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Understanding the Impact of H.R.1 and Federal Changes to Medicaid

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From Kim Bimestefer, executive director of HCPF:

What to know about the federally mandated changes coming to Medicaid

Read Executive Director Bimestefer's monthly messages

On July 4, 2025 the House Reconciliation bill (H.R.1), previously known as the “H.R.1. One Big Beautiful Bill Act,” was signed into law. This page provides information on the federally mandated changes to Health First Colorado, Colorado’s Medicaid program, and the Child Health Plan Plus (CHP+). Together, these programs cover 1.3 million Coloradans or about 20% of the state’s population.

Impact Snapshot Coverage and Eligibility Provisions

Providers, Fees, Payments, and Tax Provisions Rural Health Transformation

Resources Stay Informed and Engaged

Impact Snapshot

The new Medicaid provisions take effect over the next several years, impacting eligibility criteria, the administration of our programs, and our state budget - generating downstream impacts to program benefits, coverage policies, and provider reimbursements. Colorado in particular will face exacerbated fiscal challenges because our state constitution includes balanced budget requirements and Colorado’s Taxpayer Bill of Rights (TABOR), which limits tax revenues available to cover program expenses.

Our Commitment: We are required to implement and abide by federal directives. Within our authority, and in partnership with stakeholders and the Colorado General Assembly, HCPF is prioritizing:

  • Mitigating inappropriate coverage loss, which is our North Star
  • Avoiding draconian cuts to Medicaid by navigating budget challenges through the Medicaid Sustainability Framework
  • Mitigating Medicaid and CHP+ federal funding clawbacks by achieving eligibility processing performance requirements under the CMS Payment Error Rate Measurement audits (PERM) and stepping up program fraud, waste and abuse efforts

Major Impact Areas

H.R.1 will bring significant changes to Medicaid in Colorado, including:

  • Rewriting major eligibility, financing, and compliance rules over the next 2-8 years that will impact Coloradans’ ability to gain and retain Medicaid coverage. These changes are expected to increase the state’s uninsured rate, increase uncompensated care for health care providers, and put pressure on some providers to shift their rising uncompensated care costs to commercial coverage.
  • Reducing Medicaid and individual marketplace exchange enrollments, and increasing uninsured rates, with downstream impact to families (adverse health impacts, increasing medical debt and bankruptcies), employers (increased premium rates due to cost shifting) and the economy (biggest part of CO/US economy is healthcare).
  • Forcing states to make difficult decisions that influence how costly or disruptive these shifts become for enrollees, providers, and the state General Fund.
  • Providing very limited funding for states to implement changes that will drive higher administrative and Information Technology (IT) costs.

More details and data about H.R.1’s impact on Medicaid can be found in: Colorado Medicaid Insights and Potential Federal Medicaid Reduction Impact Estimates - July 2, 2025, and on our Sustainability Framework page.

H.R. 1 Provisions

Coverage and Eligibility Provisions

Prohibited Entity Funding

  • Active: July 2025 - July 2026
  • Member Impact: 14,000+ members
  • This provision was effective upon signing of H.R.1. Subsequent legal action had put an injunction in place to allow states to keep paying what H.R. 1 defines as "Prohibited Entities" while courts reviewed the injunction.
  • During the Colorado Special Session in August 2025, the legislature added additional protections through Senate Bill 25B-002 "State-Only Funding for Certain Entities" establishing that Colorado will be able to use a state-only funding source to continue Planned Parenthood and “prohibited entity” reimbursement.
  • Update: On September 11, 2025, a federal judge lifted an injunction protecting federal match on these payments, and the state began using the state only dollars authorized in SB25B-002 to continue supporting Planned Parenthood.
  • In Colorado, this means that the state is currently allowed to reimburse Planned Parenthood for critical primary care and family planning services, including but not limited to contraceptives, cervical cancer screening and prevention, sexually transmitted infection (STI) testing and treatment, and gender-affirming care.

Eligibility changes for certain immigrants

  • Active: October 2026 and January 2027
  • Member Impact: approximately 7,000 lawfully present immigrants will lose Medicaid coverage
  • Limits Medicaid and CHP+ eligibility to lawful permanent residents, certain Cuban and Haitian entrants, and individuals from the Compacts of Free Association nations. Excludes refugees, asylees, and other humanitarian groups who were previously eligible for Medicaid coverage.
  • Multiple provisions impact immigrant eligibility for Medicaid, CHIP, and ACA programs:
    • October 2026: Restricts the definition of qualified immigrants for purposes of Medicaid or CHIP eligibility to legal permanent residents (“green card” holders), certain Cuban and Haitian immigrants, citizens of the Freely Associated States (COFA migrants) lawfully residing in the US, and lawfully residing children and pregnant adults in states that cover them under the Immigrant Children's Health Improvement Act (ICHIA) option.
    • October 2026: Limits federal matching payments for Emergency Medicaid for individuals who would otherwise be eligible for expansion coverage except for their immigration status to the state’s regular FMAP.
    • January 2027: Bars legal immigrants, aside from specific groups, from receiving premium tax credits and cost sharing reductions. Exempted groups are lawful permanent residents, Compact of Free Association (COFA) migrants, and Cuban and Haitian entrants as defined in section 501(e) of the Refugee Education Assistance Act of 1980.

Retroactive coverage restrictions

  • Active: January 2027
  • Member Impact: Anyone applying for new coverage
  • For individuals who apply for Medicaid benefits on or after January 1, 2027, this provision reduces the mandatory retroactive coverage period from 3 months to one month prior to the month of application for low income adults without disabilities (also referred to as the ACA expansion population) and limits retroactive coverage for kids, adults aged 65+ and individuals with disabilities to 2 months prior to month of application. This will result in increased administrative burden, confusion for members and providers, greater out-of-pocket costs for members, and uncompensated care for providers.

