If you've been watching federal legislation, you've likely heard about the One Big Beautiful Bill Act.
Signed into law on July 4, 2025, this major budget reconciliation package includes several provisions that will affect Medicare agents and the beneficiaries we serve.
What Actually Made It Into the Final Law
The original House bill contained several Medicare proposals, but the final signed version was much more focused.
Three main Medicare provisions survived the legislative process:
- Limits on Medicare eligibility for certain individuals
- A temporary physician fee schedule increase
- Changes to the orphan drug exclusion under the Drug Price Negotiation Program
Many of the initially proposed changes – including HSA contribution expansions, rural hospital designation changes, and AI fraud detection initiatives – were removed during negotiations between the House and Senate, as detailed in this Medicare policy analysis from Kiplinger.
Medicare Eligibility Changes
Section 71201 restricts Medicare coverage to specific eligible groups starting 18 months after enactment (January 2027).
Going forward, Medicare eligibility will be limited to:
- U.S. citizens and nationals
- Lawful permanent residents
- Cuban and Haitian entrants
- Individuals from Compact of Free Association countries (Marshall Islands, Micronesia, and Palau)
This eliminates Medicare eligibility for refugees, asylees, and individuals with temporary protected status. Current beneficiaries in these categories can remain on Medicare for 18 months, but new eligibility requirements will apply starting in January 2027.
Temporary Physician Fee Schedule Increase
Section 71202 provides a one-year, 2.5% increase to the Medicare Physician Fee Schedule conversion factor for services provided between January 1, 2026, and January 1, 2027.
This addresses concerns about physician payment rates that had remained flat for several years.
This temporary increase may help with provider network stability during 2026, which could be a positive factor for beneficiaries concerned about access to care.
Orphan Drug Exclusion Expansion
Section 71203 expands the orphan drug exclusion under the Medicare Drug Price Negotiation Program. Previously, only drugs designated for a single rare disease were excluded from price negotiations. The change now covers drugs designated for one or more rare diseases, as long as all approved indications are for rare conditions.
This change preserves innovation incentives for rare disease treatments but may limit the scope of drug price negotiations in some cases.
The Bigger Financial Picture
While these specific Medicare provisions may seem modest, the broader fiscal impact of the bill creates additional concerns. The Congressional Budget Office projects the law will add $3.3 trillion to the national deficit over the next decade.
When federal legislation increases the deficit by large amounts, it triggers automatic spending cuts under a 2010 federal budget law called the Statutory Pay-As-You-Go Act. Many programs like Social Security and Medicaid are protected from these cuts, but Medicare provider payments are not.
According to the Congressional Budget Office and Medicare Rights Center, these automatic cuts would reduce Medicare provider payments by up to 4% annually, totaling approximately $500 billion over eight years starting in 2026. This would affect payments to doctors, hospitals, and other healthcare providers who treat Medicare patients.
Congress could pass new legislation to prevent these cuts, but doing so requires additional Congressional action that may face political hurdles.
Looking Forward
The One Big Beautiful Bill Act represents a shift in federal healthcare policy, though its Medicare provisions are narrower than initially anticipated.
The more significant impacts may come from the fiscal effects and automatic spending cuts that could affect Medicare in future years.
Related:
- What Medicare Agents Should Know About Part E Proposals
- What Medicare Agents Need to Know About the 2026 Market Landscape
