Category: OBBBA Text

(a) In general.—Section 1902 of the Social Security Act (42 U.S.C. 1396a), as amended by sections 71103 and 71104, is further amended by adding at the end the following new subsection:

“(xx) Community engagement requirement for applicable individuals.—

“(1) IN GENERAL.—Except as provided in paragraph (11), beginning not later than the first day of the first quarter that begins after December 31, 2026, or, at the option of the State under a waiver or demonstration project under section 1115 or the State plan, such earlier date as the State may specify, subject to the succeeding provisions of this subsection, a State shall provide, as a condition of eligibility for medical assistance for an applicable individual, that such individual is required to demonstrate community engagement under paragraph (2)—

“(A) in the case of an applicable individual who has filed an application for medical assistance under a State plan (or a waiver of such plan) under this title, for 1 or more but not more than 3 (as specified by the State) consecutive months immediately preceding the month during which such individual applies for such medical assistance; and

“(B) in the case of an applicable individual enrolled and receiving medical assistance under a State plan (or under a waiver of such plan) under this title, for 1 or more (as specified by the State) months, whether or not consecutive—

“(i) during the period between such individual’s most recent determination (or redetermination, as applicable) of eligibility and such individual’s next regularly scheduled redetermination of eligibility (as verified by the State as part of such regularly scheduled redetermination of eligibility); or

“(ii) in the case of a State that has elected under paragraph (4) to conduct more frequent verifications of compliance with the requirement to demonstrate community engagement, during the period between the most recent and next such verification with respect to such individual.

“(2) COMMUNITY ENGAGEMENT COMPLIANCE DESCRIBED.—Subject to paragraph (3), an applicable individual demonstrates community engagement under this paragraph for a month if such individual meets 1 or more of the following conditions with respect to such month, as determined in accordance with criteria established by the Secretary through regulation:

“(A) The individual works not less than 80 hours.

“(B) The individual completes not less than 80 hours of community service.

“(C) The individual participates in a work program for not less than 80 hours.

“(D) The individual is enrolled in an educational program at least half-time.

“(E) The individual engages in any combination of the activities described in subparagraphs (A) through (D), for a total of not less than 80 hours.

“(F) The individual has a monthly income that is not less than the applicable minimum wage requirement under section 6 of the Fair Labor Standards Act of 1938, multiplied by 80 hours.

“(G) The individual had an average monthly income over the preceding 6 months that is not less than the applicable minimum wage requirement under section 6 of the Fair Labor Standards Act of 1938 multiplied by 80 hours, and is a seasonal worker, as described in section 45R(d)(5)(B) of the Internal Revenue Code of 1986 .

“(3) EXCEPTIONS.—

“(A) MANDATORY EXCEPTION FOR CERTAIN INDIVIDUALS.—The State shall deem an applicable individual to have demonstrated community engagement under paragraph (2) for a month, and may elect to not require an individual to verify information resulting in such deeming, if—

“(i) for part or all of such month, the individual—

“(I) was a specified excluded individual (as defined in paragraph (9)(A)(ii)); or

“(II) was—

“(aa) under the age of 19;

“(bb) entitled to, or enrolled for, benefits under part A of title XVIII, or enrolled for benefits under part B of title XVIII; or

“(cc) described in any of subclauses (I) through (VII) of subsection (a)(10)(A)(i); or

“(ii) at any point during the 3-month period ending on the first day of such month, the individual was an inmate of a public institution.

“(B) OPTIONAL EXCEPTION FOR SHORT-TERM HARDSHIP EVENTS.—

“(i) IN GENERAL.—The State plan (or waiver of such plan) may provide, in the case of an applicable individual who experiences a short-term hardship event during a month, that the State shall, under procedures established by the State (in accordance with standards specified by the Secretary), in the case of a short-term hardship event described in clause (ii)(II) and, upon the request of such individual, a short-term hardship event described in subclause (I) or (III) of clause (ii), deem such individual to have demonstrated community engagement under paragraph (2) for such month.

“(ii) SHORT-TERM HARDSHIP EVENT DEFINED.—For purposes of this subparagraph, an applicable individual experiences a short-term hardship event during a month if, for part or all of such month—

“(I) such individual receives inpatient hospital services, nursing facility services, services in an intermediate care facility for individuals with intellectual disabilities, inpatient psychiatric hospital services, or such other services of similar acuity (including outpatient care relating to other services specified in this subclause) as the Secretary determines appropriate;

“(II) such individual resides in a county (or equivalent unit of local government)—

“(aa) in which there exists an emergency or disaster declared by the President pursuant to the National Emergencies Act or the Robert T. Stafford Disaster Relief and Emergency Assistance Act; or

“(bb) that, subject to a request from the State to the Secretary, made in such form, at such time, and containing such information as the Secretary may require, has an unemployment rate that is at or above the lesser of—

“(AA) 8 percent; or

“(BB) 1.5 times the national unemployment rate; or

“(III) such individual or their dependent must travel outside of their community for an extended period of time to receive medical services necessary to treat a serious or complex medical condition (as described in paragraph (9)(A)(ii)(V)(ee)) that are not available within their community of residence.

“(4) OPTION TO CONDUCT MORE FREQUENT COMPLIANCE VERIFICATIONS.—With respect to an applicable individual enrolled and receiving medical assistance under a State plan (or a waiver of such plan) under this title, the State shall verify (in accordance with procedures specified by the Secretary) that each such individual has met the requirement to demonstrate community engagement under paragraph (1) during each such individual’s regularly scheduled redetermination of eligibility, except that a State may provide for such verifications more frequently.

