Medicaid is a joint federal-state program that provides health insurance and long-term care coverage to low-income individuals. Minnesota’s version of Medicaid is called Medical Assistance (MA). To be eligible for MA, individuals must meet income requirements that vary by age, pregnancy status, and family size. Currently, people enrolled in MA pay no premium for coverage and no cost sharing for a comprehensive list of health services.
In 2024, MA covered 1.3 million Minnesotans (i.e., 22% of the state population). MA plays a pivotal role in minimizing Minnesota’s uninsured rate, which sits at an all-time low of 3.8% in 2025. Minnesotans covered by public programs, like MA, are half as likely to delay or forgo care due to cost compared to uninsured Minnesotans (i.e., 26% and 53%, respectively).
These figures are not expected to hold in the wake of the OBBBA. According to the nonpartisan CBO, the following provisions in the OBBBA are estimated to, collectively, reduce Medicaid spending by $911 billion and result in at least 5.9 million Americans losing health insurance in the next 10 years. This guide lists the provisions in order of effective date and discusses how Minnesota will be uniquely impacted by each.
Effective Date: July 4, 2025
Estimated Federal Savings: $191 billion
Estimated Number of Americans to Lose Insurance: 400,000
Background
The federal government has historically allowed states to finance the non-federal share of Medicaid spending with provider taxes on hospitals, professionals, and/or insurance companies. When states spend provider tax revenue on Medicaid, it triggers federal matching funds that states have increasingly relied on to keep their Medicaid programs afloat.
The OBBBA prohibits states from establishing new provider taxes and imposes significant restrictions on existing ones.
Impact in Minnesota
According to KFF, Minnesota has at least one provider tax that surpasses the restrictions imposed by the OBBBA. While its full impact is unclear at this time, this OBBBA provision will reduce the federal matching funds that Minnesota receives for MA. To compensate for this lost revenue, Minnesota will have to increase taxes, decrease spending on other state priorities, lower provider payments, and/or limit MA coverage.
Moreover, the 2025 Minnesota Legislature enacted a new provider tax, developed by the MMA, which would assess health plans based on their MA and non-MA enrollment. Revenue from this assessment was dedicated to increasing the payment rates for mental health services. The MMA had planned to pursue expansion of it to increase other outpatient professional services rates as well. This OBBBA provision blocks the implementation of this new assessment.
The Minnesota Department of Human Services estimates that this provision alone may result in Minnesota hospitals losing roughly $1 billion per year once fully implemented.
Effective Date: July 4, 2025
Estimated Federal Savings: $36 billion
Estimated Number of Americans to Lose Insurance: No clear effect (but may affect supply of care).
Background
The federal government allows states to use state directed payments (SDPs), a mechanism through which states can force insurers to pay providers certain rates for care provided to Medicaid patients. In 2024, the Biden Administration adopted a rule that caps SDPs to the average commercial rate for hospital and nursing facility services (i.e., roughly two to three times the Medicare rate).
The OBBBA caps SDPs to 100% of the Medicare rate for hospital and nursing facility services. SDPs approved prior to July 4, 2025, are exempted but are subject to a 10-percentage-point reduction each year starting January 1, 2028, until they reach 110% of Medicare rates.
Impact in Minnesota
Since 2022, Minnesota has used SDPs for services delivered by Hennepin Healthcare, given its unique position as the state’s largest safety-net hospital. Since the SDP rate for Hennepin Healthcare is not publicly available, it is unclear whether this OBBBA provision will affect the system’s revenue. If SDPs to Hennepin Healthcare are affected, the consequences may be significant – the system’s 2022 annual report disclosed that “actual aggregated collections saw an increase of 17.04% primarily due to the new funding source for safety net hospitals called directive payments” (p. 7).
This OBBBA provision is expected to restrict a new SDP system – one applicable to all Minnesota hospitals-- that was passed by the Minnesota Legislature in 2025.
With restrictions on SDPs for hospital and nursing home services, Minnesota will have significantly less authority to establish minimum payment rates that insurers pay hospitals and nursing homes for services provided to MA patients.
Effective Date: July 4, 2025
Estimated Federal Costs: $52 million
Estimated Number of Americans to Lose Insurance: No clear effect (but may affect access to care).
Background
Historically, Medicaid beneficiaries not assigned to a contracted insurer (i.e., managed care organization [MCO]) could obtain healthcare from any qualified and willing provider. Medicaid beneficiaries assigned to MCOs are generally limited to in-network providers, save for family planning services.
The OBBBA prohibits Medicaid funds from being paid to non-profit organizations and essential community providers that (a) are primarily engaged in family planning services, reproductive services, or abortion services outside of the Hyde Amendment exceptions and (b) received $800 million or more in combined state and federal Medicaid payments in 2023. Of note, the New York Times acknowledges that this threshold seems to target Planned Parenthood specifically. For now, this provision is effective for just one year.
