One Big Beautiful Bill Act (OBBBA): Hospital reimbursement and Medicare payments [updated]

 Updated on July 9, 2025

The One Big Beautiful Bill Act (OBBBA) — a major budget reconciliation bill passed by the U.S. House of Representatives in May — became law on July 4. While the legislation covers a wide range of national issues, several key Medicare fee-for-service (FFS) provisions could have a direct and lasting impact on hospitals and health systems. 

Because OBBBA has Medicare FFS implications, DataGen analyzed the impact of these major areas. Here’s a preview of what we’re seeing so far — and what hospital leaders need to keep on their radar: 

1. update to physician Medicare payments; 

2. potential 4.0% additional Pay-As-You-Go (PAYGO) sequestration reduction; and 

3. Medicare Disproportionate Share Hospital uncompensated care impact. 

1. Physician payment updates  

For the calendar year 2026, physician payments are slated to increase by 2.5%.  

2. The potential new 6% sequester 

With the new legislation, Congress may allow the Statutory Pay-As-You-Go (PAYGO) Act of 2010 to be triggered with its 4% sequestration cut and continuing the current 2% sequestration cut from the Budget Control Act of 2011, for a total of 6%. 

This change would significantly reduce total Medicare FFS payments across the board for all Medicare providers. Our estimated national impact analysis predicts a $98.3 billion reduction over ten years (2026-2035). This is the maximum amount by which Medicare payments may be reduced by this Act.    

Important note: The PAYGO additional 4% sequestration may not go into effect. So, it will remain in DataGen’s  Potential Changes analysis but not added to our Enacted Changes analysis at this time. 

3. DSH UCC payments could rise 

Starting in 2034, the OBBBA will increase the national uninsured population by 16 million. Our impacts reflect the estimated changes to the national UCC payment pool amount based on projected increase of 16 million people to the national uninsured population starting in 2034 resulting from the OBBBA, as provided by the Congressional Budget Office and combined with CMS’ Office of the Chief Actuary projections.  

Hospital-specific impacts due to changes in patient population (i.e., Medicaid DSH and UCC percentages) are not included in these impacts. 

What comes next 

Our full Potential Changes analysis — powered by DataGen’s Medicare FFS Policy Analytics — provides hospital-specific modeling to help organizations prepare for major payment shifts. Learn more about DataGen’s Medicare FFS Policy Analytics and how we help you anticipate the dollars behind federal decisions.