Transcription
President Trump's one big beautiful bill act is soon to become the law of the land. In his final version, it was 887 pages long. There are some Americans that are excited about and actually love it, and there's others that absolutely hate it, and there's plenty of people in between. One side of the political aisle says that this law is going to destroy America's health care system. The other side said it is the only way that it can be rescued. So regardless of a person's political persuasion or the type of insurance that you may have, whether that's Medicare, Medicaid, a marketplace plan, or even a group plan, rest assured that every single one of us are going to be affected by this law.
So in this video, what I'm going to do is look at the details and the consequences of this law and show you the impact that this law will have on you and America's health care system. [Music] Now, in this video, I'm going to reference several different articles that I think will really help us to understand the impact of this legislation. I want to begin just with a summary of what one particular author wrote because I think this sums up well what we'll be discussing. He says this: "The bill includes significant changes in enrollments, eligibility, and premium tax credit rules as well as cost sharing reduction payments combined with the expiration of the enhanced premium tax credits. The bill would result in an individual market that looks fundamentally different when the full effects of all the changes occur." And I think that's really the essence of what we're going to see. This is truly going to change everything in the American health care system.
All right, to set the stage here. Uh, what I want to do is I want to go back and actually look at the history of Medicare and Medicaid and currently what's changed ever since uh this began in 1965. Of course, President Lyndon Johnson was the president at the time, and he and Congress worked on putting together a health care system for those people that retired. Uh, there was not much of an individual market. Certainly people no longer working or covered by group plans. So uh they began this system, and it was for people 65 and above, and of course they had to be US citizens to qualify and of course paid into that particular system.
Now uh there were some changes beginning in 1970 to about 2000. They began to add others to the roles of Medicare, and the first one would have been those that had end-stage renal disease. This is permanent kidney failure. Someone that's either on dialysis or waiting a kidney transplant would qualify then at any age for Medicare. And then someone with Lou Gehrig's disease, same thing at any age. And then what happened, uh they began to give people that were receiving Social Security disability benefits automatic enrollment into Medicare A and B on their 25th month of having received disability payments. And so this is why there are many people today that are not yet 65 but are on Medicare A and B because they came through the disability system.
Now when it comes to funding, I want to talk about how this works. So funding of course is different depending upon A or B, the original Medicare, but part A funding is done by um us; we pay into a part A; we're taxed for Medicare; and the money that we pay would be FICA taxes or self-employment taxes. Right now, we pay 1.45%; the employer matches that; um, if you're self-employed, you pay the full 2.90%. And so all of our income is subject to Medicare taxes, so it's funded, and the part A actually would be the hospital trust fund. Now just so you know, if you're a single person above $200,000 in income, you pay an additional 0.9% of that income that's going to be above 200,000. A married person filing a joint return, if they're above 250,000, they pay an additional 0.9%. But my point is this, we are funding Medicare Part A through our payroll taxes. Okay.
Now, part B is funded differently. Part B is actually funded um by premium payments that we have to make, which are really based upon our income. Uh, right now in 2025, people are paying $185 a month. If they're above certain income thresholds, uh single people above 106, uh married people above 212,000 in modified adjusted gross income, they pay an additional amount for their part B called an IRMAA. That's a surcharge. So, we pay premiums into the part B system, but also general revenue from the federal government provides funding for part B as well. Okay, so that's how Medicare is working today.
Now, let's talk about Medicaid. So Medicaid again began at the same time, 1965, but it was for a very special group of people, and that would be those that are considered to be pretty low income. In fact, frankly, very low income or those that were actually disabled. Remember disability kind of coming in later for the Medicare. But here it was for people that had disabilities. All right.
Now um what happened then again during the next 30 years, there would be some changes, and they would begin to add categories of people who qualified for Medicaid, and that would be anyone that's a pregnant woman, of course, children, or parents that had low income. All right, and so this was kind of how it worked for many years until the expansion of Medicaid, which we'll talk about, but the funding is different. Uh, so Medicaid is actually a federally funded plan as well as state, but the state has the really the flexibility to be able to establish their own rules. Okay. So federal and state funding, but states oversee the program. And so what happens is this: the government historically has paid about 50 to 78% of the cost of Medicaid coverage in each particular state. So, if we have a state that is has good revenue, high income, they're going to be kind of on the lower side. If we have a state where traditionally there's more lower-income people, maybe a state that does not have as much of a budget, then they're going to get a little bit more funding from the federal government. So, again, that's how much the federal government paid for many years. And of course, this would begin to change. And we'll talk about how the Medicaid program began to expand. All right.