“(5) EX PARTE VERIFICATIONS.—For purposes of verifying that an applicable individual has met the requirement to demonstrate community engagement under paragraph (1), or determining such individual to be deemed to have demonstrated community engagement under paragraph (3), or that an individual is a specified excluded individual under paragraph (9)(A)(ii), the State shall, in accordance with standards established by the Secretary, establish processes and use reliable information available to the State (such as payroll data or payments or encounter data under this title for individuals and data on payments to such individuals for the provision of services covered under this title) without requiring, where possible, the applicable individual to submit additional information.

“(6) PROCEDURE IN THE CASE OF NONCOMPLIANCE.—

“(A) IN GENERAL.—If a State is unable to verify that an applicable individual has met the requirement to demonstrate community engagement under paragraph (1) (including, if applicable, by verifying that such individual was deemed to have demonstrated community engagement under paragraph (3)) the State shall (in accordance with standards specified by the Secretary)—

“(i) provide such individual with the notice of noncompliance described in subparagraph (B);

“(ii) (I) provide such individual with a period of 30 calendar days, beginning on the date on which such notice of noncompliance is received by the individual, to—

“(aa) make a satisfactory showing to the State of compliance with such requirement (including, if applicable, by showing that such individual was or should be deemed to have demonstrated community engagement under paragraph (3)); or

“(bb) make a satisfactory showing to the State that such requirement does not apply to such individual on the basis that such individual does not meet the definition of applicable individual under paragraph (9)(A); and

“(II) if such individual is enrolled under the State plan (or a waiver of such plan) under this title, continue to provide such individual with medical assistance during such 30-calendar-day period; and

“(iii) if no such satisfactory showing is made and the individual is not a specified excluded individual described in paragraph (9)(A)(ii), deny such individual’s application for medical assistance under the State plan (or waiver of such plan) or, as applicable, disenroll such individual from the plan (or waiver of such plan) not later than the end of the month following the month in which such 30-calendar-day period ends, provided that—

“(I) the State first determines whether, with respect to the individual, there is any other basis for eligibility for medical assistance under the State plan (or waiver of such plan) or for another insurance affordability program; and

“(II) the individual is provided written notice and granted an opportunity for a fair hearing in accordance with subsection (a)(3).

“(B) NOTICE.—The notice of noncompliance provided to an applicable individual under subparagraph (A)(i) shall include information (in accordance with standards specified by the Secretary) on—

“(i) how such individual may make a satisfactory showing of compliance with such requirement (as described in subparagraph (A)(ii)) or make a satisfactory showing that such requirement does not apply to such individual on the basis that such individual does not meet the definition of applicable individual under paragraph (9)(A); and

“(ii) how such individual may reapply for medical assistance under the State plan (or a waiver of such plan) under this title in the case that such individuals’ application is denied or, as applicable, in the case that such individual is disenrolled from the plan (or waiver).

“(7) TREATMENT OF NONCOMPLIANT INDIVIDUALS IN RELATION TO CERTAIN OTHER PROVISIONS.—

“(A) CERTAIN FMAP INCREASES.—A State shall not be treated as not providing medical assistance to all individuals described in section 1902(a)(10)(A)(i)(VIII), or as not expending amounts for all such individuals under the State plan (or waiver of such plan), solely because such an individual is determined ineligible for medical assistance under the State plan (or waiver) on the basis of a failure to meet the requirement to demonstrate community engagement under paragraph (1).

“(B) OTHER PROVISIONS.—For purposes of section 36B(c)(2)(B) of the Internal Revenue Code of 1986, an individual shall be deemed to be eligible for minimum essential coverage described in section 5000A(f)(1)(A)(ii) of such Code for a month if such individual would have been eligible for medical assistance under a State plan (or a waiver of such plan) under this title but for a failure to meet the requirement to demonstrate community engagement under paragraph (1).

“(8) OUTREACH.—

“(A) IN GENERAL.—In accordance with standards specified by the Secretary, beginning not later than the date that precedes December 31, 2026 (or, if the State elects under paragraph (1) to specify an earlier date, such earlier date) by the number of months specified by the State under paragraph (1)(A) plus 3 months, and periodically thereafter, the State shall notify applicable individuals enrolled under a State plan (or waiver) under this title of the requirement to demonstrate community engagement under this subsection. Such notice shall include information on—

“(i) how to comply with such requirement, including an explanation of the exceptions to such requirement under paragraph (3) and the definition of the term ‘applicable individual’ under paragraph (9)(A);

“(ii) the consequences of noncompliance with such requirement; and

“(iii) how to report to the State any change in the individual’s status that could result in—

“(I) the applicability of an exception under paragraph (3) (or the end of the applicability of such an exception); or

“(II) the individual qualifying as a specified excluded individual under paragraph (9)(A)(ii).

“(B) FORM OF OUTREACH NOTICE.—A notice required under subparagraph (A) shall be delivered—

“(i) by regular mail (or, if elected by the individual, in an electronic format); and

“(ii) in 1 or more additional forms, which may include telephone, text message, an internet website, other commonly available electronic means, and such other forms as the Secretary determines appropriate.

