Hidden health care spending in ‘Big Beautiful Bill’

The One Big Beautiful Bill Act (OBBBA) became law on July 4, 2025. The OBBBA has a broad reach over many areas of the government and the economy, including several provisions that impact health care providers.

Rather than discuss the breadth of OBBBA and its impact on federal expenditures, this article addresses two aspects of OBBBA that increase federal spending on health care, namely the Rural Health Transformation Program, and a one-time increase to Medicare Part B payments under the 2026 Medicare Physician Fee Schedule.

Congress dedicated additional financial resources in these two areas partially to offset anticipated reductions in federal health care spending in Medicaid and Medicare.

Rural Health Transformation Program

Beginning in 2026 and continuing for five years, CMS will spend up to $10 billion annually to improve the health of residents living in rural areas under the new Rural Health Transformation Program (RHTP).

The Senate created the RHTP to offset the financial concerns of rural health care providers because many rural populations, and in turn rural providers, rely disproportionally on Medicaid to pay for health care services. Other sections of the OBBBA project an overall decrease in federal Medicaid spending, which would have adversely affected rural health care providers.

Each state had to submit a threshold rural health care service plan to CMS to receive RHTP funding. Each plan addressed how to deliver health care to rural residents. All 50 states met their filing deadlines.

RHTP funding is allocated using a two-part method that reflects, in part, each state’s rural health care service plan. The first part, which accounts for $5 billion annually, allocates funding equally among the 50 states that met the rural health care service plan filing deadline.

The second part, called Workload Funding, allocates $5 billion annually under specific criteria set forth by CMS. Some of the Workload Funding criteria included each state’s percentage of its population that resides in a rural census tract, the proportion of rural health facilities in the state in proportion to the number of rural health facilities nationwide, the financial situation of disproportionate share hospitals, and over a dozen other weighted technical criteria.

Maryland’s rural health care service plan was submitted by the Maryland Department of Health and included proposals that addressed the rural health care workforce; promoted access to primary care, disease management, and behavioral health; and increased access to food choices that address root causes of chronic diseases like heart disease, obesity, and diabetes.

CMS announced that Maryland’s 2026 allocation will be a little over $168 million while neighboring Virginia and Pennsylvania received $189 million and $193 million, respectively. Texas received the most funding, more than $281 million, while Washington D.C. received the least because it was ineligible to receive funding under the RHTP.

Medicare Physician Fee Schedule (MPFS)

The OBBBA also provides some relief to Medicare Part B suppliers with a one-time 2.5% increase in the MPFS reimbursement for calendar year 2026. This Congressional increase was intended as an offset to CMS’s efficiency adjustment decrease of 2.5% as a result of changes to the Medicare Economic Index, meaning that the MPFS will remain flat in the aggregate from 2025 to 2026, absent any other specific changes.

The MPFS impacts more than just physicians. Other health care professionals and Medicare suppliers are paid under the MPFS, including physical therapists, DME Suppliers, and Advanced Practice Nurses. Many commercial health insurers, state Medicaid agencies, Tricare, and others use the MPFS as the basis for setting commercial rates, Medicaid rates, and various health care policies.

Impact

For rural health care providers, Year 1 RHTP funding is available now and funding for 2027 is projected to be available on October 1, 2026, at the start of the federal fiscal year. This means that Maryland, and its rural health care providers should receive two allocations of RHTP funds in 2026. Unspent funds in any year may be re-distributed annually by CMS.

In the meantime, providers supporting any of Maryland’s 18 rural counties should continually assess how they might be included within the Maryland Rural Health Transformation Program – which could provide them with additional funding to improve rural health care by improving the workforce, addressing specific care specialties, implementing technology in rural areas to increase access to care, or promoting nutritious foods which impact chronic diseases.

Given that many hospitals in rural counties are currently adjusting to the new AHEAD Model, RHTP funding may provide them with additional financial resources at a time when the new model might reduce their available financial resources.

The MPFS adjustment is in effect as of January 1, which means that Medicare Part B suppliers such as physician groups, DME suppliers, and others are receiving some relief from the annual drum beat of Medicare payment reductions. These annual reductions are a result of CMS trying to maintain the fiscal solvency of the Medicare Part B Trust Fund while providing adequate care to an aging population.

Barry F. Rosen leads the Health Care Practice Group at Gordon Feinblatt LLC, and can be reached at 410-576-4224 and [email protected], and Christopher P. Dean is a member of Gordon Feinblatt’s Health Care Practice Group and can be reached at 410-576-4249 and [email protected].