What Is the One Big Beautiful Bill Act?
The One Big Beautiful Bill Act (OB3), signed into law on July 4, 2025, marks a major shift in U.S. Medicaid policy. For Tribal health organizations, the impact is immediate. This new law reshapes the funding pipeline that supports clinics, workforces, and community health outcomes across Native communities.
Tribal health organizations face serious challenges on two fronts. First, OB3 cuts federal Medicaid spending by roughly $1 trillion over 10 years. Consequently, payments to hospitals, clinics, and nursing facilities will decrease in the years ahead. Medicaid forms a critical revenue source for Tribal health organizations — in some cases, it accounts for more than 60% of a facility’s budget. Although the federal government reimburses states 100% of payments made to Indian Health Service (IHS) and Tribal health facilities for Medicaid-eligible patients, this protection does not shield Tribal systems from the broader effects of program cuts.
Second, OB3 significantly reduces the number of people who qualify for Medicaid. This reduction will hit Tribal communities especially hard. Nearly three million Native Americans are enrolled in Medicaid or the Children’s Health Insurance Program (CHIP). Furthermore, the Kaiser Family Foundation estimates that 35% of non-elderly patients served by Tribal health entities — including 52% of children — rely on Medicaid or CHIP. In many Tribal organizations, Medicaid accounts for about two-thirds of third-party revenue.
How OB3 Medicaid Cuts Affect Tribal Health Finances
OB3 targets patient eligibility rather than encounter rates directly. Therefore, Tribal facilities face revenue losses driven by fewer insured patients. The Memorandum of Understanding between CMS and IHS protects reimbursement rates for now. Even so, shrinking patient eligibility will reduce the number of reimbursable encounters — and ultimately, total revenue.
Understanding the Financial Pipeline
Tribal leaders must understand how Medicaid flows through their organizations. Each eligible patient generates reimbursable encounters. Moreover, multiple encounters can occur in a single day. For instance, a patient visiting both a primary care physician and a dermatologist generates two separate encounters. Each state’s Medicaid agency regulates the maximum number of reimbursable encounters per day, typically between three and five.
IHS CMS Reimbursement Rates for CY 2026
The IHS Federal Register notice for calendar year 2026 published the following all-inclusive rates:
| Service | Lower 48 States | Alaska |
|---|---|---|
| Inpatient Hospital Per Diem Rate | $5,707 | $5,208 |
| Medicare Part B Inpatient Ancillary Per Diem Rate | $1,289 | $1,617 |
| Outpatient Per Visit Rate (Excluding Medicare) | $826 | $1,222 |
| Outpatient Per Visit Rate (Medicare Only) | $733 | $1,233 |
| Outpatient Surgery Rate (Medicare) | ASC rates apply | ASC rates apply |
These rates cover all ancillary services — including lab work, radiology, and pharmacy — within a single visit. As a result, Tribal facilities receive a flat all-inclusive rate per encounter rather than itemized billing.
Which OB3 Provisions Carry the Highest Risk?
Highest Risk: Access Restrictions
The most damaging provisions reduce adult Medicaid eligibility. Several new rules drive this reduction.
To begin with, undocumented immigrants previously enrolled in Medicaid must now be removed from coverage. This creates a larger uninsured patient population at clinics that previously served these individuals. Additionally, adults aged 19 to 67 in Medicaid expansion states must now meet new work requirements to remain eligible. Importantly, the legislation exempts Native Americans from this requirement. However, clinics serving non-Native beneficiaries will feel a measurable impact.
Another significant provision introduces cost sharing of up to $35 per service for Medicaid expansion adults with incomes between 100% and 138% of the federal poverty level — effective October 1, 2028. Most Tribal clinics offer primary care and behavioral health, which are exempt. Nevertheless, clinics with visiting specialists will face new financial pressure. Moreover, copayments often force low-income patients to delay care, which leads to poorer health outcomes and increased medical debt over time.
On a positive note, Native Americans remain exempt from biannual Medicaid eligibility re-verification — a significant administrative relief that protects continuity of care.
Mixed Risk: Program Cuts and Available Funding
Tribal healthcare systems are not exempt from overall Medicaid funding reductions. Consequently, these cuts may force difficult decisions about staffing levels, services offered, and program expansion. However, the bill also opens access to the Rural Health Transformation Program (RHTP), which makes $50 billion available from 2026 through 2030 to support rural healthcare sustainability. While this funding helps, it is unlikely to fully offset Medicaid losses. Importantly, existing cost-sharing exemptions for services provided through IHS, Tribal, and urban Indian health providers remain intact.
Lower Risk: Encounter Rates
OB3 does not reduce or redefine IHS/CMS negotiated encounter rates. Similarly, the definition of a Medicaid-reimbursable encounter is not expected to change. Additionally, Medicaid-eligible children and pregnant women remain covered through other federal programs, so Tribal clinics should not anticipate changes in that area.
How OB3 Affects Long-Term Care Reimbursement
The Risk to Tribal Nursing Homes
Long-term care presents the clearest financial risk under OB3. While IHS does not cover long-term care, some Tribal nations fund these services directly. They typically do so through enhanced reimbursement rates — state-modified federal rates that benefit specific service lines or facilities. Under OB3, those enhanced rates will revert to standard federal rates.
In Arizona, for example, regular Medicaid pays an average of $422 per day for long-term care patients. With the state’s enhanced rate, Tribal nursing homes receive an average of $725 per day. This is a substantial difference. To illustrate the real-world impact, a recent financial feasibility study for a proposed 60-bed Tribal nursing home showed that 80% of revenue came from Medicaid. At $725 per day, the facility would generate positive annual cash flow. At $422 per day, however, operations would result in zero or negative cash flow — making the project financially unviable.
How Tribal Health Organizations Can Respond
Building a Strategic Financial Plan
OB3 signals a new era of challenge for Tribal health organizations. Rising uninsured rates and mounting administrative demands call for immediate, strategic action. A robust strategic financial plan is not optional — it is essential.
Effective planning helps Tribal leaders in several ways:
- Anticipate and Manage Risk — Model multiple funding scenarios to identify vulnerabilities early and prepare targeted responses before funding gaps emerge.
- Align Priorities and Resources — Bring clarity to investment decisions and align organizational initiatives with the Tribe’s long-term mission.
- Support Informed Decision-Making — Use data-driven analysis to evaluate growth opportunities, improve resource allocation, and avoid misaligned investments.
- Strengthen Advocacy — Clear financial projections empower Tribal leaders in negotiations with federal and state partners.