“(9) DEFINITIONS.—In this subsection:

“(A) APPLICABLE INDIVIDUAL.—

“(i) IN GENERAL.—The term ‘applicable individual’ means an individual (other than a specified excluded individual (as defined in clause (ii)))—

“(I) who is eligible to enroll (or is enrolled) under the State plan under subsection (a)(10)(A)(i)(VIII); or

“(II) who—

“(aa) is otherwise eligible to enroll (or is enrolled) under a waiver of such plan that provides coverage that is equivalent to minimum essential coverage (as described in section 5000A(f)(1)(A) of the Internal Revenue Code of 1986 and as determined in accordance with standards prescribed by the Secretary in regulations); and

“(bb) has attained the age of 19 and is under 65 years of age, is not pregnant, is not entitled to, or enrolled for, benefits under part A of title XVIII, or enrolled for benefits under part B of title XVIII, and is not otherwise eligible to enroll under such plan.

“(ii) SPECIFIED EXCLUDED INDIVIDUAL.—For purposes of clause (i), the term ‘specified excluded individual’ means an individual, as determined by the State (in accordance with standards specified by the Secretary)—

“(I) who is described in subsection (a)(10)(A)(i)(IX);

“(II) who—

“(aa) is an Indian or an Urban Indian (as such terms are defined in paragraphs (13) and (28) of section 4 of the Indian Health Care Improvement Act);

“(bb) is a California Indian described in section 809(a) of such Act; or

“(cc) has otherwise been determined eligible as an Indian for the Indian Health Service under regulations promulgated by the Secretary;

“(III) who is the parent, guardian, caretaker relative, or family caregiver (as defined in section 2 of the RAISE Family Caregivers Act) of a dependent child 13 years of age and under or a disabled individual;

“(IV) who is a veteran with a disability rated as total under section 1155 of title 38, United States Code;

“(V) who is medically frail or otherwise has special medical needs (as defined by the Secretary), including an individual—

“(aa) who is blind or disabled (as defined in section 1614);

“(bb) with a substance use disorder;

“(cc) with a disabling mental disorder;

“(dd) with a physical, intellectual or developmental disability that significantly impairs their ability to perform 1 or more activities of daily living; or

“(ee) with a serious or complex medical condition;

“(VI) who—

“(aa) is in compliance with any requirements imposed by the State pursuant to section 407; or

“(bb) is a member of a household that receives supplemental nutrition assistance program benefits under the Food and Nutrition Act of 2008 and is not exempt from a work requirement under such Act;

“(VII) who is participating in a drug addiction or alcoholic treatment and rehabilitation program (as defined in section 3(h) of the Food and Nutrition Act of 2008);

“(VIII) who is an inmate of a public institution; or

“(IX) who is pregnant or entitled to postpartum medical assistance under paragraph (5) or (16) of subsection (e).

“(B) EDUCATIONAL PROGRAM.—The term ‘educational program’ includes—

“(i) an institution of higher education (as defined in section 101 of the Higher Education Act of 1965); and

“(ii) a program of career and technical education (as defined in section 3 of the Carl D. Perkins Career and Technical Education Act of 2006).

“(C) STATE.—The term ‘State’ means 1 of the 50 States or the District of Columbia.

“(D) WORK PROGRAM.—The term ‘work program’ has the meaning given such term in section 6(o)(1) of the Food and Nutrition Act of 2008.

“(10) PROHIBITING WAIVER OF COMMUNITY ENGAGEMENT REQUIREMENTS.—Notwithstanding section 1115(a), the provisions of this subsection may not be waived.

“(11) SPECIAL IMPLEMENTATION RULE.—

“(A) IN GENERAL.—Subject to subparagraph (C), the Secretary may exempt a State from compliance with the requirements of this subsection if—

“(i) the State submits to the Secretary a request for such exemption, made in such form and at such time as the Secretary may require, and including the information specified in subparagraph (B); and

“(ii) the Secretary determines that based on such request, the State is demonstrating a good faith effort to comply with the requirements of this subsection.

“(B) GOOD FAITH EFFORT DETERMINATION.—In determining whether a State is demonstrating a good faith effort for purposes of subparagraph (A)(ii), the Secretary shall consider—

“(i) any actions taken by the State toward compliance with the requirements of this subsection;

“(ii) any significant barriers to or challenges in meeting such requirements, including related to funding, design, development, procurement, or installation of necessary systems or resources;

“(iii) the State’s detailed plan and timeline for achieving full compliance with such requirements, including any milestones of such plan (as defined by the Secretary); and

“(iv) any other criteria determined appropriate by the Secretary.

“(C) DURATION OF EXEMPTION.—

“(i) IN GENERAL.—An exemption granted under subparagraph (A) shall expire not later than December 31, 2028, and may not be renewed beyond such date.

“(ii) EARLY TERMINATION.—The Secretary may terminate an exemption granted under subparagraph (A) prior to the expiration date of such exemption if the Secretary determined that the State has—

“(I) failed to comply with the reporting requirements described in subparagraph (D); or

“(II) based on the information provided pursuant to subparagraph (D), failed to make continued good faith efforts toward compliance with the requirements of this subsection.

“(D) REPORTING REQUIREMENTS.—A State granted an exemption under subparagraph (A) shall submit to the Secretary—

“(i) quarterly progress reports on the State’s status in achieving the milestones toward full compliance described in subparagraph (B)(iii); and

“(ii) information on specific risks or newly identified barriers or challenges to full compliance, including the State’s plan to mitigate such risks, barriers, or challenges.”.

(b) Conforming amendment.—Section 1902(a)(10)(A)(i)(VIII) of the Social Security Act (42 U.S.C. 1396a(a)(10)(A)(i)(VIII)) is amended by striking “subject to subsection (k)” and inserting “subject to subsections (k) and (xx)”.

