Navigating the Shifting Sands of Medicaid Funding: A Critical Juncture for Tribal Health Organizations
The One Big Attractive Bill Act (OB3), signed into law on July 4, 2025, is reshaping the financial landscape for Tribal health organizations. With potential cuts to Medicaid funding reaching roughly $1 trillion over the next decade, these organizations face unprecedented challenges in maintaining vital services for their communities.
The Impact of Medicaid Cuts: A Deep Dive
Medicaid is a cornerstone of funding for many Tribal health organizations, accounting for over 60% of some facilities’ budgets. While the federal government currently reimburses states 100% of payments made to Indian Health Service (IHS) and Tribal health facilities for Medicaid-eligible patients, this safeguard won’t fully insulate these systems from the broader program reductions. Cuts to Medicaid eligibility and access will directly impact the financial health of these organizations.
Understanding the 2026 IHS CMS Reimbursement Rates
Current reimbursement rates, outlined in the Memorandum of Understanding between the Centers for Medicare & Medicaid Services (CMS) and IHS, haven’t been specifically targeted by OB3. However, changes to patient eligibility have been. The IHS Federal Register notice for calendar year 2026 details these rates, which are all-inclusive, covering ancillary services like laboratory work and radiology. It’s critical to note that states regulate the maximum number of reimbursable encounters per day, typically ranging from three to five.
OB3 Provisions: Risks Categorized
The impact of OB3 varies. Risks to Tribal health organizations have been categorized based on the likelihood of financial impact:
Highest Risk: Access Restrictions
The most significant impact stems from provisions reducing the number of adults qualifying for Medicaid, particularly in expansion states. OB3 now prohibits Medicaid enrollment for undocumented immigrants, potentially increasing the number of uninsured patients. Adults aged 19-67 in expansion states with incomes between 100% and 138% of the federal poverty level must now meet work requirements, though Native Americans are exempt. Cost-sharing requirements of up to $35 per service for this same group, beginning October 1, 2028, could also deter care, though primary and behavioral health services are exempt.
Pro Tip: While Native Americans are exempt from certain OB3 requirements, clinics serving non-Native beneficiaries must prepare for potential impacts.
Mixed Risk: Program Funding & Opportunities
While overall Medicaid funding is being reduced, OB3 offers opportunities through the Rural Health Transformation Program (RHTP), which allocates $50 billion from 2026-2030 to support rural healthcare. However, this funding is unlikely to fully offset Medicaid losses. Existing Medicaid cost-sharing exemptions for services through IHS, Tribal, or urban Indian health providers remain in place.
Low Risk: Encounter & Reimbursement Rates
OB3 doesn’t indicate any changes to the IHS/CMS negotiated encounter rate or the definition of a reimbursable encounter. Clinics shouldn’t anticipate changes to the number of Medicaid-eligible children and pregnant women.
Long-Term Care: A Specific Area of Concern
While IHS doesn’t cover long-term care, some tribes fund these services with Tribal funds, often through “enhanced” reimbursement rates offered by certain states. OB3 will revert these rates to federal levels, increasing the financial burden on tribes operating nursing homes. A recent financial feasibility study showed that 80% of a Tribal nursing home’s revenue comes from Medicaid, and a reduction in rates could jeopardize its financial viability.
Strategic Financial Planning: A Path Forward
The passage of OB3 necessitates robust strategic financial planning. This planning should focus on anticipating and managing risk, aligning priorities and resources, supporting informed decision-making, and strengthening advocacy efforts.
Did you know? A well-defined strategic financial plan can assist Tribal leaders model various funding scenarios and proactively identify vulnerabilities.
How Forvis Mazars Can Assist
Forvis Mazars supports Tribal health organizations through a multistage strategic financial planning process, including data-rich analyses, enterprise-wide goal setting, service line strategies, and provider needs assessments.
Frequently Asked Questions
- What is OB3?
- The One Big Beautiful Bill Act is a new law signed on July 4, 2025, that significantly alters Medicaid policy.
- How will OB3 affect Medicaid eligibility?
- OB3 limits eligibility in several ways, including new work requirements for some adults and prohibiting enrollment for undocumented immigrants.
- Is there any funding available to offset Medicaid cuts?
- The Rural Health Transformation Program (RHTP) offers $50 billion in funding, but it’s unlikely to fully offset the losses.
- What should Tribal health organizations do now?
- Develop a robust strategic financial plan to anticipate risks, align resources, and support informed decision-making.
If you have questions about the impact of OB3 on your organization or need assistance with your strategic response, reach out to our team today.
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