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House of Representatives Bill H.R. 1, An Act to provide for reconciliation pursuant to title II of H. Con. Res. 14

Myers & Stauffer provides an overview of key Medicaid provisions in H.R. 1 and what state agencies should know as they assess the law’s potential impact on Medicaid financing, payment, eligibility, and rural health programs.

August 5, 2025

4 minutes

Key Takeaways

On July 4, 2025, President Trump signed H.R. 1, “An Act to provide for reconciliation pursuant to title II of H. Con. Res. 14,” into law as Public Law 119-21. The legislation includes significant changes to Medicaid financing and program requirements, including provisions addressing provider taxes, State Directed Payments (SDPs), Medicaid community-engagement requirements, and rural health funding. Myers & Stauffer has reviewed the legislation to help states understand key provisions and prepare for implementation.

Provider Taxes: H.R. 1 establishes new restrictions on Medicaid provider taxes, with key provisions taking effect beginning October 1, 2026.
State Directed Payments: Section 71116 changes the payment limits applicable to certain SDPs for Medicaid managed care rating periods beginning on or after July 4, 2025, with temporary grandfathering provisions for certain existing SDPs.
Community Engagement: Section 71119 establishes Medicaid community-engagement requirements for certain individuals, generally effective January 1, 2027, with options for states to implement earlier or seek an implementation delay under specified circumstances.

What State Agencies Need to Know: At a Glance

H.R. 1 contains numerous provisions that may require states to evaluate existing Medicaid financing arrangements, managed care payment methodologies, eligibility and enrollment processes, and rural health initiatives. Myers & Stauffer can help state agencies assess the potential fiscal and operational implications of these provisions, evaluate implementation considerations, and prepare for changes as federal guidance becomes available.

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Medicaid Financing and Provider Taxes

Sections 71115 and 71117 make significant changes to Medicaid provider tax requirements. Beginning October 1, 2026, states face new restrictions on establishing or increasing provider taxes, while additional changes affect the treatment of provider tax arrangements and the circumstances under which states may receive waivers of the uniform tax requirement.

State Directed Payments

Section 71116 revises the limits applicable to certain State Directed Payments under Medicaid managed care. The provision applies to rating periods beginning on or after July 4, 2025, with temporary grandfathering available for certain existing SDPs. CMS has continued to issue guidance and pursue rulemaking related to implementation of the provision.

Rural Health Transformation Program

H.R. 1 also establishes the Rural Health Transformation Program, providing $10 billion for fiscal year 2026 to support state efforts to transform rural health care. States seeking funding must submit a detailed rural health transformation plan addressing areas such as access to health care, rural health outcomes, and the use of new and emerging technologies. The law requires the application submission period to end no later than December 31, 2025.

Medicaid Community-Engagement Requirements

Section 71119 requires states to establish community-engagement requirements for certain specified nonpregnant, nondisabled adults ages 19 through 64. Generally, affected individuals must complete at least 80 hours per month of qualifying community-engagement activities for one or more consecutive months, subject to the requirements and exemptions established by the law.

States will need to evaluate how these requirements may affect eligibility and enrollment systems, beneficiary communications, verification processes, reporting, and operational workflows.

How Myers & Stauffer Can Help

Need More Information?

Myers & Stauffer will continue to monitor federal guidance and state implementation of the H.R. 1 Medicaid provisions, including provider tax requirements, State Directed Payments, Medicaid community-engagement requirements, and the Rural Health Transformation Program. We are available to assist states with assessments, implementation planning, requests for early or delayed implementation, federal funding considerations, and other related needs.

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Myers & Stauffer can help states assess the fiscal, operational, and programmatic implications of H.R. 1 and develop strategies for implementation. Our team can support states as they evaluate Medicaid financing arrangements, payment methodologies, eligibility requirements, and rural health initiatives.

As federal guidance and implementation requirements continue to develop, Myers & Stauffer can help states understand what the changes mean for their Medicaid programs and identify the analyses, planning, and operational steps needed to move forward.

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