Now, let's quickly look at the history of the Affordable Care Act/Marketplace plans. Uh, this became law, ACA did, back in 2010, actually March of 2010. Uh, President Obama was our president, and the ACA became law. Now when it was first passed, what was going to happen were states would be required to expand their Medicaid program; required. It was going to be mandatory under the ACA law. But what happened was the Supreme Court had a case, and they examined the case and decided that states did not have to expand Medicaid. It could not be made mandatory. It actually had to be optional. Uh, and so that was the ruling here. So what happened was 40 of the states plus the District of Columbia decided they would cooperate with the expansion of Medicaid and the ACA plans, and then 10 states did not. So they're non-participating with expansions. We have 40 that did, 10 that did not, and of course, DC did as well. All right.
So, what happened? Uh, they of course took a couple years to get the ACA in, you know, instigated and everything going, and so we have our very first open enrollment for ACA plans October of 2013. And then those new plans actually began January 1 of 2014. All right. So, that's kind of the history of how ACA was developed.
I just want to pause just real briefly because I know a lot of you that are watching this are Medicare eligible. And if you'd like to make sure you're staying up to date on everything related to Medicare as well as Social Security, if you've never subscribed to our channel, we'd love to have you subscribe. Uh, there certainly is no cost to do that. It's totally free. Uh, and if you'd like to give us a thumbs up or even a comment about any of the videos that we do, we would greatly appreciate that. But those who do subscribe are notified every time we do new content.
Okay. So we have a new ACA law. We have 40 states and DC that decide that they're going to participate in the expansion of Medicaid. So, let me show you exactly what that looked like and really the impact for this. We have what we refer to as a new national eligibility group. In other words, a group that's added to that original list. Uh, before it had to be low-income, it had to be women that are pregnant or children, low-income families, and that was the only group. And now we're going to add a large group. And this is going to be a new group. And this would be anyone that is an adult that is age 19 to 64 and their modified adjusted gross income is below 138% of the federal poverty level. Uh, the federal poverty level established of course on an annual basis. And uh prior to this expansion, someone had to be at or below the 100% of that federal poverty level to qualify for Medicaid. Now some states it wasn't 100 and actually would be lower than that, but it could be no more than 100 to qualify for Medicaid. Now we have this expansion, and so they raise the income level and then add adults. Uh, so these are people that do not have to have children. Uh, could be a woman, could be a man, but again they're childless adults. And so we have this new group that's going to now be eligible for Medicaid.
All right, that brings us into this federal funding. In other words, how are they going to be able to expand and encourage states to expand their Medicaid program? Certainly has to be some funding behind that. And so what we have is an acronym here called the FMAP. And that stands for the federal medical assistance percentage. Let me say it again: federal medical assistance percentage, FMAP. We'll talk about that with some of the changes with this new law as well. So here's the way it worked. So what happened in the first three years of ACA, 2014 to 2016, the government said that they would provide 100% funding for all these people that are going to be covered now as a result of expanding Medicare. So they're going to cover this group differently, 100% of the funds. And then what happened from 2017 to 2019, they begin to lower that percentage. So in 2017 they covered 95% of it. In 2018 they covered 94% of it. And then 2019 they covered 93% of the expansion group. So again they're covering the majority of the cost. And then what happened in 2020, they lowered that then to 90%, and this then has been permanent. But as you're going to see with the passing of the one big beautiful bill act, that is actually going to change, but this is how it was through 2021 up until the passing of this new legislation. All right.
So, another thing that happened is they expanded ACA, and I mean expanded Medicaid, and now we have these Affordable Care Act plans is they have streamlined enrollment, trying to really expedite the enrollment process, and so someone's eligibility now, notice this, the eligibility is now based upon their modified adjusted gross income, and we know for Medicaid purposes it's all the way up to 138%, but for ACA purposes is actually going to be up to 400% of someone's modified adjusted gross income. All right. And so, we'll look at the actual formula for this in just a minute, but again, we have to be financially eligible. And then what you're going to see with the passing of the one big beautiful bill act, that's actually going to be reduced. And you'll see here in just a second.
All right. In addition to streamlining eligibility, now we also can do everything online, online applications, and all this will be then coordinated then and combined with the ACA marketplace. We call that the federal exchange. You can call healthcare.gov and actually make arrangements to get one of these plans. All right, so this is kind of the components of the new Medicaid rules and the ACA plans.
