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July 4, 2025 Legislative Update

President to Sign the Reconciliation Bill Today

On July 3, after a record-breaking almost 9-hour speech by Minority Leader Hakeem Jeffries (D-NY), the US House of Representatives passed the Senate version of the "One Big Beautiful Bill Act" (H.R. 1) by a vote of 218 to 214 that included all Republicans voting for it except Rep. Thomas Massie (R-KY) due to the high cost of the bill and Rep. Brian Fitzpatrick (R-PA) due to the severe Medicaid cuts. This follows similar defections in the upper chamber. With three Republican Senators opposing the bill, Vice President JD Vance had to cast the tie-breaking vote for 51 to 50 passage. The three Republicans included Appropriations Committee Chair Susan Collins (ME) and Thom Tillis (NC) who opposed the severe cuts in health and food assistance programs, and Rand Paul (KY) who opposed increasing the debt and the debt ceiling extension.

OVERVIEW

The bill makes permanent lower tax rates from the 2017 tax law (Public Law 115-97) that expires at the end of the year andincreases the debt limit by $5 trillion. It also provides $150 billion increase in funding for a border wall, immigration enforcement and deportations and $150 billion in new defense spending for priorities like shipbuilding and a “Golden Dome” missile defense project. It expands oil and gas leasing and extends key commodity support programs under the Farm Bill, which also expires at the end of the year.

The cost of those policies are offset by limiting eligibility and federal funding for Medicaid with a $1 trillion cut and a $300 billion cut to SNAP food assistance benefits (with states now required to shoulder a larger portion of the cost with a 5% match in 2028), implementing stricter student loan repayment requirements, rolling back clean energy tax credits from Democrats’ 2022 tax and climate law (Public Law 117-169), and imposing new immigration fees. It would increase the deficit by $3.4 trillion over 10 years, according to the non-partisan Congressional Budget Office and Joint Committee on Taxation.

Overall, the bill includes notable changes from the initial House-passed bill sent to the Senate in June:

• Increasing the debt limit by $5 trillion, instead of $4 trillion.
• Increasing the cap on the state and local tax (SALT) deduction for five years, starting at $40,000, instead of permanently.
• Making permanent several business tax cuts that were temporary in the House bill.
• Modifying timelines to phase out clean energy tax credits.
• Limiting a safe harbor threshold for state provider taxes under Medicaid and providing $50 billion for a new rural hospital fund.

HEALTH

Those hit the hardest by cuts are people whose income is 100% to 138% of the federal poverty level (roughly $32,150 to $42,760 for a family of four) who gained insurance when their states expanded Medicaid. The $1 trillion in Medicaid cuts will result in roughly 17 million people losing health coverage and becoming uninsured by 2034 due to the Medicaid and ACA marketplace cuts in the bill, lack of extension for the enhanced premium tax credits for ACA marketplace coverage, and other ACA marketplace changes, according to estimates from the CBO.

Changes to Medicaid are historic and vast. Medicaid covers 1 in 5 people and roughly 41% of all births (and 50% in some states, such as Louisiana, Mississippi, New Mexico, Ohio, and Oklahoma, according to the KFF). Since the 2012 Supreme Court ruling that made it optional for states to choose to expand Medicaid, 40 states have done so. Some Republican-led states have expanded it and others have chosen to only offer more limited coverage. Nearly all states pay for their share of Medicaid with provider taxes, however the bill puts a new cap on provider taxes that begins in 2028 for the states that expanded Medicaid coverage under the ACA.

Work requirements are established across entire country. The bill requires states to impose “community engagement” rules as a condition of receiving Medicaid benefits starting in 2027, or an earlier date under a state waiver. Apart from exempted groups, Medicaid beneficiaries ages 19 to 64 would have to demonstrate at least one of the following per month:

• Working at least 80 hours.
• Performing at least 80 hours of community service.
• Participating in a work program for at least 80 hours.
• Attending an educational program at least half time.
• Performing a combination of the above activities for at least 80 hours.
• Earning a monthly income that meets minimum wage requirements multiplied by 80 hours, which would be averaged over the previous six months for seasonal workers.

