The "One Big Beautiful Bill" and 2025-2026 Healthcare Policy

Introduction

The "One Big Beautiful Bill," the administration's omnibus reconciliation legislation moving through Congress in 2025-2026, includes several healthcare provisions that could materially affect company valuations, deal activity, and sub-sector dynamics across the healthcare landscape. While the legislation's final form remains uncertain, the directional policy shifts are clear enough to inform banking analysis and interview preparation.

The most financially significant healthcare provision is Medicaid restructuring, which proposes shifting federal Medicaid funding from the current open-ended matching formula to per-capita caps or block grants. The Congressional Budget Office estimates this restructuring would reduce federal Medicaid spending by $700-900 billion over 10 years, with states forced to absorb the shortfall or reduce coverage. Independent analyses project approximately 7.5 million people could lose Medicaid coverage.

Per-Capita Cap

A Medicaid funding model that limits federal payments to a fixed amount per enrolled beneficiary, adjusted for inflation. Under the current system, the federal government matches a percentage of whatever states spend on Medicaid (ranging from 50% to 77% depending on the state). Per-capita caps would convert this open-ended commitment to a defined ceiling, transferring financial risk to states when per-beneficiary costs exceed the cap. States facing cost overruns would need to increase their own funding, reduce benefits, tighten eligibility, or reduce provider reimbursement rates.

For healthcare bankers, Medicaid restructuring creates significant volume and reimbursement risk for providers with heavy Medicaid exposure. Safety-net hospitals, community health centers, home health agencies, and behavioral health providers derive 30-60% of revenue from Medicaid. Coverage losses translate directly to higher uncompensated care, lower patient volumes, and deteriorating financial performance. M&A implications include potential valuation compression for Medicaid-heavy services targets, distressed acquisition opportunities for financially stressed providers, and strategic repositioning toward commercial payer mix.

The enhanced ACA premium subsidies enacted during COVID and extended through 2025 are set to expire at the end of 2025 unless renewed. Expiration would trigger average premium increases of approximately 75% for marketplace enrollees, with some states seeing increases exceeding 100%. The subsidy expiration threatens to reduce ACA marketplace enrollment by an estimated 3-4 million people, adding to the coverage losses from Medicaid restructuring.

The legislation includes PBM transparency provisions that would require pharmacy benefit managers to pass through 100% of manufacturer rebates to patients at the point of sale, disclose spread pricing arrangements, and delink PBM compensation from drug list prices. The "Big Three" PBMs (CVS Caremark, Express Scripts/Cigna, OptumRx/UnitedHealth) control approximately 79% of prescription claims.

Healthcare bankers advising on transactions in the current environment should incorporate policy scenario analysis into their models, particularly for companies with significant government payer exposure.

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