Okay, so as you saw in the previous slide, eligibility is based upon someone's modified adjusted gross income. Now, frankly, in the financial world, there are different formulas for modified adjusted gross income. Uh, there's a different one for Medicare than what we're going to look at here. Uh, but the point is, let me show you the formula real quickly so you'll see exactly how this works for eligibility purposes. So first off, we start with adjusted gross income. If someone's looking at their 1040, that's actually going to be line 11 on the 1040. Secondly, what we're going to add is tax-exempt interest. Now, frankly, most people don't have this, but if you do, that means you invest in municipal bonds and sometimes savings bonds, US savings bonds, that you don't have to pay federal taxes on those, that interest, those earnings. You have to report them, but you don't pay taxes. So that is actually on line 2A of a 1040 form. All right. So we're going to add those two together. Then what we're going to do is we're going to add non-taxable Social Security benefits. I think most people know that all of our Social Security benefits are not subject to income taxes. In fact, some people none of their Social Security income is subject to taxes. Some people 50% will be, and some 85% will be. But the point is, when we look at a tax return, we have two lines under Social Security. It says line 6A is what we're getting total in Social Security, and then line 6B is what is subject to taxes. So now what they're saying is, because the portion that's subject to taxes is already in your adjusted gross income, so the difference of that now has to be added back in. Meaning all of our Social Security is going to be a part of this equation. So we're going to add that in as well. That which was already taxed and that which was not taxed needs to be included. All right. So again, that line I'm talking about here would be line 6A. Line 6B was the one that is actually a part of the adjusted gross income. All right. Then in addition to that, we have two other items here. And most people are not going to have this, but I want to make sure you know it's part of the ACA, Medicaid formula. And this should be foreign income. Uh, these are people that work clearly outside the country, and their income up to a certain limit. I think this year it's like 124,000 is actually exempt, um but it has to be added back in for ACA purposes, and then because they have foreign housing, the rent, utilities, and different things, they also can deduct that off their taxes. So that's excluded, but it cannot be for the purpose of ACA modified adjusted gross income. So the whole point is this is going to be the formula we're going to use to decide exactly what kind of a subsidy someone would be eligible for.
All right, that brings us then to the federal poverty level chart. And by the way, this is 2025. These numbers change every year on an annual basis just based upon inflation. And so what we're going to do is I'm going to explain a couple of terms to you that matter certainly this year but also matter with the changes with the one big beautiful bill act law. Okay. The first one is called a premium tax credit. Premium tax credit. Okay. And so what this means is that when our premium on our insurance plan, regardless of the carrier that you have, the majority of people are getting some type of reduction of premium, and that money is not going to be paid to them directly. What happens is it's actually paid to the insurance company to reduce the premium that they have to pay for their insurance. Uh, so it's a premium tax credit. And so now people that have consistent incomes, meaning salary or hourly type work, they can pretty much project what their income is going to be for the coming year. And that premium tax credit is very easy to assess. So let's say someone's on a plan that costs $1,000 a month, and they get a premium tax credit of $800. That's going to be applied immediately, actually forwarded to that insurance company on a monthly basis. So they may have to pay out of their own pocket $200 a month or maybe even less than that. But the point is this is actually applied to the premium, and it's done on a monthly basis. Now people that have fluctuating income, what happens is um they get their premium tax credit differently. Uh, some get it advanced because they know what their income is going to be. Others with fluctuating income do not. They actually then would get that tax credit when they file their income taxes. Either way, the net result is still the same. It just depends on if you're getting it advanced, you get a reduced premium. If you're not, then you may pay full premium, but you'll see that back then when you file your taxes. All right, so this is a big deal. One way in which people are having a reduction in their insurance premiums on a monthly basis. All right, so that's that.
Now, the next one is CSR. And what this stands for is this is a cost savings reduction or cost-sharing reduction, really cost-sharing reduction. All right. So what this means is this is somebody that not only got a premium tax credit but also some of their out-of-pocket expenses are reduced. So this could be reduced deductible, reduced co-payments, reduced co-insurance, reduced max out-of-pocket. So all the components that we have to pay out of pocket for our health care expenses then can be reduced based upon, of course, what we qualify for based upon the federal poverty level. So those are the two ways in which people benefit or are incentivized by the ACA marketplace plans. And then there's another thing I want to teach you about, and this is called enhanced premium tax credits. Okay, enhanced. All right, so the same thing up here, but these are enhanced. So let me explain exactly how this works. What happened in 2021? We had the American Rescue Plan Act, ARPA, American Rescue Plan Act. And then we had the Inflation Reduction Act in 2022. And so what happened was for these particular years, what they did is they changed the formula and actually allowed more people to qualify for premium tax credits. Okay? And I'll show you how that's going to work here in just a second. But again, with the passing of the one big beautiful bill act, this is actually going to change because these particular tax credits are actually going to expire at the end of 2025. And they're going to expire, and there's some that wanted to renew them, but in this act, they're not going to renew those. Okay.
Now, let's look at the chart and let's begin to talk about how the equations of these numbers here actually affect premium tax credits and cost savings reductions. And so what happens is this anyone that is at the 138% federal poverty level or below. Okay? These people now are going to be qualified for Medicaid. So when a state expanded its Medicaid program, it agreed to begin to cover under Medicaid insurance anyone that's going to be here or below. Okay, that 138%. Now in the old days before ACA expansion, then it would just would have been 100% or below. So again, we have this new group. So what happens for premium tax credits and cost sharing? Uh, these people do not get those because they're on Medicaid. So premium tax credits and cost sharing actually begin here. We move forward. And so the way this is going to work with a premium tax credit originally, it would have been this group right here. Anyone that would have made anywhere between 150% to 400% of the federal poverty level was going to be qualified or eligible to get some type of a reduced premium for their Affordable Care Act plan. Of course, you can see household size and by the way, when we talked about modified adjusted gross income, it was anyone that was working in the home as
Well, as those that um were dependent uh that you claimed as a dependent, their income as well had to be included into that modified adjusted gross income. So, that's what we're talking about. It would be household income, household size. All right?