Exclusions from the work requirement include:

• People who are in compliance with work requirements under the Temporary Assistance for Needy Families (TANF) program and Supplemental Nutrition Assistance Program (SNAP).
• Pregnant women (but excludes women who experience miscarriages).
• Parents or caregivers of a dependent child or individual with a disability.
• Individuals with disabilities, including blindness and substance use disorders.
• Inmates of public institutions.

In a departure from the House bill, the bill requires the exemption for parents or caregivers be applied only to those with dependent children 13 years old or younger, but allows states to choose to not require an individual to verify their exemptions.

It terminates Medicare coverage for many individuals with lawful immigration status who have worked and paid taxes in the US for decades. This is a significant departure from current, longstanding policy, which recognizes eligibility for everyone who has paid sufficient Social Security and Medicare taxes on wages to be considered “fully insured.” Medicare already prohibits payment for care for anyone who is undocumented. This bill ends these individuals’ access to the Affordable Care Act (ACA) tax credits that make buying private health insurance affordable once ineligible for Medicare.

It also stops a new rule that was starting to increase workforce in nursing home to improve safety and stops the Streamlining Medicaid Eligibility & Enrollment Rulesthat modernized outdated policies to be easier for older adults and people with disabilities to enroll in and keep Medicaid and Medicare Savings Programs (MSPs) that help pay Medicare costs. Finally, with Medicaid (not Medicare) paying for 61% of all long-term care and more than 70% of Home- and Community-Based Services (HCBS), the bill limits access to long-term care for many seniors by shifting costs to states, likely resulting in cuts to HCBS programs.

Access to reproductive care and health screenings is blocked by this bill as well. It prohibits clinics and providers that offer abortions from accepting federal Medicaid funding for any services — birth control, cancer screenings, STI testing and treatment. When paired with the recent Medina decision, which allows individual states to defund Planned Parenthood through state Medicaid programs, the legislation means nearly 200 centers across 24 states are at risk of closures with 90% of those closures in states where abortion is still legal.

Pharma gets a $5 billion break for rare diseases by allowing more medications to be exempt from Medicare’s price negotiation program. Now, manufacturers will be able to keep those prices higher for subsequent rare disease therapies that will cost $5 billion over 10 years, according to an estimate by the CBO.

INNOVATION TAX

The tax changes are expansive but one change G2G worked on for the past two years is ending the Innovation Tax. The bill ensures companies receiving SBIRs are no longer forced to pay taxes on 90% of these grants by providing for immediate R&D expensing. For companies with gross receipts of $31 million or less, they can retroactively expense R&D back to 12/31/21. The requirements for foreign R&D expenses are not modified so still need to capitalize expenses over a 15 year period. Deductions will be allowed for software development expenses but prohibited for property acquisitions or oil and gas exploration.

TAX CHANGES

INVESTMENT ACCOUNT

The bill creates a new tax-free investment program that parents can open on behalf of their children under 18 as long as U.S. citizens that are referred to as “Trump Accounts.” For children born 2025-2028, the government will contribute $1,000 to the account while parents can contribute up to $5,000 and employers can contribute up to $2,500. These investment accounts can be used for college or a down payment on a home and are available regardless of income.

BILL BECOMES LAW TODAY

On July 4, President Trump signed the bill into law with an Independence Day ceremony at the White House.

ELECTIONS

Despite the celebrations, several who voted for passage are concerned about their own re-elections given the unpopular cuts to health insurance. More than 75% of adults oppose major cuts to Medicaid — that includes more than half of the Republicans polled, according to a survey by KFF. The mid-term elections are November 3, 2026 but the primaries start in March — just 8 months away. This will be a prominent issue in the campaigns, especially those 37 districts that were decided by 5% points or less in the 2024 elections.