(c) Prohibiting conflicts of interest.—A State shall not use a Medicaid managed care entity or other specified entity (as such terms are defined in section 1903(m)(9)(D)), or other contractor to determine beneficiary compliance under such section unless the contractor has no direct or indirect financial relationship with any Medicaid managed care entity or other specified entity that is responsible for providing or arranging for coverage of medical assistance for individuals enrolled with the entity pursuant to a contract with such State.

(d) Interim final rulemaking.—Not later than June 1, 2026, the Secretary of Health and Human Services shall promulgate an interim final rule for purposes of implementing the provisions of, and the amendments made by, this section. Any action taken to implement the provisions of, and the amendments made by, this section shall not be subject to the provisions of section 553 of title 5, United States Code.

(e) Development of government efficiency grants to States.—

(1) IN GENERAL.—In order for States to establish systems necessary to carry out the provisions of, and amendments made by, this section or other sections of this chapter that pertain to conducting eligibility determinations or redeterminations, the Secretary of Health and Human Services shall—

(A) out of amounts appropriated under paragraph (3)(A), award to each State a grant equal to the amount specified in paragraph (2) for such State; and

(B) out of amounts appropriated under paragraph (3)(B), distribute an equal amount among such States.

(2) AMOUNT SPECIFIED.—For purposes of paragraph (1)(A), the amount specified in this paragraph is an amount that bears the same ratio to the amount appropriated under paragraph (3)(A) as the number of applicable individuals (as defined in section 1902(xx) of the Social Security Act, as added by subsection (a)) residing in such State bears to the total number of such individuals residing in all States, as of March 31, 2025.

(3) FUNDING.—There are appropriated, out of any monies in the Treasury not otherwise appropriated—

(A) $100,000,000 for fiscal year 2026 for purposes of awarding grants under paragraph (1)(A), to remain available until expended; and

(B) $100,000,000 for fiscal year 2026 for purposes of award grants under paragraph (1)(B), to remain available until expended.

(4) DEFINITION.—In this subsection, the term “State” means 1 of the 50 States and the District of Columbia.

(f) Implementation funding.—For the purposes of carrying out the provisions of, and the amendments made by, this section, there are appropriated, out of any monies in the Treasury not otherwise appropriated, to the Administrator of the Centers for Medicare & Medicaid Services, $200,000,000 for fiscal year 2026, to remain available until expended.

(a) In general.—Section 1115 of the Social Security Act (42 U.S.C. 1315) is amended by adding at the end the following new subsection:

“(g) Requirement of budget neutrality for Medicaid demonstration projects.—

“(1) IN GENERAL.—Beginning January 1 2027, the Secretary may not approve an application for (or renewal or amendment of) an experimental, pilot, or demonstration project undertaken under subsection (a) to promote the objectives of title XIX in a State (in this subsection referred to as a ‘Medicaid demonstration project’) unless the Chief Actuary for the Centers for Medicare & Medicaid Services certifies that such project, or, in the case of a renewal, the duration of the preceding waiver, is not expected to result in an increase in the amount of Federal expenditures compared to the amount that such expenditures would otherwise be in the absence of such project. For purposes of this subsection, expenditures for the coverage of populations and services that the State could have otherwise provided through its Medicaid State plan or other authority under title XIX, including expenditures that could be made under such authority but for the provision of such services at a different site of service than authorized under such State plan or other authority, shall be considered expenditures in the absence of such a project.

“(2) TREATMENT OF SAVINGS.—In the event that expenditures with respect to a State under a Medicaid demonstration project are, during an approval period for such project, less than the amount of such expenditures that would have otherwise been made in the absence of such project, the Secretary shall specify the methodology to be used with respect to the subsequent approval period for such project for purposes of taking the difference between such expenditures into account.”.

(b) Implementation funding.—For the purposes of carrying out the provisions of, and the amendments made by, this section, there are appropriated, out of any monies in the Treasury not otherwise appropriated, to the Administrator of the Centers for Medicare & Medicaid Services, $5,000,000 for each of fiscal years 2026 and 2027, to remain available until expended.

(a) In general.—Section 1903(w) of the Social Security Act (42 U.S.C. 1396b(w)) is amended—

(1) in paragraph (3)(E), by inserting after clause (ii)(II) the following new clause:

“(iii) For purposes of clause (ii)(I), a tax is not considered to be generally redistributive if any of the following conditions apply:

“(I) Within a permissible class, the tax rate imposed on any taxpayer or tax rate group (as defined in paragraph (7)(J)) explicitly defined by its relatively lower volume or percentage of Medicaid taxable units (as defined in paragraph (7)(H)) is lower than the tax rate imposed on any other taxpayer or tax rate group explicitly defined by its relatively higher volume or percentage of Medicaid taxable units.

“(II) Within a permissible class, the tax rate imposed on any taxpayer or tax rate group (as so defined) based upon its Medicaid taxable units (as so defined) is higher than the tax rate imposed on any taxpayer or tax rate group based upon its non-Medicaid taxable unit (as defined in paragraph (7)(I)).

“(III) The tax excludes or imposes a lower tax rate on a taxpayer or tax rate group (as so defined) based on or defined by any description that results in the same effect as described in subclause (I) or (II) for a taxpayer or tax rate group. Characteristics that may indicate such type of exclusion include the use of terminology to establish a tax rate group—

“(aa) based on payments or expenditures made under the program under this title without mentioning the term ‘Medicaid’ (or any similar term) to accomplish the same effect as described in subclause (I) or (II); or

“(bb) that closely approximates a taxpayer or tax rate group under the program under this title, to the same effect as described in subclause (I) or (II).”; and

(2) in paragraph (7), by adding at the end the following new subparagraphs:

“(H) The term ‘Medicaid taxable unit’ means a unit that is being taxed within a health care related tax that is applicable to the program under this title. Such term includes a unit that is used as the basis for—

“(i) payment under the program under this title (such as Medicaid bed days);

“(ii) Medicaid revenue;

“(iii) costs associated with the program under this title (such as Medicaid charges, claims, or expenditures); and

“(iv) other units associated with the program under this title, as determined by the Secretary.