And so, what happened then, this group here under ACA got some sort of a um of a subsidy. And again, it's kind of on a sliding sliding sliding scale. Uh, and so obviously these people got a greater um uh benefit than what these people did, but again, they got something. All right?
And so what happened in in the original days is this: You would pay no more uh of a premium than 9.8% out of your pocket; of your modified adjusted gross income would go towards your insurance premium. Uh that would be the max. So they kind of max it out. But anyone that was above $400,000—400% of federal poverty level—uh they got no uh premium tax credit, and where there was no subsidy there was nothing uh for them at all. Uh so the cap would have been right here, and again the formula would have been at this level they had paid 9.8%. But after that, again, no cap, so those that are high income received no benefit whatsoever, and this was a system that uh was in place uh for many years until uh 21 and 22.
Now, I want to clarify something here real quickly when it comes to cost sharing reduction because not everyone is going to get a cost sharing reduction. It's actually this group of people here. Anyone between 100% of the federal poverty level up to 250%. This group here would be eligible for a cost sharing reduction, meaning uh uh they don't have to pay full out-of-pocket deductible, co-pays, co-insurance, max out-of-pocket. They got help. All right, but up to 250%. So, these people here were not qualified for that; still qualified for uh a premium tax credit but not the cost sharing reductions.
Another thing about these is a person had to be enrolled into what is called a silver plan. Remember we have bronze, gold, and platinum plans. None of those qualified for uh cost sharing reductions; only the silver plans. So people had to enroll into those particular plans. Okay.
So that's the way that's going to work. So this is exactly how the system worked from 2014 up until uh the passing of the American Protection Act and the um uh Inflation Reduction Act. So the whole point is this is how it worked. And then what they do now is they're going to enhance premium tax credits. They're not going to enhance cost sharing reduction, but now more and more people are going to be qualified to get a reduced premium through the premium tax credit.
So here's they set the new rules, and now what happens is no one would spend any more than 8.5% of their income uh on their premium. That was the max cap. So even high-income people uh if they have a premium above 8.5%, they too are going to get a premium tax credit. Again, it's going to be applied to the monthly premium or it's going to be settled up at tax time.
And so what happened then is before uh uh before these acts uh no one paid more uh I mean no one got a subsidy if they made above 400%. Now there is no limit. In other words, uh you could uh you know be very very wealthy and still get some kind of a tax credit because again the max would be 8.5%. And again these things are set to expire at the end of the year, and with the passing of um Oba uh that is exactly what's going to happen; they're not going to renew uh that particular aspect of the premium tax credits.
Okay, now that we understand that aspect of the federal poverty levels and the the premium tax credits and uh cost sharing reduction, let's talk about some other changes that are happening now uh with the passing of the one big beautiful bill act. Okay, the first one is the way Medicaid and the amount of Medicaid funding that they're going to actually get from the federal government. Okay, and so here's what we saw earlier; we saw this acronym which was the FMAP, and that stands for the federal medical assistance percentage. That's the matching by the federal government for the state's Medicaid program.
And so what's going to happen, you're going to see this now; it's going to be reduced. And so we remember earlier we talked about whenever the whole program started uh back in 2014 uh all the way to 2016, the federal government paid 100% of the cost of that Medicare Medicaid, excuse me, expansion population. And then remember it went down. It went from 95, 94, 93, and then in 2020 on what happened uh they paid 90%, and that's exactly uh where we stand today. But with the passing of this bill what's going to happen? This 90% is actually going to go to 80% matching. That's it. So it's reduced.
Now we look at and say well that's only 10% less. But that's huge for the majority of states. Let me just show you a quick example. Let's just say that someone some state has 500,000 people that are part of their expansion population; now uh childless adults up to 138% of the federal poverty level now on their Medicaid uh program. We have 500,000 of them. Average cost uh let's say it's uh $8,000. That's a pretty reasonable number. That's what it's going to cost the state. And so that equals to be $4 billion. $4 billion. So at that $4 billion presently, what's happening? The the federal government is paying 90% of that. And that means the uh state's paying 10% of that, which is actually going to cost the state $400 million. Okay? Uh and the federal government paid the rest, the other 90%. But with a reduction to 80% on the federal matching, what's going to happen now that those same people um the cost is the same, but now uh because they're getting less money, it's actually going to cost them $800 million to cover uh that expansion population. Again, that's going to put some strain probably on some states' budgets. So, the whole point is uh now with this new bill, there's going to be less money coming from the federal government into uh the the budget, state budgets for their Medicaid population. All right.
