The recent federal budget bill, which has received final approval from the House of Representatives, is poised to cost New York billions in health-care funding annually.
State leaders and industry officials express concerns that this legislation could lead to a significant reduction in enrollment in state-run health plans, displacing hundreds of thousands of individuals.
However, experts suggest that the consequences may not be as severe as forecasted.
New York’s health-care system benefits from an exceptionally high level of funding from both public and private sources, positioning it better than many other states to handle potential losses in federal support.
Indeed, despite the anticipated cuts, total government funding for New York’s health-care system has surged under the new budget, meaning the state could potentially cut $7 billion in federal support and still have greater funding resources than it did in 2025.
The budget bill, referred to as the One Big Beautiful Bill, includes several crucial health-care provisions that specifically impact New York.
One major change is the exclusion of most non-naturalized immigrants from receiving tax credits under the Affordable Care Act (ACA) and from participation in the state’s Essential Plan.
Currently, undocumented immigrants are excluded from federally funded health programs and subsidies, and this legislation extends that exclusion to additional legally present but non-naturalized immigrants.
This group includes green-card holders who have been in the U.S. for less than five years, refugees, and individuals protected under the Deferred Action for Childhood Arrivals (DACA) program.
Under existing law, these individuals are eligible for ACA tax credits and enrollment in New York’s Essential Plan, a Medicaid-like program, but their eligibility will terminate on January 1, 2027.
State estimates indicate this change could cost the Essential Plan $7.6 billion in revenue and displace approximately 730,000 of its 1.7 million enrollees.
Furthermore, a 2001 court ruling, Aliessa v. Novello, obligates the state to maintain state-only Medicaid coverage for around 500,000 individuals with incomes below 138 percent of the poverty level, which is estimated to cost $2.7 billion.
This provision alone, linked to the ACA, has immense implications for New York’s health-care framework, amounting to a collective financial impact exceeding $10 billion, though experts believe the net loss to the overall health-care industry will be closer to $5 billion.
It’s crucial to note that the per-person cost of state-only Medicaid coverage is expected to decrease compared to the current situation because of a previous funding anomaly in the Essential Plan, which had benefitted from excessive federal aid.
As a result of this anomaly, state reimbursements for hospitals were increased to 225 percent of standard Medicaid fees.
For immigrant enrollees above the poverty line, options for alternative coverage are limited due to New York’s high commercial insurance costs, making health plans unaffordable for lower-income individuals lacking ACA tax credits.
Another significant provision in the budget requires non-disabled adults on Medicaid to demonstrate at least 80 hours of “community engagement” monthly in order to maintain their benefits.
Activities that qualify include paid work, educational programs, and community service.
The Hochul administration estimates this requirement could displace around 1.2 million individuals, representing more than half of the non-disabled adult enrollment in the state’s Medicaid program.
This estimate is based on data from previous implementations of work requirements in Republican-led states.
However, there is a possibility that New York may mitigate these losses through a more user-friendly compliance system.
While state officials have not yet provided precise estimates on budgetary impacts, any downturn in coverage is anticipated to result in savings for the state.
Given the average cost of Medicaid coverage for non-disabled adults, a reduction of 1.2 million recipients could yield approximately $9 billion in Medicaid savings, which would include $7.6 billion in federal funds and $1.4 billion in state savings.
The federal budget legislation also imposes stricter limits on provider taxes.
Provider taxes allow states to leverage federal matching funds without contributing their own money upfront.
In New York, this includes a tax on managed care organizations specifically aimed at Medicaid managed providers.
Although this tax was provisionally approved at the end of the Biden administration, the Centers for Medicare & Medicaid Services has hinted that authorization for it may expire soon.
The new legislation formalizes this anticipated decision, which can cost the state $1.6 billion in expected revenue.
Nonetheless, this revenue was likely in jeopardy regardless of the budget’s passage.
In addition to the managed care provider tax, New York imposes various other provider taxes that could be impacted by new restrictions.
However, larger taxes that have historically been imposed have protection under a 1997 budget provision attributed to then-Senator Alfonse D’Amato, and there is no clear indication that the new laws would abolish this D’Amato amendment.
From $6.8 billion in provider tax revenue recorded in 2024, the patient services surcharge generated under the Health Care Reform Act of 1996 accounts for a substantial $5.2 billion.
Another key aspect of the budget targets states that provide coverage to undocumented immigrants.
Though federal Medicaid funds cannot be used for this purpose, some states like New York have chosen to extend coverage using state funds.
The latest budget package stipulates that states offering government-funded health coverage for undocumented immigrants would see a deduction from their federal Medicaid funding.
In New York, this adjustment is anticipated to result in a loss of $924 million.
The state can either relinquish this funding, which constitutes about 1 percent of its total federal health funding, or retract its coverage options for the ineligible populations.
Additionally, the budget introduces new administrative requirements for states, including enforcing work requirements and conducting more frequent eligibility screenings.
State officials project these additional responsibilities will incur costs amounting to $564 million annually.
Among the other provisions in the legislation that remain unestimated by state officials is a ban on using Medicaid funds for gender transition services and a prohibition on Medicaid reimbursements for organizations like Planned Parenthood involved in performing abortions.
As New York navigates these changes, the pressure is on state officials to find alternative means to replace the support being pulled by the federal government.
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