“(I) The term ‘non-Medicaid taxable unit’ means a unit that is being taxed within a health care related tax that is not applicable to the program under this title. Such term includes a unit that is used as the basis for—

“(i) payment by non-Medicaid payers (such as non-Medicaid bed days);

“(ii) non-Medicaid revenue;

“(iii) costs that are not associated with the program under this title (such as non-Medicaid charges, non-Medicaid claims, or non-Medicaid expenditures); and

“(iv) other units not associated with the program under this title, as determined by the Secretary.

“(J) The term ‘tax rate group’ means a group of entities contained within a permissible class of a health care related tax that are taxed at the same rate.”.

(b) Non-application to territories.—The amendments made by this section shall only apply with respect to a State that is 1 of the 50 States or the District of Columbia.

(c) Effective date.—The amendments made by this section shall take effect upon the date of enactment of this Act, subject to any applicable transition period determined appropriate by the Secretary of Health and Human Services, not to exceed 3 fiscal years.

(a) In general.—Subject to subsection (b), the Secretary of Health and Human Services (in this section referred to as the Secretary) shall revise section 438.6(c)(2)(iii) of title 42, Code of Federal Regulations (or a successor regulation) such that, with respect to a payment described in such section made for a service furnished during a rating period beginning on or after the date of the enactment of this Act, the total payment rate for such service is limited to—

(1) in the case of a State that provides coverage to all individuals described in section 1902(a)(10)(A)(i)(VIII) of the Social Security Act (42 U.S.C. 1396a(a)(10)(A)(i)(VIII)) that is equivalent to minimum essential coverage (as described in section 5000A(f)(1)(A) of the Internal Revenue Code of 1986 and determined in accordance with standards prescribed by the Secretary in regulations) under the State plan (or waiver of such plan) of such State under title XIX of such Act, 100 percent of the specified total published Medicare payment rate (or, in the absence of a specified total published Medicare payment rate, the payment rate under a Medicaid State plan (or under a waiver of such plan)); or

(2) in the case of a State other than a State described in paragraph (1), 110 percent of the specified total published Medicare payment rate (or, in the absence of a specified total published Medicare payment rate, the payment rate under a Medicaid State plan (or under a waiver of such plan)).

(b) Grandfathering certain payments.—In the case of a payment described in section 438.6(c)(2)(iii) of title 42, Code of Federal Regulations (or a successor regulation) for which written prior approval (or a good faith effort to receive such approval, as determined by the Secretary) was made before May 1, 2025, or a payment described in such section for a rural hospital (as defined in subsection (d)(2)) for which written prior approval (or a good faith effort to receive such approval, as determined by the Secretary) was made by the date of enactment of this Act, for the rating period occurring within 180 days of the date of the enactment of this Act, or a payment so described for such rating period for which a completed preprint was submitted to the Secretary prior to the date of enactment of this Act, beginning with the rating period on or after January 1, 2028, the total amount of such payment shall be reduced by 10 percentage points each year until the total payment rate for such service is equal to the rate for such service specified in subsection (a).

(c) Treatment of expansion states.—The revisions described in subsection (a) shall provide that, with respect to a State that begins providing the coverage described in paragraph (1) of such subsection on or after the date of the enactment of this Act, the limitation described in such paragraph shall apply to such State with respect to a payment described in section 438.6(c)(2)(iii) of title 42, Code of Federal Regulations (or a successor regulation) for a service furnished during a rating period beginning on or after the date of enactment of this Act.

(d) Definitions.—In this section:

(1) RATING PERIOD.—The term “rating period” has the meaning given such term in section 438.2 of title 42, Code of Federal Regulations (or a successor regulation).

(2) RURAL HOSPITAL.—The term “rural hospital” means the following:

(A) A subsection (d) hospital (as defined in paragraph (1)(B) of section 1886(d) of the Social Security Act (42 U.S.C. 1395ww(d))) that—

(i) is located in a rural area (as defined in paragraph (2)(D) of such section);

(ii) is treated as being located in a rural area pursuant to paragraph (8)(E) of such section; or

(iii) is located in a rural census tract of a metropolitan statistical area (as determined under the most recent modification of the Goldsmith Modification, originally published in the Federal Register on February 27, 1992 (57 Fed. Reg. 6725)).

(B) A critical access hospital (as defined in section 1861(mm)(1) of such Act (42 U.S.C. 1395x(mm)(1))).

(C) A sole community hospital (as defined in section 1886(d)(5)(D)(iii) of such Act (42 U.S.C. 1395ww(d)(5)(D)(iii))).

(D) A Medicare-dependent, small rural hospital (as defined in section 1886(d)(5)(G)(iv) of such Act (42 U.S.C. 1395ww(d)(5)(G)(iv))).

(E) A low-volume hospital (as defined in section 1886(d)(12)(C) of such Act (42 U.S.C. 1395ww(d)(12)(C))).

(F) A rural emergency hospital (as defined in section 1861(kkk)(2) of such Act (42 U.S.C. 1395x(kkk)(2))).

(3) STATE.—The term “State” means 1 of the 50 States or the District of Columbia.