So, the second aspect uh that is uh happening because of the OBA bill uh as it relates to Medicaid funding is this statement here: phasing down the maximum provider tax rate. Uh and now again the you know most folks would even be aware of this, but with those states that actually agreed to expand Medicare uh the federal government allowed them to have a tax on providers, and these providers are typically going to be managed care uh uh insurance companies. Uh they're going to be um nursing homes, hospitals; rarely are doctors uh taxed or ambulance service, but many people in healthcare uh uh business are going to be taxed, and this is allowable. But what what happens? The feds set a maximum. So right now we have a 6% uh max tax uh on these providers. Now keep in mind where is this uh this uh uh tax going? It's going actually into uh the state budget. So they tax the provider. That money then goes into the state Medicaid budget, and then the government again has been matching that up to 90%. Again that's going to go down to 80%. And so what they're doing, they're just saying, "We're not going to allow you to uh tax them as much because we're not willing to match as much." And so what's going to happen the very first year now that with the OBA bill is this is going to go down to 5 1/2%, and then it's going to 5%, and then it's going to um uh 4.5, and then 4 uh and then eventually it's going to stop at 3 1/2%. So you can see they're going to kind of uh gradually remove the ability for them to tax so much. And so again, uh, the federal government eventually is not going to have to be matching as much because the state's not going to be able to, uh, charge as much taxes to those particular providers. So again, what's that going to the net effect is going to be less in that Medicaid budget, less money matched then by the federal government. All right.
Then that brings us to the third uh consequence of this bill, and that is financial penalties for non-compliant states. Uh, right now there are states that uh actually cover um uh non-citizens, non uh you know, even documented citizens. And so they actually fund uh that health insurance out of the state Medicaid budget. Not all do, but but many do. And so uh part of the changes are going to be the eligibility for uh people being able to uh get different plans based upon their citizenship status. And so for states that decide they're going to go ahead and cover people that the federal government says are no longer eligible, if they catch them doing that, then what's going to happen is they're going to give them a financial penalty; that would be a non-compliant state. Now, I think eventually states can can have a workaround in that they can set up their own insurance pools if they want to do that, but they're going to use the normal Medicaid program. What's going to happen is uh every quarter uh they actually the government uh sends them a quarterly uh matching amount. And so, if they find that they were non-compliant, uh they will not get their quarterly matching amount. And again, we're talking about billions of dollars here. And so again, they're trying to put some teeth in this to make sure that uh these states are complying with the new Medicaid rules. Okay. So that'll be a big deal as well. So we'll have to see exactly how that fleshes out. Uh we believe that some states are going to set up their own way to cover uh these uh uh uh people instead of just going, you know, through the traditional Medicaid program. All right, so those are the Medicaid funding changes.
Now, let's look at the Medicaid eligibility changes because these two are going to be huge. The first one will be now they're going to establish uh work requirements for those uh that are on Medicaid. And not for everyone. There's be people that will be exempt, but some are actually going to now um uh have a requirement placed upon them that's it's actually called this. It's called a community engagement rule. Uh and one writer said this way: said the bill proposes um uh new uh community engagement rules requiring able-bodied adults um uh without dependents to complete 80 hours per month of work training or volunteer service to maintain their their Medicaid coverage. And so uh originally that's what it was going to be. Anyone that uh uh that had dependents uh were still raising children would be exempt. They changed that in the final version, and now it's this: Here's the new the new wording on it. Parents or caregivers of children aged 15 or older. So 14 or below you're exempt. But if you have children 15 or above, you're no longer exempt. They too must complete the 80 hours of work. It could be volunteering, education, or other qualifying engagement. Okay? So this this means they're they're working, they're getting paid. It could be that they're going through some kind of job training or job education for the 80 hours. Uh it could be voluntary work as well or just proving that they're uh searching for a job or other approved programs. But the point is they want people that can work or that can volunteer to be doing that. So again 14 if you have children 14 and below, exempt, but 15 and above or you're single then you're going to have to fulfill this particular work requirement. So that is also a huge change. All right.
