OBBBA and the Future of Medicaid: What the Federal Changes Could Mean for Minnesota

This summer, Congress enacted the One Big Beautiful Bill Act (OBBBA), also known as H.R. 1 — a sweeping budget reconciliation measure that makes the most significant structural changes to Medicaid in more than a decade.  While promoted as a means to reduce federal spending, OBBBA also fundamentally reshapes how states administer Medicaid and how millions of Americans access essential care.

Key provisions include:

·         Work Requirements and Community Engagement Requirements. Adults ages 19–64 must complete and report at least 80 hours per month of work, volunteer service, or community engagement to remain eligible for Medicaid.  There are exemptions from work requirements, which include parents and caregivers of children under 14 years old or disabled individuals; individuals who are “medically frail” or otherwise have special medical needs — those with disabilities or serious medical conditions; those with substance use disorders; and pregnant or postpartum individuals.  However, those that are exempt must show that they qualify for the exemption at application and at redeterminations. 

·         Frequent Eligibility Reviews and Reporting. Once people are enrolled in Medicaid they must verify their eligibility through renewals or redeterminations.  There will be more frequent eligibility redeterminations for the Affordable Care Act (ACA) expansion population (at least every 6 months instead of every 12 months), beginning January 1, 2027. States – by and through the Counties will be required to verify recipients eligibility for the programs more often — increasing administrative load and costs for the states and processing times for all Medicaid recipients.  The increase of redeterminations also present a risk that otherwise eligible individuals may lose coverage because they are unable to timely submit the necessary paperwork or the county is unable to process that paperwork timely.

·         Restrictions on Provider Taxes and State-Directed Payments (SDPs). These financing mechanisms have long allowed states to draw down additional federal Medicaid funds and support provider reimbursements that make it more feasible for providers to accept Medicaid as a payor source. OBBBA phases in new caps that could reduce state revenue and strain provider systems.

·         Home Equity Limits.  Generally, a homestead is considered an exempt asset that is not counted towards eligibility limits so long as its value does not exceed the home equity limit (currently $730,000 in Minnesota, which was adjusted for inflation annually).  States were previously able to provide an increased limit if they were in areas with high cost of living.  Under the new law, there will be a $1 million home-equity limit for long-term care eligibility. This flat cap (without inflation adjustment) will affect older homeowners seeking Medicaid coverage for long-term services and supports.

·         Reduced Federal Growth Funding. The Congressional Budget Office projects federal Medicaid spending will decline by roughly $840 billion over ten years, resulting in coverage losses for 7–10 million people nationwide.

Collectively, these measures represent a fundamental shift toward greater state accountability — but with less federal support.

State Spotlight: Minnesota’s Medicaid Landscape

Minnesota’s Medicaid program — known as Medical Assistance (MA) — and its sister program, MinnesotaCare, cover roughly 1.2 million residents each month. Together they serve one in five Minnesotans (previously one in four during the height of the COVID pandemic), including low-income families, older adults, and people with disabilities. Minnesota’s program is notable for its broad eligibility, strong managed-care participation, and emphasis on home- and community-based services (HCBS).

During his recent presentation at the 2025 Elder Law Institute, John Connolly, Minnesota’s Deputy Commissioner for Human Services and State Medicaid Director, outlined the key concerns OBBBA poses for Minnesota’s system:

1.      Fiscal Impact.  Minnesota stands to lose an estimated $500 million per year in federal Medicaid funding due to new limits on provider taxes, supplemental payments, and the administrative costs of implementing new eligibility verification rules.  Connolly emphasized that these reductions come as Minnesota continues to unwind pandemic-era enrollment protections and process a record number of redeterminations.

2.      Administrative Capacity.  Minnesota’s county-administered eligibility system is already stretched thin. OBBBA’s requirements for biannual eligibility reviews and monthly work-activity verification will add a substantial workload for county workers and managed-care organizations. Connolly noted that even a small increase in administrative churn could lead to tens of thousands of Minnesotans losing coverage despite remaining eligible.

3.      Populations Most at Risk.  The groups most likely to be affected include:

·         Low-income adults without children, especially those with variable work hours or seasonal employment.

·         Older adults whose home equity now exceeds the new eligibility limit but who lack liquid assets.

·         People with disabilities receiving HCBS, where service authorizations may be delayed or interrupted by eligibility lapses.

Connolly cautioned that these disruptions could create “ripple effects” across Minnesota’s aging and disability service networks.

4.      Impact on Providers and Local Economies.  Minnesota hospitals and long-term care providers — particularly in rural and northern regions — depend heavily on Medicaid reimbursement.  Cuts to state-directed payments and provider tax revenues may threaten their financial sustainability. Connolly’s presentation highlighted that nearly 40 percent of Minnesota’s rural hospital revenue comes from Medicaid, meaning even modest rate reductions could have significant consequences for access.

5.      State Response and Mitigation.  The Minnesota Department of Human Services is exploring strategies to:

·         Streamline documentation through electronic verification systems.

·         Seek 1115 waiver authority to adjust implementation timelines or establish “good cause” exemptions for certain populations.

·         Partner with counties and community organizations to maximize communication to Medical Assistance recipients and minimize disenrollment during re-verification cycles.

Connolly underscored the importance of advocacy and communication among providers, advocates, and policymakers as Minnesota adapts to the new federal landscape.

Why This Matters — Even If You Don’t Use Medicaid

Even if you personally don’t rely on Medical Assistance, or you don’t have family members enrolled, these changes will still affect all of us.  As John Connolly cautioned, when federal and state funding for Medicaid declines, providers often look for ways to shift the cost burden — by increasing charges to private insurers or patients, reducing participation in government programs, or leaving the marketplace altogether.

When providers exit the Medicaid network, access shrinks not only for low-income residents but for everyone in the community. Shortages in primary care, home care, or long-term care ripple outward — leading to higher private-pay rates, longer waitlists, and workforce instability across the healthcare continuum.  In short, Medicaid policy is community policy: changes to its structure impact the affordability, accessibility, and stability of care for all Minnesotans.

Looking Ahead

For Minnesota’s aging population, individuals with disabilities, and low-income families, the stakes are high. As the federal landscape shifts, the state will need to make hard choices: whether to allocate more general funds to maintain coverage, redesign its benefit structure, or explore creative waiver options to mitigate harm.

Advocates, providers, and policymakers alike should stay engaged — watching for forthcoming state implementation guidance and opportunities to shape local response strategies.

At Bravura Group, we are closely monitoring both the federal and state implementation of OBBBA and its implications for long-term care planning, special-needs trusts, and asset-protection strategies.  Attorneys Mary Frances Price and Brenna Galvin are active members of the National Academy of Elder Law Attorneys (NAELA) and the Minnesota State Bar Association’s Elder Law Section Council.  Our goal is to help families navigate these changes with clarity and confidence.

Call to Action

If you or someone you care about relies on Medical Assistance, this is the time to review your eligibility and care plan.  Even if you don’t, understanding how OBBBA will affect Minnesota’s healthcare system helps you anticipate changes in cost, access, and provider availability.

Contact Bravura Group, P.C. to discuss how OBBBA may affect your long-term care coverage, special-needs planning, or estate planning in Minnesota.