Key Healthcare Items of the 2025 Federal Budget
In the past week, the 2025 federal budget was passed in the House, and introduces a number of impactful changes to healthcare funding and policy. Expected expenditures being what highlights the list. Such notable provisions include cuts to Medicaid, a reorganization of the Department of Health and Human Services (HHS), and modifications to Medicare and other public health initiatives.
Here are some of the major healthcare-related provisions:
- Medicaid Cuts and Structural Changes
Most noticeable of all items in the budget is approximately $880 billion in spending reductions over the next ten years, with most (estimated between $500 billion and $600 billion) targeted at healthcare programs such as Medicaid.
Key proposed changes to Medicaid include:
- Per-Capita Funding Caps: Limiting federal contributions based on a fixed amount per enrollee.
- Work Requirements: Implementing mandatory employment or job-seeking activities for certain beneficiaries.
- Quarterly Eligibility Verifications: Increasing the frequency of eligibility checks to ensure continued qualification.
These measures could lead to millions losing coverage and place additional strain on healthcare facilities, especially in states with high Medicaid enrollment.
The budget proposes restricting the use of provider taxes (a mechanism states use to fund their share of Medicaid costs) to attain federal matching funds. This change could save the federal government over $600 billion over ten years but may significantly impact hospital finances, particularly those serving large Medicaid populations.
- Reorganization of the Department of Health and Human Services (HHS)
In March 2025, a comprehensive reorganization of HHS was announced, aiming to streamline operations and reduce expenditures. Key aspects include:
- Realignment of Agency Functions: Directing focus by the Centers for Disease Control and Prevention towards infectious disease programs and restructuring other agencies to improve efficiency.
- Creation of the Administration for Healthy America: Merging five existing agencies to focus on a unified public health strategy.
- Workforce Reductions: Eliminating approximately 20,000 full-time positions across HHS, with significant cuts to the Food and Drug Administration and Centers for Disease Control and Prevention.
- Medicare and Prescription Drug Policy Adjustments
The budget does not introduce new Medicare cuts but rather aligns with ongoing efforts to control prescription drug costs. Building on the Inflation Reduction Act, Medicare continues to negotiate drug prices, aiming to reduce expenditures and out-of-pocket costs for beneficiaries.
Additionally, the Elijah Cummings Lower Drug Costs Now Act mandates the Department of Health and Human Services to negotiate prices for certain high-cost drugs, including insulin, and expands Medicare coverage to include dental, vision, and hearing services.
- Affordable Care Act (ACA) Subsidies
The budget maintains the extension of enhanced ACA subsidies through 2025, as established by the Inflation Reduction Act. These subsidies have contributed to increased enrollment in ACA health insurance plans by making coverage more affordable for a broader population.
- Public Health Funding and Programs
While specific allocations are not detailed, the budget indicates a shift in funding priorities, with potential reductions in programs related to mental health, substance abuse, and community health initiatives. The reorganization of HHS and the emphasis on cost-cutting suggest a focus on efficiency over expansion of services.
Implications and Outlook
The 2025 federal budget reflects a significant shift in healthcare policy, emphasizing fiscal and structural changes over program expansion. The proposed Medicaid cuts and HHS reorganization have sparked debate over the potential impact on vulnerable populations and the nation’s public health infrastructure. There’s no question that as legislative processes continue, including committee markups and potential revisions, stakeholders across the industry will closely monitor developments to assess everyday impact of such decisions.