Yesterday, the House of Representatives gave final approval to President Donald Trump’s top legislative priority – the One Big Beautiful Bill (OBBB) Act (H.R. 1), and the President is expected to sign it today.  Special Districts across the Country expect impacts and have been bracing for coming changes.  For example,  Hospital and Health Districts may see immediate and severe impacts noted below. Theese highlights provisions of interest to NSDA and our members, but is not inclusive of all items.

Overview

Passage of the legislation, which embodies much of the president’s domestic policy agenda, comes on the heels of months of infighting among House and Senate Republicans over the size and scope of the bill. In the end, only two House Republicans – Representatives Thomas Massey (KY) and Brian Fitzpatrick (PA) – voted against the measure, while House Democrats remained unified in their opposition. Final passage came after efforts by Democrats to delay the vote, including a record-breaking floor speech by House Minority Leader Hakeem Jeffries (D-NY).

The Senate narrowly passed the budget reconciliation bill earlier this week, with three Republicans – Senators Rand Paul (R-KY), Thom Tillis (R-NC), and Susan Collins (R-ME) – joining all Democrats in opposition. Senator Lisa Murkowski (R-AK) ultimately supported the measure after securing concessions related to rural hospitals nationwide and nutrition program implementation timelines for her home state. With the chamber evenly divided, Vice President J.D. Vance cast the tie-breaking vote, advancing the reconciliation measure by a vote of 51-50.

The centerpiece of the OBBB – which is expected to be signed into law by President Trump on July 4 – is a permanent extension of a number of major tax provisions of the 2017 Tax Cuts and Jobs Act that were set to expire at the end of the year. The legislation also directs hundreds of billions of dollars toward new investments in border enforcement and makes significant reductions to social safety net programs, including Medicaid and the Supplemental Nutrition Assistance Program. Clean energy provisions authorized under the Inflation Reduction Act (IRA) also were scaled back.

All told, the Congressional Budget Office estimates the net effect of the final bill will be an additional $3.3 trillion in deficit spending over the next decade. The legislation also includes a $5 trillion increase in the debt ceiling.

Key Revisions

Several key changes to H.R. 1 emerged from a series of intense negotiations over the course of this past weekend. Of particular interest to public hospital districts – and given the anticipated harmful impact on future restrictions on states’ use of provider taxes to fund a portion of their Medicaid program – the legislation authorizes a $50 billion Rural Health Transformation grant program.

Pursuant to the final bill, states applying for the program would receive a portion of $10 billion in grants annually over five years, effective in federal fiscal year 2026. States would need to apply by December 31, 2025 and the administrator of the Centers for Medicare and Medicaid Services will have discretion to approve a state’s plan. For approved states, 50 percent of the funding will be distributed equally, with the remaining 50 percent distributed to eligible entities based on the application’s merits. Rural health facilities available for funding include: critical access hospitals; sole community hospitals; Medicare-dependent, small rural hospitals; low-volume hospitals; rural emergency hospitals; rural health clinics; FQHCs; Community Mental Health Centers; Community Health Centers; Opioid Treatment Programs; and, Certified Community Behavioral Health Clinics.

While the intent of the Rural Health Transformation grant program is to soften the fiscal blow of some of the forthcoming cuts to the Medicaid program (please see below for additional details), rural public hospitals are anticipating severe budgetary impacts as a result of H.R. 1. Because many public health districts serve a significant percentage of patients who are on Medicaid, the cuts to the program are expected to result in rural hospitals cutting services, laying off providers, and even closing facilities.

Other 11th-hour revisions to H.R. 1 included the dropping of a controversial proposal from Senator Mike Lee (R-UT) requiring the sale of public lands due to bipartisan opposition and a ruling from the Senate Parliamentarian. Additionally, a three-year extension of the Secure Rural Schools (SRS) program also was not included in the legislation.

With regard to energy policy, the final bill retains language phasing out tax credits for solar and wind projects. Lawmakers also removed a proposed tax on clean energy development.

In another key amendment, the Senate overwhelmingly voted to eliminate a moratorium on state and local regulation of artificial intelligence, removing language that would have restricted such efforts.

Medicaid

As described above, a series of modifications to the Medicaid program were included in the final bill. Beginning in 2029, most individuals who were covered under the Affordable Care Act’s Medicaid expansion who are between the ages of 19 and 64 will be required to participate in work or community engagement activities for at least 80 hours per month to maintain eligibility. States must verify compliance at redetermination and may conduct more frequent checks. Exemptions apply to pregnant individuals, Medicare enrollees, caretakers of children under 14, recently incarcerated individuals, and residents of disaster-affected areas. Unlike earlier efforts, these requirements cannot be waived. However, states may apply for a one-time exemption through the end of 2028 if they demonstrate a good-faith effort to implement the policy.

The final bill also prescribes new out-of-pocket costs for Medicaid enrollees beginning on October 1, 2028. Cost-sharing will be capped at $35 per service, with exemptions for primary care, behavioral health, substance use treatment, and services provided at federally qualified health centers. While the fees are limited, the provision is expected to increase uncompensated care burdens on public hospitals and clinics.

Tax Exempt Status of Municipal Bonds

In a legislative win for special districts and other local governments, the final package maintains the tax-exempt status of municipal bonds. By preserving this exemption, the bill ensures that special districts can continue to issue municipal bonds to finance public infrastructure projects at a lower cost to taxpayers. This includes investments in transportation infrastructure, water systems, public safety facilities, schools, hospitals, and other essential services.

State and Local Tax Deduction

The final reconciliation bill will increase the cap on the State and Local Tax (SALT) deduction to $40,000 for the 2025 tax year for individuals and joint filers earning less than $500,000 annually. The cap will gradually phase down before reverting to $10,000 in 2030.

Child Tax Credit

H.R. 1 includes a modest expansion of the Child Tax Credit, increasing the maximum per-child credit from $2,000 to $2,200. It also requires both parents and all qualifying children to be U.S. citizens with Social Security numbers.

Other Notable Provisions

With regard to environmental and energy policy, the bill folds $13 billion in unobligated IRA funds into the U.S. Department of Agriculture’s conservation programs. The funds are now mandatory and can be used to support soil, water, and land stewardship efforts in partnership with special districts and other local entities.

Separately, H.R. 1 makes a significant change to the National Environmental Policy Act (NEPA). Under the bill, project sponsors will now be allowed to expedite environmental reviews by paying a fee equal to 125 percent of the cost of preparing the review. While intended to streamline project delivery, the provision could have implications for local government permitting and zoning authority.

The final bill also includes federal investment for in upgrades to air traffic control systems at airports across the country.

Sequestration Cuts

Because the OBBB Act is projected to increase the federal deficit, it will trigger automatic spending cuts under the statutory PAYGO law, unless Congress acts to waive them. If left in place, these sequestration cuts could reduce Medicare spending by up to $500 billion over the next decade. Additionally, mandatory funding for several human services programs could be eliminated. However, these cuts would not take effect immediately. The Office of Management and Budget typically issues its PAYGO notice within 14 days of the end of the congressional session, which gives lawmakers several months to consider and pass legislation waiving these requirements.