(4) TOTAL PUBLISHED MEDICARE PAYMENT RATE.—The term “total published Medicare payment rate” has the meaning given to such term in section 438.6(a) of title 42, Code of Federal Regulations (or a successor regulation).

(5) WRITTEN PRIOR APPROVAL.—The term “written prior approval” has the meaning given to such term in section 438.6(c)(2)(i) of title 42, Code of Federal Regulations (or a successor regulation).

(e) Funding.—There are appropriated out of any monies in the Treasury not otherwise appropriated $7,000,000 for each of fiscal years 2026 through 2033 for purposes of carrying out this section, to remain available until expended.

(a) Change in threshold for hold harmless provision of broad-based health care related taxes.—Section 1903(w)(4) of the Social Security Act (42 U.S.C. 1396b(w)(4)) is amended—

(1) in subparagraph (C)(ii), by inserting “, and for fiscal years beginning on or after October 1, 2026, the applicable percent determined under subparagraph (D) shall be substituted for ‘6 percent’ each place it appears” after “each place it appears”; and

(2) by inserting after subparagraph (C)(ii), the following new subparagraph:

“(D) (i) For purposes of subparagraph (C)(ii), the applicable percent determined under this subparagraph is—

“(I) in the case of a non-expansion State or unit of local government in such State and a class of health care items or services described in section 433.56(a) of title 42, Code of Federal Regulations (as in effect on May 1, 2025)—

“(aa) if, on the date of enactment of this subparagraph, the non-expansion State or unit of local government in such State has enacted a tax and imposes such tax on such class and the Secretary determines that the tax is within the hold harmless threshold as of that date, the applicable percent of net patient revenue attributable to such class that has been so determined; and

“(bb) if, on the date of enactment of this subparagraph, the non-expansion State or unit of local government in such State has not enacted or does not impose a tax with respect to such class, 0 percent; and

“(II) in the case of an expansion State or unit of local government in such State and a class of health care items or services described in section 433.56(a) of title 42, Code of Federal Regulations (as in effect on May 1, 2025), subject to clause (iv)—

“(aa) if, on the date of enactment of this subparagraph, the expansion State or unit of local government in such State has enacted a tax and imposes such tax on such class and the Secretary determines that the tax is within the hold harmless threshold as of that date, the lower of—

“(AA) the applicable percent of net patient revenue attributable to such class that has been so determined; and

“(BB) the applicable percent specified in clause (ii) for the fiscal year; and

“(bb) if, on the date of enactment of this subparagraph, the expansion State or unit of local government in such State has not enacted or does not impose a tax with respect to such class, 0 percent.

“(ii) For purposes of clause (i)(II)(aa)(BB), the applicable percent is—

“(I) for fiscal year 2028, 5.5 percent;

“(II) for fiscal year 2029, 5 percent;

“(III) for fiscal year 2030, 4.5 percent;

“(IV) for fiscal year 2031, 4 percent; and

“(V) for fiscal year 2032 and each subsequent fiscal year, 3.5 percent.

“(iii) For purposes of clause (i):

“(I) EXPANSION STATE.—The term ‘expansion State’ means a State that, beginning on January 1, 2014, or on any date thereafter, elects to provide medical assistance to all individuals described in section 1902(a)(10)(A)(i)(VIII) under the State plan under this title or under a waiver of such plan.

“(II) NON-EXPANSION STATE.—The term ‘non-expansion State’ means a State that is not an expansion State.

“(iv) In the case of a tax of an expansion State or unit of local government in such State in effect on the date of enactment of this clause, that applies to a class of health care items or services that is described in paragraph (3) or (4) of section 433.56(a) of title 42, Code of Federal Regulations (as in effect on May 1, 2025), and for which, on such date of enactment, is within the hold harmless threshold (as determined by the Secretary), the applicable percent of net patient revenue attributable to such class that has been so determined shall apply for a fiscal year instead of the applicable percent specified in clause (ii) for the fiscal year.”.

(b) Non-application to territories.—The amendments made by this section shall only apply with respect to a State that is 1 of the 50 States or the District of Columbia.

(c) Implementation funding.—For the purposes of carrying out the provisions of, and the amendments made by, this section, there are appropriated, out of any monies in the Treasury not otherwise appropriated, to the Administrator of the Centers for Medicare & Medicaid Services, $20,000,000 for fiscal year 2026, to remain available until expended.

SEC. 71111. Moratorium on implementation of rule relating to staffing standards for long-term care facilities under the Medicare and Medicaid programs.

The Secretary of Health and Human Services shall not, during the period beginning on the date of the enactment of this section and ending September 30, 2034, implement, administer, or enforce the amendments made by the provisions of the final rule published by the Centers for Medicare & Medicaid Services on May 10, 2024, and titled “Medicare and Medicaid Programs; Minimum Staffing Standards for Long-Term Care Facilities and Medicaid Institutional Payment Transparency Reporting” (89 Fed. Reg. 40876) to the following sections of part 483 of title 42, Code of Federal Regulations:

(1) Section 483.5.

(2) Section 483.35.

SEC. 71112. Reducing State Medicaid costs.