Impact in Minnesota
According to Planned Parenthood North Central States, which includes Minnesota, approximately 22,000 Minnesotans on MA seek care at Planned Parenthood clinics each year—constituting roughly 35% of all patients. This OBBBA provision will limit MA patients’ access to family planning services across Minnesota.
The Minnesota Department of Human Services estimates that this provision alone will cost Minnesota up to $154 million in 2026.
On July 28, 2025, a federal district court indefinitely blocked this provision of the OBBBA with a nationwide injunction. According to the New York Times, “pending any action from the court of appeals, the injunction…will stay in effect for the time being.”
Effective Date: January 1, 2026
Estimated Federal Costs: $50 billion
Estimated Number of Americans to Lose Insurance: No effect.
Background
To blunt the impact of the Medicaid provisions on rural hospitals, the OBBBA establishes a new Rural Health Transformation Program (RHTP). The RHTP will provide a total of $50 billion in grants to states between fiscal years 2026 and 2030 for promoting care interventions, paying for healthcare services, expanding the rural health workforce, and providing technical assistance aimed at transformation. Half of these funds will be distributed equally across states with approved applications. The other half will be distributed by CMS based on various measures of regional rurality.
Impact in Minnesota
Minnesota should expect to be awarded $500 million to $1 billion in total RHTP grants across fiscal years 2026 and 2030. Compared to the percentage of the population living in rural areas across all states, Minnesota ranked 23rd at 28.9% in 2023 – this ranking will impact total dollars received. Minnesota will have to submit proposals to the federal government to receive this grant funding.
Effective Date: October 1, 2026
Estimated Federal Savings: $28 billion
Estimated Number of Americans to Lose Insurance: No clear effect.
Background
Under federal law, hospitals must provide emergency care to anyone, regardless of their immigration status or ability to pay. Emergency Medicaid reimburses hospitals for emergency care provided to people with undocumented status who would qualify for Medicaid but for their undocumented status. Historically, for every $1 states spend on Emergency Medicaid for childless adults with undocumented status, the federal government has contributed $9 in federal matching funds.
The OBBBA reduces the federal matching rate for Emergency Medicaid for childless adults with undocumented status. Moving forward, for every $1 states spend for this population, the federal government will contribute $1 to $3.33, depending on the state’s per-capita income.
Impact in Minnesota
Moving forward, for every $1 Minnesota spends on Emergency MA for childless adults with undocumented status, the federal government will contribute approximately $1.03 – an 89% reduction. Without this federal support, Minnesota may have to reduce or eliminate Emergency MA payments for services provided to this population. A reduction or elimination in these payments will be harmful for Minnesota hospitals, which must continue to provide emergency care as required by federal law.
Effective Date: October 1, 2026
Estimated Federal Savings: $6 billion
Estimated Number of Americans to Lose Insurance: No clear effect.
Background
Under longstanding federal law, undocumented immigrants are not eligible for federally funded healthcare programs including Medicaid, CHIP, or Medicare. They are also not eligible to receive federal ACA tax subsidies sold via MNsure in Minnesota.
Most legally present non-U.S. citizens need to hold a “qualified non-citizen” immigration status for five years before they are eligible for Medicaid. States can eliminate this waiting period for some children and pregnant people through federal waivers.
A “qualified non-citizen” includes:
- lawful permanent resident,
- refugee,
- parolee paroled into U.S. for at least one year,
- abused spouse or child that meets certain criteria,
- victim of human trafficking that meets certain criteria,
- a Cuban or Haitian entrant, or
- a citizen of the Freely Associated States (COFA) residing in states and territories.
The OBBBA restricts the definition of “qualified non-citizens” for the purposes of Medicaid to criteria 1, 6, and 7 only. The OBBBA provides $15 million in implementation funding in 2026.
Impact in Minnesota
While the number of qualified non- citizens enrolled in MA is unclear, this OBBBA provision is expected to reduce MA enrollment for this population and restrict their access to healthcare.
The Minnesota Department of Human Services estimates that this provision alone will cost the state $13.6 million per year in lost federal funding.
Effective Date: January 1, 2027
Estimated Federal Savings: $326 billion
Estimated Number of Americans to Lose Insurance: 4.8 million
Background
Historically, the federal government has prohibited states from adding work requirements as a Medicaid eligibility condition. The first Trump Administration approved waivers for 13 states to impose work requirements, but by the end of the Biden Administration, only Georgia’s requirements remained active.
The OBBBA requires states to condition Medicaid eligibility for adults 19-64 on meeting one of the following criteria:
- Working, completing community service, and/or participating in a work program for at least 80 hours per month,
- Enrolling in an educational program at least “half-time” (undefined in statute), or
- Earning an income of at least 80 times the hourly federal minimum wage per month (can be averaged over six months if the applicant is a seasonal worker)
The OBBBA exempts several classes of adults from work requirements, including:
- Parents or guardians of dependents who are (a) 13 years old or younger or (b) disabled,
- People who are pregnant,
- People who are disabled or medically frail,
- People who are Native American
Adults subject to the law will have to demonstrate satisfaction of the requirements for the previous one to three months (depending on their state) at the time of application, and for at least one month prior (no upper limit; depending on their state) at time of eligibility redetermination. Under a separate OBBBA provision, states will be required to process redeterminations every six months.