This brings us into the second aspect of eligibility, and that's this statement here: there's going to be an elimination of coverage for certain groups of people, meaning no longer going to be eligible for premium tax credits, cost uh uh cost sharing reductions, uh the different uh incentives that come along, uh with um ACA plans, but also uh Medicaid eligibility as well. All right. And so, uh I like this particular statement kind of summary again. Uh this bill, uh uh directly eliminates coverage for some subgroups. And then he says here, for example, under section uh 71110, Medicaid eligibility for non-citizens would be severely limited to a few specific groups; ending eligibility for refugees and other lawfully residing non-citizens. So again, they're here in the country legally uh but they are are are not citizens. Uh this would be a couple examples. Anyone who is what is referred to as an asylee. Uh this is someone that was granted US protection after fleeing persecution. So, under this new legislation, they're no longer going to be eligible for either premium tax credits or for uh the cost um sharing reduction. Anyone who's in a refugee status, uh they were admitted directly from abroad due to persecution. Again, they're disqualified from subsidies. Uh those are TPS holders. This was just in the news about some uh from Haiti uh temporary protection status. They're non-citizens. They've been allowed in the US temporarily due to unsafe return conditions. So under this law, uh their subsidies also have been removed. Okay? So they cannot get them. Anyone that's called a special juvenile immigrant, these are children under US juvenile court jurisdiction unable to reunify with their parents; under this new law, the subsidy eligibility is also been revoked for them. And so the whole point is we're seeing this happen where certain of these groups are just no longer going to get help in the way that they did in the past. All right.
Then it brings us then to the third aspect here, and that's increased frequency of redetermination. And uh one author said it this way: He said the uh act calls for more frequent checks on Medicaid eligibility, potentially leading to more people losing coverage due to paperwork or procedural issues. And so what they're doing is uh uh uh up to this point in time uh people did not have to on a regular basis uh you know prove that eligibility, that status that allowed them to get the tax credits or you know qualify for Medicaid, and now they're going to have to do that, and so uh with this higher degree of accountability and the frequency of redetermining this eligibility that of course could affect people staying on their insurance plan as well. All right, so those are the things that are changing because of this law. All right, that brings us now then to the changes uh that the law is going to have upon the ACA plans and the marketplace plans.
And so here's the way uh we're going to see changes now with the law: Shortened open enrollment period. Um uh this is going to change now from November 1 uh through December uh the 15th. Okay. So uh we're going to have about 6 weeks. Prior to that, we had at least eight weeks. And some states would even expand that beyond this. And so again, people are going to have to get real serious about doing their reenrollments because less time to do that. Number two, it's going to eliminate automatic reenrollment. Uh the majority of people actually are actually passively enrolled in these plans. If they had a plan, uh uh they're going to be they were automatically enrolled. That can no longer happen. They're going to have to go back through and reverify their address and their income and go through these uh different um hoops uh to make sure they're going to still requalify. Okay? So again, it's not passive any longer as it has been in the past. All right? So shorter time, not passive.
And then they're going to end this what's called the provisional premium eligibility. What this meant is if somebody applies and they're going through that paperwork process, uh sometimes the paperwork uh takes a while to go through. So, as it stands today in 2025, before the passing of the law, what would happen is these people would then have about a 90-day window to clear up any discrepancies, to uh complete the paperwork, and to do whatever they needed to do uh for that policy to actually be issued. But while they're doing this waiting, uh they're still covered. They're still getting their premium tax credit, their cost sharing reduction if they're on that silver plan. And so, what's going to happen now is they no longer will be. In other words, they're going to have to make sure all the paperwork is done correctly, dates on time because if it's not uh then they're not going to get any of of those premium subsidies, no incentives whatsoever. So that's going to go away, these provisional. So they're going to have to be real serious about making sure everything is buttoned up very quickly and that they're eligible uh because again that could cost them uh you know dearly financially.
And then that brings us to this, and that is the um uh the tax credits that we talked about earlier expiring. Remember the American Rescue Plan Act 2021 uh the inflation reduction act of 2022 uh it allowed more people to uh qualify uh for premium tax credits. Uh remember prior to this uh if you were above 400 uh% of the federal poverty level you had to pay full premium. U we had a max uh at that 400% of 9.8%. And then what they did with these acts uh they said now more people qualify uh and the max that someone would spend would be 8.5%. And there was no income cap at all. That meant almost all people are going to get some kind of sub uh you know help. And so the point is those are not going to be renewed. Uh the act said no; these are actually going to expire. So that's going to impact people's uh premiums. In fact, they say that some people could see an increase anywhere from 25 to 50% because they're going to lose that premium tax credit.
And then lastly, just like we saw with Medicaid, we're going to see reduced eligibility for certain groups. So people that could have qualified for ACA in the past, no longer going to. Again, it's going to be uh really a lot to do uh with uh their citizenship status or how long they've actually been in the country. Uh those people that have been here less than 5 years, be very difficult for them to get any kind of cover coverage. Those after five years uh then their citizenship status is also going to come into the equation. But the whole point is this: Because the passing of this law, certain people that may have had coverage in the past uh probably not going to be able to get it in the future. All right, that brings us now to how this law is impacting Medicare.
Before I get into that, I just want to mention something to you. Those of you that may be approaching Medicare eligibility and starting to make some decisions. Uh we have what we call an essentials workshop that I uh do a new one every year. Uh it lasts about 50 minutes. Uh but it gives all the ins and outs of Medicare. It truly would give you all the information you need to know to be able to be confident in your Medicare choices. You can go to our website medicarechool.com, and there's a link there that you can actually click on uh and uh it will take you to that essentials workshop. There's no obligation. There's no cost for it whatsoever. Uh but it would really help you to understand Medicare very very well. And again, it gives you everything that you need to know. And the whole point is we want to make sure when people go on Medicare, uh they can do so without making any kind of mistake. All right.
