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One Big Beautiful Bill Act (Senate's Version)

On July 1st, the Senate passed their version of the OBBBA on a 51-50 vote, with Vice President Vance casting the tie-breaking vote. The bill now returns to the House for another vote.
 
The Senate amended the bill quite a bit from what the House passed. Unfortunately, bill text is not broadly available yet as amendments were draft up until the final vote in the Senate. A lot of the changes are small and should not be a big problem in the House. However, the Senate made some big changes in the following areas:

Medicaid

The Senate added a few hundred billion in new cuts to Medicaid – mainly by phasing down (by up to 50% from current levels) allowable health care provider taxes starting in 2028. 2-3 years This will impact hospitals and nursing homes significantly if they follow through on the cuts. Rural facilities and others under fiscal stress will likely have to cut service options or close. A measure cutting federal funds to states that use their own money to provide health care coverage to immigrants lacking permanent legal status (a cut targeted at New York), were pulled from the bill because it did not comply with Senate rules. New York operates under a 2001 Court of Appeals order that the state must provide coverage to the populations targeted under the House proposal if they would comply under regular eligibility rules for the health coverage, regardless of their immigration status. .
 
Total funding cuts are estimated to be more than $1 trillion over the next 10 years. The $1 trillion is equivalent to about 15% of total Medicaid spending projected over the next decade.

It is highly unlikely that revenue reductions of this size can occur without large numbers of individuals and families losing their Medicaid coverage and forcing hospitals and nursing homes to reduce services or close. The Congressional Budget Office estimates nearly 12 million people with lose their health insurance by 2034 due to these changes.

As people lose coverage and access to care becomes more difficult former Medicaid recipients will apply to county DSS offices, aging, and public health programs for services. Counties in NYS will likely be on the hook for backfilling some of these federal cuts. We will provide updates when final bill text is available. Moderates in the House have expressed reservations about supporting the Senate version due to additional Medicaid cuts.

Clean Energy Credits

The Senate is phasing out these credits faster than the House and it will impact future growth in the clean energy sector. Current projects that have broken ground would be allowed to receive the credits they were promised. Moderates in the House whose districts and states will benefit from new production facilities will see less long-term growth than initially forecast and is causing concern about their final support for the bill.

SALT Cap

Senate agrees with the House cap on the SALT fix, but sunsets the fix after 5 years. Meaning the higher cap is only temporary and will return to $10,000 in five years. The SALT caucus will lose all their leverage in the future because the cap automatically is lowered under this bill in the future. They have leverage today because the SALT cap of $10,000 sunsets at the end of 2025 under current law. This leverage made a fix possible.

SNAP Cost Sharing

The Senate version softened some of the state/local government cost sharing provisions related to benefit costs. The Senate version utilizes the same error rate scoring methodology, but lowers the maximum penalty to 15%, down from 25% in the House version. The bill also delays the cost sharing for the 10 states with the highest SNAP error rates. For 2024, New York would be one of these top 10 highest, but without bill language we are not sure if the state needs to show improvement to qualify for this exemption from 2023 to 2024 or prospectively for 2025 and 2026.

Debt Increase

The Senate would add $3.3 trillion to the deficit over the next 10 years. The House would add about $2.5 trillion over 10 years (debt increases are higher for both bills by $400B to $600B when economic/interest costs are considered). The Senate used a new approach under budget reconciliation that says making tax cuts permanent and extending tax cuts that are set to expire have no impact on deficits. From the Senate standpoint the bill saves money for taxpayers, but the bill also includes a $5 trillion increase in the debt limit over the next 10 years. From a federal debt perspective – this bill increases the federal debt more than any bill in U.S. history. Conservatives in the House are very upset by the Senate’s approach to the legislation and indicated it violates the agreement they had when the bill passed the House initially.

What's Next?

The House can only lose 3 republicans on final passage (the first version passed 215-214). There are several options on passage at this point (with the final three adding more time to completion, possibly months):

  • The House adopts the bill as passed by the Senate,
  • The Senate and House go to a Conference Committee to modify the proposal and both chambers vote on the compromise,
  • Break the OBBBA into smaller bills and pass what they can, or
  • Pass another budget reconciliation bill in the near future to clean up what they could not agree to now.
     

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