The OBBBA authorizes a total of $200 million to states for implementation of this provision in 2026. The federal government may exempt states from compliance with the requirements through 2028, so long as states are demonstrating a good faith effort towards implementation.
Impact in Minnesota
At least 243,000 Minnesotans on MA will be subject to the work requirements imposed by the OBBBA. A significant portion of these Minnesotans are expected to lose MA coverage because they will either (a) not meet the requirements or (b) fail to process the appropriate paperwork demonstrating compliance every six months. Moreover, Minnesota will have to build a new administrative infrastructure to comply with this OBBBA provision. The Minnesota Department of Human Services estimates that this provision alone will cost Minnesota $200 million in reduced federal funding per year and a potential annual increase of $165 million per year in administrative costs.
Effective Date: January 1, 2027
Estimated Federal Savings: $62 billion
Estimated Number of Americans to Lose Insurance: 700,000
Background
Historically, the federal government has required states to conduct Medicaid eligibility redeterminations every 12 months.
The OBBBA will require states to conduct Medicaid eligibility every six months for childless adults. The OBBBA authorizes a total of $75 million to help states with implementation.
Impact in Minnesota
At least 243,000 Minnesotans on MA will be subject to the new six-month eligibility redetermination frequency. A significant portion of these Minnesotans are expected to lose MA coverage because they will fail to process the appropriate paperwork on a semiannual basis. The Minnesota Department of Human Services estimates that this provision alone will cost Minnesota $4.9 million in increased administrative costs.
Effective Date: January 1, 2027
Estimated Federal Savings: $4.2 billion
Estimated Number of Americans to Lose Insurance: No clear effect (but may affect the number of Americans with medical debt)
Background
Currently, states are required to provide Medicaid coverage for qualified medical expenses incurred up to 90 days prior to the date of Medicaid application.
The OBBBA limits retroactive Medicaid coverage to one month prior to application for childless adults and two months prior to application for all other enrollees. The OBBBA authorizes a total of $15 million in implementation funding.
Impact in Minnesota
Under this OBBBA provision, all MA enrollees will experience more limited retroactive coverage. Given that MA beneficiaries are low-income, this increase in exposure to out-of-pocket healthcare costs may contribute significantly to the percentage of Minnesotans with medical debt and to uncompensated care at healthcare facilities.
The Minnesota Department of Human Services estimates that this provision alone will result in a $31 million loss in federal funding to Minnesota and a $9 million reduction in state spending.
Effective Date: July 1, 2028
Estimated Federal Costs: $6.6 billion
Estimated Number of Americans to Lose Insurance: No effect (but may improve access to home care)
Background
The federal government allows states to cover home care under Medicaid through 1915(c) waivers, which limit services to people who need an institutional level of care.
The OBBBA allows states to begin submitting 1915(c) waivers for people who do not need an institutional level of care, but states will be required to demonstrate that the new waivers will not increase wait times for people who do. The OBBBA authorizes $150 million across 2026 and 2027 for implementation.
Impact in Minnesota
Approximately 95,000 Minnesotans on MA receive home care services each year under the current institutional level of care qualifier. If Minnesota can expand home care access without increasing wait times, this number is expected to increase.
Effective Date: October 1, 2028
Estimated Federal Savings: $7.4 billion
Estimated Number of Americans to Lose Insurance: No effect (but will reduce MA coverage)
Background
Historically, the federal government has allowed states the option to impose cost sharing on Medicaid enrollees within certain limits.
Under the OBBBA, all states will be required to impose Medicaid cost-sharing of $0.01 to $35 per service on childless adults making 100% to 138% of the federal poverty line (i.e., $15,700 to $20,800 for a single adult). Total out-of-pocket costs are capped at 5% of family income.
Exempt services include:
- primary care services,
- mental health care and substance use disorder services, and
- services provided by federally qualified health centers, certified behavioral health clinics, or rural health clinics.
Services covered under the exemptions are not clearly defined in the law.
States have the choice to allow providers to require payment of cost-sharing prior to providing services.
Impact in Minnesota
In July 2025, there were at least 191,218 childless adults on MA. Because their income distribution is not published, it's not clear how many of these adults will be subject to the new cost-sharing requirements. A KFF literature review and analysis suggests that increased Medicaid cost-sharing is associated with reduced coverage, worse access to care, and increased financial burden. The Minnesota Department of Human Services estimates that this provision alone will cost Minnesotans on MA a total of $4 million in increased annual out-of-pocket costs.
Minnesota is not expected to allow providers to require payment of cost-sharing before delivering services, which will increase collection costs and may increase uncompensated care burdens for healthcare facilities.