So let's now look at how OBA is affecting Medicare. All right. So Medicare eligibility of course uh is not changing for anyone that is a US citizen uh or even a naturalized citizen. They have paid into the Medicare tax system for at least 40 quarters or their spouse did or their ex-spouse did, and they're approaching 65. Uh that is certainly not going to change at all. What I want to do is just make a contrast between how it is today as I shoot this video uh in um uh September 20 I mean excuse me July of 2025 uh and then what's going to be after this law uh is then fully uh implemented. Okay. So today uh here's what happens: A person does not have to be a citizen to be able to get Medicare, uh as long as they are um a legal permanent resident, meaning they hold a green card and they've been here for at least five consecutive years, they're actually eligible for Medicare. And of course, that's going to change. Uh they just have to be lawfully present uh five years um and they actually qualify for Medicare Part A. Now, if I'm going to get part A at premium free, I'd have to be here for, you know, working for uh at least 10 years or my spouse or ex-spouse. So we can actually draw that uh presently at zero premium for part A. Now someone has not does not have the 40 quarters, they're still eligible to buy Medicare part A. A lot of people pay for part A. So you can buy into that uh presently. And then also
You can qualify for Part B, uh, Part B, that outpatient side of Medicare that we pay a premium for. Most people pay $185 a month this year. And so they also get extra help if indeed they're low income and qualify for one of those Medicare plans. And so this is how it is today as I, uh, am sharing this video with you in July of 2025. But, uh, the bill is passed, and so what's going to happen now? Things are going to change for Medicare. Not just Medicaid and marketplace plans, but for, uh, Medicare.
Now, in order to be, um, on Medicare, you have to be a US citizen. Well, what's that mean? Well, there's people over here today that are on Medicare that are probably going to lose their Medicare eligibility because now they have to be a citizen. And so they have to be lawfully present for sure. But look what happens. Um, uh, they can no longer buy Part A if that's their only status, meaning they're even a green card holder. Uh, again, they're they can't buy it any longer. Uh, there's no more extra help eligibility for them as well. The only way they're going to be able to do it then is if they go through the naturalization process, in other words, becoming a citizen in that particular way. Okay, that's the only way. So again, a big change, uh, for, uh, several hundred thousand people that are on Medicare now that may lose that because of this bill.
All right, so that's all about the Medicare eligibility. Let's talk about some additional changes as well, as a result of this law. And the first one is we have an expanded definition of a rural emergency hospital. And frankly, folks, the reason for this is because, uh, uh, uh, with, uh, some of the impact that's happening on Medicaid now, uh, the reduction of eligibility, the reduction of funding, uh, people are very concerned about the, um, the stability of rural hospitals. And this has been a problem for a while, but we believe this is probably even going to increase. And so what they're doing is they're going to allow, um, uh, more hospitals to be defined as rural emergency hospitals.
Now, what this means obviously they're in rural areas. These are certainly not in cities. Uh, large hospitals could not function and could not, you know, financially survive in a rural setting, but these kind of hospitals may be able to. And so what what happened was, uh, they've defined a rural emergency hospital as hospitals certainly in a rural area or an area that would be maybe close to a suburb. They're just redefining this. Let me just read this to you: "Rural emergency hospitals are a type of Medicare-designated facility that operates in areas where bigger hospitals may struggle to stay open." And what happens is these people, these hospitals receive a monthly payment just for remaining open. And they also get a 5% increase on outpatient payments to help ensure they're able to continue, uh, providing care for residents in those rural areas.
And right now there's only I think 30 some of these hospitals throughout the country. But by, uh, bringing about this particular act, uh, and this law passing, what they're going to do is they're hoping that some of these hospitals that have closed will reopen now, uh, because to have this designation, uh, they had a cut-off date, um, years ago. It had to be designated as a rural, uh, emergency hospital by 2020. And so a lot of hospitals did not take that status. They closed down. So now what they're going to do, they're actually going to backdate that eligibility and say if you're a hospital that operated, uh, uh, from 2014 and 2020 and you closed because you couldn't make it financially, uh, we're going to allow you to come back and apply for that program. And so what they're hoping is there could be anywhere from 300 to 500 of these hospitals, or maybe even more, that will reopen again, uh, and, uh, begin to serve those communities by, uh, by this particular law. So, uh, this definition is in moving from rural to semi-rural and also those serving underserved urban fringe areas as well. So again, they're redefining this so more, uh, will be able to participate in the program.
