coverage. This will have a ripple effect across the healthcare system, particularly in low-income states and underserved regions, placing additional strain on hospitals, safety-net providers, and a wide range of healthcare professionals. O&P providers and suppliers are no exception. Since the House passed its version of the Reconciliation bill, the focus now shifts to the US Senate. Leaders on both sides of the political aisle have signaled that the magnitude of Medicaid cuts in the House bill are not likely to be embraced in the Senate. While Medicaid reform is still on the table, the Senate is expected to take a more targeted approach, focusing on addressing fraud, improving oversight, and minimizing disruptions in care. Whether House Republicans will eventually agree to align with this approach to secure passage of the President's ultimate objective—extension of his tax policies—is yet to be seen. Peter W. Thomas, JD, is general counsel for the National Association for the Advancement of Orthotics and Prosthetics (NAAOP) and counsel to the O&P Alliance. Taryn Couture, MPA, is director of Government Relations, Powers Law Firm. Annika Berlin, MS, is NAAOP's 2025 George and Dena Breece Fellow. References More about budget reconciliation from the Bipartisan Policy Center available at https://bipartisanpolicy.org/explainer/budget-reconciliation-simplified/ US House of Representatives. 2025. Subtitle D—Health. In Committee Print: Providing for reconciliation pursuant to H. Con. Res. 14, the Concurrent Resolution on the Budget for Fiscal Year 2025. https://d1dth6e84htgma.cloudfront.net/Subtitle_D_Health_ae3638d840.pdf The Hill Staff. 2025. Republicans advance Medicaid bill aligned with Trump agenda. The Hill. https://thehill.com/policy/healthcare/5299154-republicans-advance-medicaid-bill-trump-agenda/ Congressional Budget Office. 2025. Estimates for Medicaid Policy Options and State Responses. https://www.cbo.gov/system/files/2025-05/Wyden-Pallone_Letter.pdf

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