(a) In general.—Section 1902(a)(34) of the Social Security Act (42 U.S.C. 1396a(a)(34)) is amended to read as follows:

“(34) provide that in the case of any individual who has been determined to be eligible for medical assistance under the plan and—

“(A) is enrolled under paragraph (10)(A)(i)(VIII), such assistance will be made available to the individual for care and services included under the plan and furnished in or after the month before the month in which the individual made application (or application was made on the individual’s behalf in the case of a deceased individual) for such assistance if such individual was (or upon application would have been) eligible for such assistance at the time such care and services were furnished; or

“(B) is not described in subparagraph (A), such assistance will be made available to the individual for care and services included under the plan and furnished in or after the second month before the month in which the individual made application (or application was made on the individual’s behalf in the case of a deceased individual) for such assistance if such individual was (or upon application would have been) eligible for such assistance at the time such care and services were furnished;”.

(b) Definition of medical assistance.—Section 1905(a) of the Social Security Act (42 U.S.C. 1396d(a)) is amended by striking “in or after the third month before the month in which the recipient makes application for assistance” and inserting “, with respect to an individual described in section 1902(a)(34)(A), in or after the month before the month in which the recipient makes application for assistance, and with respect to an individual described in section 1902(a)(34)(B), in or after the second month before the month in which the recipient makes application for assistance”.

(c) CHIP.—Section 2102(b)(1)(B) of the Social Security Act (42 U.S.C. 1397bb(b)(1)(B)) is amended—

(1) in clause (iv), by striking “and” at the end;

(2) in clause (v), by striking the period and inserting “; and”; and

(3) by adding at the end the following new clause:

“(vi) shall, in the case that the State elects to provide child health or pregnancy-related assistance to an individual for any period prior to the month in which the individual made application for such assistance (or application was made on behalf of the individual), provide that such assistance is not made available to such individual for items and services included under the State child health plan (or waiver of such plan) that are furnished before the second month preceding the month in which such individual made application (or application was made on behalf of such individual) for assistance.”.

(d) Effective date.—The amendments made by this section shall apply to medical assistance, child health assistance, and pregnancy-related assistance with respect to individuals whose eligibility for such medical assistance, child health assistance, or pregnancy-related assistance is based on an application made on or after the first day of the first quarter that begins after December 31, 2026.

(e) Implementation funding.—For the purposes of carrying out the provisions of, and the amendments made by, this section, there are appropriated, out of any monies in the Treasury not otherwise appropriated, to the Administrator of the Centers for Medicare & Medicaid Services, $10,000,000 for fiscal year 2026, to remain available until expended.

SEC. 71113. Federal payments to prohibited entities.

(a) In general.—No Federal funds that are considered direct spending and provided to carry out a State plan under title XIX of the Social Security Act or a waiver of such a plan shall be used to make payments to a prohibited entity for items and services furnished during the 1-year period beginning on the date of the enactment of this Act, including any payments made directly to the prohibited entity or under a contract or other arrangement between a State and a covered organization.

(b) Definitions.—In this section:

(1) PROHIBITED ENTITY.—The term “prohibited entity” means an entity, including its affiliates, subsidiaries, successors, and clinics—

(A) that, as of the first day of the first quarter beginning after the date of enactment of this Act—

(i) is an organization described in section 501(c)(3) of the Internal Revenue Code of 1986 and exempt from tax under section 501(a) of such Code;

(ii) is an essential community provider described in section 156.235 of title 45, Code of Federal Regulations (as in effect on the date of enactment of this Act), that is primarily engaged in family planning services, reproductive health, and related medical care; and

(iii) provides for abortions, other than an abortion—

(I) if the pregnancy is the result of an act of rape or incest; or

(II) in the case where a woman suffers from a physical disorder, physical injury, or physical illness, including a life-endangering physical condition caused by or arising from the pregnancy itself, that would, as certified by a physician, place the woman in danger of death unless an abortion is performed; and

(B) for which the total amount of Federal and State expenditures under the Medicaid program under title XIX of the Social Security Act for medical assistance furnished in fiscal year 2023 made directly, or by a covered organization, to the entity or to any affiliates, subsidiaries, successors, or clinics of the entity, or made to the entity or to any affiliates, subsidiaries, successors, or clinics of the entity as part of a nationwide health care provider network, exceeded $800,000.

(2) DIRECT SPENDING.—The term “direct spending” has the meaning given that term under section 250(c) of the Balanced Budget and Emergency Deficit Control Act of 1985 (2 U.S.C. 900(c)).

(3) COVERED ORGANIZATION.—The term “covered organization” means a managed care entity (as defined in section 1932(a)(1)(B) of the Social Security Act (42 U.S.C. 1396u–2(a)(1)(B))) or a prepaid inpatient health plan or prepaid ambulatory health plan (as such terms are defined in section 1903(m)(9)(D) of such Act (42 U.S.C. 1396b(m)(9)(D))).

(4) STATE.—The term “State” has the meaning given such term in section 1101 of the Social Security Act (42 U.S.C. 1301).

(c) Implementation funding.—For the purposes of carrying out this section, there are appropriated, out of any monies in the Treasury not otherwise appropriated, to the Administrator of the Centers for Medicare & Medicaid Services, $1,000,000 for fiscal year 2026, to remain available until expended.

Section 1905(ii)(3) of the Social Security Act (42 U.S.C. 1396d(ii)(3)) is amended—

(1) by striking “which has not” and inserting the following: “which—

“(A) has not”;

(2) in subparagraph (A), as so inserted, by striking the period at the end and inserting “; and”; and

(3) by adding at the end the following new subparagraph:

“(B) begins to expend amounts for all such individuals prior to January 1, 2026.”.

(a) In general.—No Federal funds that are considered direct spending and provided to carry out a State plan under title XIX of the Social Security Act or a waiver of such a plan shall be used to make payments to a prohibited entity for items and services furnished during the 1-year period beginning on the date of the enactment of this Act, including any payments made directly to the prohibited entity or under a contract or other arrangement between a State and a covered organization.

