UHS · 10-Q · 2026Q2 · Full report

OBBBA Medicaid Payment Reductions

UNIVERSAL HEALTH SERVICES INC · 2026-08-07 · Importance 71 · Surprise 60 · In source text

The One Big Beautiful Bill Act (OBBBA), enacted July 4, 2025, caps state-directed Medicaid payments at 100% of Medicare in expansion states and 110% in non-expansion states, while phasing down provider-tax limits beginning with 2028 state fiscal years. Based on Universal Health Services’ approximately $1.520 billion 2026 net benefit from state Medicaid supplemental payment programs, management estimates aggregate annual net benefits could decline by approximately $500 million by 2032. The company expects the reduction to occur on an annually increasing and relatively pro rata basis, although CMS rulemaking and state-level interpretations could materially change the estimate. New Medicaid eligibility requirements, including an 80-hour monthly work requirement and six-month redeterminations by January 1, 2027, could reduce Medicaid enrollment and revenue while increasing uncompensated care.

Key facts

• The One Big Beautiful Bill Act, effective July 4, 2025, limits Medicaid enrollment and provider fee growth and, based on current expectations, is estimated to reduce the company's aggregate annual net benefit by approximately $500 million by 2032 commencing with 2028 state fiscal years. source
• Forecasted reduction due to OBBBA: We estimate that, commencing with the 2028 state fiscal years, our aggregate annual net benefit will be reduced, on an annually increasing and relatively pro rata basis, by approximately $500 million by 2032. source
• OBBBA rural health grant program size: Establishes a $50 billion rural health grant program for states between fiscal years 2026 and 2030. source
• OBBBA grandfathering and phase-in: Beginning with the 2028 state fiscal years, SDP provisions pursuant to the OBBBA are being phased in whereby grandfathered payment plans will be reduced by no more than 10% annually until the applicable Medicare rate is reached. source
• OBBBA Provider Tax phase-in and caps: The Provider Tax provisions pursuant to the OBBBA are largely being phased in over a 5-year period and in Expansion States, beginning with the 2028 state fiscal years, this percentage will be reduced by 0.5% each year until it reaches 3.5%. source
• Rural Program 2026 state award averages: In 2026, states will receive first-year awards from CMS averaging $200 million within a range of $147 million to $281 million. source
• We applied for rural grants: We have applied for grants under this program totaling $33 million to date. source
• OBBBA SDP caps Expansion States: In states that expanded their Medicaid programs under the ACA ("Expansion States"), the SDP payment rate is capped at 100% of Medicare. source

Impact estimates