US Medicaid Cuts Begin Phasing In as Millions Face Coverage Loss Under New Federal Law

One of the most consequential restructurings of the US public health insurance system in decades continues to unfold in 2026, as key provisions of the One Big Beautiful Bill Act phase in throughout the year. According to the nonpartisan Congressional Budget Office (CBO), the legislation is projected to result in approximately 11.8 million people directly losing Medicaid coverage, with millions more affected through changes to marketplace eligibility and the expiration of enhanced premium tax credits.

Several major provisions are now taking effect. Medicaid recipients who do not meet a new 80-hours-per-month community engagement or work requirement face coverage termination, with the requirement phasing in during 2026. Critics warn that, based on prior experience, such administrative barriers historically cause coverage losses not because people are ineligible but because of paperwork complexity — a dynamic observed in Arkansas in 2018, when 17,000 people lost Medicaid in three months after a brief work requirement, with no measurable increase in employment.

From October 1, 2026, the law restricts federal Medicaid funding for most noncitizens, limiting eligibility to a narrow set of immigration categories. States wishing to maintain coverage for affected groups will need to use state-only funds. A RAND Health analysis estimates that state Medicaid budgets will contract by a total of $665 billion over the next decade, creating significant fiscal pressure as states simultaneously face slowing revenue growth and rising spending demands.

Healthcare advocacy groups, including the American Psychological Association, have raised alarms about downstream effects on behavioral health services — often classified as optional under Medicaid and among the first benefits cut when states face budget constraints. Private health insurers and managed care organizations are reviewing contracts and, in some cases, freezing new provider contracting in anticipation of membership losses. According to KFF, while major federal legislative changes are unlikely in 2026, key areas to watch include implementation guidance for the reconciliation law's provisions and states' policy responses to fiscal pressure. The Medicaid changes intersect with broader healthcare affordability debates — including the expiration of enhanced ACA premium tax credits — heading into the November 2026 midterm elections.