And so again, I think these hospitals, um, uh, get like a $5 million a year payment just for staying open and then a normal, uh, Medicare reimbursement rate is going to be increased by 5%. And again, these are hospitals that are providing outpatient care, emergency care. Uh, they have beds, so there could be someone that's maybe, uh, under observation, but it's not really an inpatient status. It's totally outpatient, totally emergent care, urgent care to take care of people in the rural areas.
One other neat thing that they're going to do, and this came out with the, uh, the bill, and this was part of the, uh, the Senate version, um, uh, as they, uh, you know, negotiated between them and the House, and they're actually going to give $50 billion. It's $10 billion a year, uh, for, uh, funding these rural hospitals to make sure that they're able to, uh, make it and stay in business. Okay, so that's really a good thing as well.
And then number two, uh, some AI tools to recoup improper Medicare payments. I think most of you know, uh, there's a problem with the wrong coding. Uh, there's a lot of fraud, waste, and abuse within Medicare. So, this bill is going to give $25 million to, um, the Department of, uh, Health and Human Services, uh, under, um, Robert Kennedy, and they're going to hire developers and hire, u, uh, you know, some tech to be able to start finding more and more of fraud, waste, and abuse. Right now, it's in the billions of, pro, uh, dollars. I think original Medicare about $30 billion in overpayments. Medicare Advantage plans, uh, somewhere around 15-16 billion dollars, uh, last year. And so this is a huge problem today even among even Part D plans as well. So there's a lot of abuse that happens, a lot of waste in Medicare. So, uh, they're going to make this AI investment to be able to recoup some of that money that's wasted by the federal government.
And then lastly, what I want to talk about is, uh, what's really been in the headlines a lot as it relates to Medicare. And that is, uh, some have said this bill is going to cost, um, Medicare to be cut by $500 billion dollars. And I'm not saying that's not going to happen, but the likelihood of that is very minimal. So let's talk about the why we're hearing this $500 billion number. Well, it all has to do with what's called sequestration. Um, and, uh, this has to do whenever, uh, Congress puts forth legislation that is going to, uh, uh, increase the, the, the, um, uh, the federal spending, the deficit, uh, then there has to be certain cuts, uh, to programs. That's called sequestration. So let me kind of explain this just with this article I thought was very good. And, um, this author said this sequestration, uh, is an automatic spending cut. It's kind of a budget haircut. Some people call it like an emergency break, uh, that the government applies when it spends too much money. Okay. Uh, it was created to force fiscal discipline. Another example of this, uh, this author said this: "Think of sequestration as like a credit card rule. If you overspend, add to the deficit, which this bill is doing, um, your bank, Congress, in this instance, is supposed to automatically freeze or reduce some of your spending the next month: sequestration." Okay. And so, uh, the way it works is this: Medicare has a a small protected card, meaning they're not going to freeze the whole Medicare card, but they will lower the spending limit by 4%. All right? And so, that's sequestration. So, that's what they're talking about here. Again, this is adding to the deficit. Uh, they're going to have to make some type of cuts. Okay?
So, let's talk about this. Medicare is protected from deep cuts, uh, for sure, but not entirely exempt because again this particular bill, um, uh, was an increase to the deficit. And so and the way it works, the maximum that Medicare cuts can occur would be 4%. Uh, but these cuts go to Medicare providers, meaning the payments to doctors, to hospitals, to surgeons, uh, they could automatically be cut up to 4%. And so this 4% has nothing to do with the reduction in your benefits. Uh, has nothing to do with anything other than some of the providers could be cut. Okay? But in the reality of this, I want to explain something to you. Uh, what normally happens is this: Uh, Congress, uh, can vote and historically has voted to stop the cuts. But if they don't, then this sequestration, uh, cuts are going to start in 2026. And so even though, uh, you, uh, may not, uh, uh, you know, have any coverage issues, uh, the doctors and hospitals could provide or could be provided less money. Okay. So that's the fact.
So let's talk this through and we'll close. Beneficiaries: no change to your benefits, no change to premiums, no change to your out-of-pocket expenses. Uh, so patients, you on Medicare, uh, are not going to feel it directly. Uh, the providers could and may, uh, anywhere from 2 to 4%. But here has been the history of this, and by the way, this all goes back to, uh, 2011, uh, with some, uh, bills at that particular time they started this, but Congress can respond and routinely now I don't know if they're going to in the future, but routinely they have waived or modified sequestration, okay, in the past, and it does require a 60, uh, majority vote in the Senate for that to happen, but again that's typically what has happened in the past. All right, so again, uh, this is part of the consequence of it. We hope that doesn't happen, uh, to Medicare. Uh, and we hope that Congress would kind of override that and give the White House the authority not to, uh, have sequestration when it comes to the Medicare budget.
All right, so listen, I hope you enjoyed this. Hope it's helpful to you. It's a huge bill. Like I said, 887 pages, a lot of details, and I hope this clears up some of the confusion that you may have around this bill. [Music]