(b) Definitions.—In this section:

(1) PROHIBITED ENTITY.—The term “prohibited entity” means an entity, including its affiliates, subsidiaries, successors, and clinics—

(A) that, as of the first day of the first quarter beginning after the date of enactment of this Act—

(i) is an organization described in section 501(c)(3) of the Internal Revenue Code of 1986 and exempt from tax under section 501(a) of such Code;

(ii) is an essential community provider described in section 156.235 of title 45, Code of Federal Regulations (as in effect on the date of enactment of this Act), that is primarily engaged in family planning services, reproductive health, and related medical care; and

(iii) provides for abortions, other than an abortion—

(I) if the pregnancy is the result of an act of rape or incest; or

(II) in the case where a woman suffers from a physical disorder, physical injury, or physical illness, including a life-endangering physical condition caused by or arising from the pregnancy itself, that would, as certified by a physician, place the woman in danger of death unless an abortion is performed; and

(B) for which the total amount of Federal and State expenditures under the Medicaid program under title XIX of the Social Security Act for medical assistance furnished in fiscal year 2023 made directly, or by a covered organization, to the entity or to any affiliates, subsidiaries, successors, or clinics of the entity, or made to the entity or to any affiliates, subsidiaries, successors, or clinics of the entity as part of a nationwide health care provider network, exceeded $800,000.

(2) DIRECT SPENDING.—The term “direct spending” has the meaning given that term under section 250(c) of the Balanced Budget and Emergency Deficit Control Act of 1985 (2 U.S.C. 900(c)).

(3) COVERED ORGANIZATION.—The term “covered organization” means a managed care entity (as defined in section 1932(a)(1)(B) of the Social Security Act (42 U.S.C. 1396u–2(a)(1)(B))) or a prepaid inpatient health plan or prepaid ambulatory health plan (as such terms are defined in section 1903(m)(9)(D) of such Act (42 U.S.C. 1396b(m)(9)(D))).

(4) STATE.—The term “State” has the meaning given such term in section 1101 of the Social Security Act (42 U.S.C. 1301).

(c) Implementation funding.—For the purposes of carrying out this section, there are appropriated, out of any monies in the Treasury not otherwise appropriated, to the Administrator of the Centers for Medicare & Medicaid Services, $1,000,000 for fiscal year 2026, to remain available until expended.

(a) In general.—Section 1902(a)(34) of the Social Security Act (42 U.S.C. 1396a(a)(34)) is amended to read as follows:

“(34) provide that in the case of any individual who has been determined to be eligible for medical assistance under the plan and—

“(A) is enrolled under paragraph (10)(A)(i)(VIII), such assistance will be made available to the individual for care and services included under the plan and furnished in or after the month before the month in which the individual made application (or application was made on the individual’s behalf in the case of a deceased individual) for such assistance if such individual was (or upon application would have been) eligible for such assistance at the time such care and services were furnished; or

“(B) is not described in subparagraph (A), such assistance will be made available to the individual for care and services included under the plan and furnished in or after the second month before the month in which the individual made application (or application was made on the individual’s behalf in the case of a deceased individual) for such assistance if such individual was (or upon application would have been) eligible for such assistance at the time such care and services were furnished;”.

(b) Definition of medical assistance.—Section 1905(a) of the Social Security Act (42 U.S.C. 1396d(a)) is amended by striking “in or after the third month before the month in which the recipient makes application for assistance” and inserting “, with respect to an individual described in section 1902(a)(34)(A), in or after the month before the month in which the recipient makes application for assistance, and with respect to an individual described in section 1902(a)(34)(B), in or after the second month before the month in which the recipient makes application for assistance”.

(c) CHIP.—Section 2102(b)(1)(B) of the Social Security Act (42 U.S.C. 1397bb(b)(1)(B)) is amended—

(1) in clause (iv), by striking “and” at the end;

(2) in clause (v), by striking the period and inserting “; and”; and

(3) by adding at the end the following new clause:

“(vi) shall, in the case that the State elects to provide child health or pregnancy-related assistance to an individual for any period prior to the month in which the individual made application for such assistance (or application was made on behalf of the individual), provide that such assistance is not made available to such individual for items and services included under the State child health plan (or waiver of such plan) that are furnished before the second month preceding the month in which such individual made application (or application was made on behalf of such individual) for assistance.”.

(d) Effective date.—The amendments made by this section shall apply to medical assistance, child health assistance, and pregnancy-related assistance with respect to individuals whose eligibility for such medical assistance, child health assistance, or pregnancy-related assistance is based on an application made on or after the first day of the first quarter that begins after December 31, 2026.

(e) Implementation funding.—For the purposes of carrying out the provisions of, and the amendments made by, this section, there are appropriated, out of any monies in the Treasury not otherwise appropriated, to the Administrator of the Centers for Medicare & Medicaid Services, $10,000,000 for fiscal year 2026, to remain available until expended.

The Secretary of Health and Human Services shall not, during the period beginning on the date of the enactment of this section and ending September 30, 2034, implement, administer, or enforce the amendments made by the provisions of the final rule published by the Centers for Medicare & Medicaid Services on May 10, 2024, and titled “Medicare and Medicaid Programs; Minimum Staffing Standards for Long-Term Care Facilities and Medicaid Institutional Payment Transparency Reporting” (89 Fed. Reg. 40876) to the following sections of part 483 of title 42, Code of Federal Regulations:

(1) Section 483.5.

(2) Section 483.35.