Work (Community Engagement) Requirements for certain members

  • Active: January 2027
  • Member Impact: Approximately 375,000 members (before exemptions).
  • This does NOT apply to:
    • Kids under 19, adults 65 and older, individuals with disabilities, medically frail individuals, Native American or Alaskan American residents, pregnant people, parents or caregivers of children ages 13 and under or disabled individuals, veterans with total disability ratings, those participating in substance abuse treatment programs, those already meeting work requirements for TANF or SNAP, or individuals experiencing qualifying short-term hardships.
  • Requires that low income adults without disabilities, ages 19-64, who are applying for coverage or renewing their current Medicaid coverage be working or participating in qualifying activities, such as going to school, participating in a work training program, volunteering in the community, for at least 80 hours per month or attending school at least half-time. States are awaiting further guidance from CMS on how these criteria will be applied.  
    These additional requirements will increase administrative costs and burdens, and result in coverage loss for members, due to members not meeting these new requirements or county eligibility processors not having information indicating that they did. See fact sheet for more detail.

6 month eligibility redeterminations for certain members

  • Active January 2027
  • Member Impact: Approximately 375,000 members. This does NOT apply to kids, adults 65+, individuals with disabilities or anyone on the Working Adults with Disabilities or Children with Disabilities Buy In programs.
  • Beginning December 31, 2026, low income adults without disabilities (also referred to as the ACA expansion population) must have their Medicaid eligibility redetermined every 6 months versus the traditional 12 months.
  • This will increase administrative costs and burdens, and result in some coverage loss for members who no longer qualify or do not comply with the additional administrative requirements. Since HCPF already checks income requirements on a quarterly basis (between renewals), the impact of this new provision on coverage loss may be far less than the work requirements provision.

Cost sharing for certain members

  • Active: October 2028 - This does NOT apply to kids, adults 65+, individuals with disabilities or anyone on the Working Adults with Disabilities or Children with Disabilities Buy In programs.
  • Member Impact: Health First Colorado already has cost sharing for individuals who use the emergency room for non-urgent services. Therefore, Colorado is already compliant with this requirement.
  • Beginning in October 2028, adults without disabilities earning more than 100% of the federal poverty level will be subject to cost sharing. Primary care and behavioral health services are exempted.

Provider Fees, Payments and Tax Provisions

Limits on New Provider Fees

  • Active: July 2025
  • Member Impact: Limits Colorado’s ability to consider new provider fee programs. Given Colorado’s constitutional revenue restrictions, these new limitations make it harder to identify sources of revenue to help fund affordability programs for Coloradans.
  • Prohibits states from establishing any new Medicaid provider fees or, with the exception of nursing facility provider fees, from increasing the rates of existing fees. Colorado’s hospital provider fee is at the current 6% of net patient revenue maximum, so this provision is not expected to impact Colorado’s existing provider fee programs.

Limits New State Directed Payments

  • Active: July 2025
  • This provision caps new State Directed Payments to Medicaid managed care organizations at 100% of the total published Medicare rate for Medicaid expansion states and 110% of the Medicare rate for non-expansion states. Legacy State Directed Payment programs submitted or already in place before the bill was signed, will gradually be reduced to the Medicare rate over time starting January 2028. This provision of the bill will reduce the ability to draw down additional federal funds through a State Directed Payment program over time.
  • Update: On June 27, 2025, Colorado submitted State Directed Payment proposals for inpatient and outpatient hospital services, including care at psychiatric hospitals, and for physician services provided to Medicaid members at Denver Health through Denver Health Medicaid Choice. These proposals were submitted before the bill was signed. This means if the Centers for Medicare and Medicaid Services (CMS) approves Colorado’s State Directed Payment proposals, Colorado will pull down federal matching funds at the higher payment rate, rather than the Medicare rate, until the rates begin to reduce over time.

Provider Fee Reductions

  • Active: Changes begin in October 2028, Federal Fiscal Year (FFY) 2028
  • Lowers or eliminates the provider fee threshold by 0.5% starting in October 2028, resulting in a reduction of fees collected from the Colorado Healthcare Affordability and Sustainability Enterprise (CHASE) fee which is used to draw down federal funding to finance coverage for low income adults without disabilities (also known as the Affordable Care Act (ACA) Expansion population) and Medicaid Buy-In programs for people with disabilities. This includes coverage for 427,000 Coloradans, including 367,000 low income adults, 34,000 kids in Children’s Health Insurance Program (CHIP), 25,000 adults and children with disabilities via Medicaid Buy-In program and 1,000 pregnant people in CHIP. This funding also increases Medicaid payments to Colorado hospitals by more than $500 million in hospital supplemental payments. Colorado could lose between $900 million to $2.5 billion annually by FFY 2032 due to a reduction in provider fees and corresponding federal matching funds through this provision.

Rural Health Transformation

  • H.R.1 creates a new Rural Health Transformation Program (RHTP) that states may apply for, providing grants totaling $50 billion in federal funds from FFY 2026 through FFY 2030 ($10 billion per year) to states. Awards will be announced no later than December 31, 2025, with funding to states in early 2026. These grants are federal funds only, meaning states will not be required to provide matching funds to draw down these Rural Health Transformation federal funds.
  • Impacts rural providers including hospitals, community health centers, and behavioral health providers.
    Resources:
  • Application is not available yet but is expected to be published by mid-September. Applications from states will be due to CMS in early November and awards will be announced by December 31, 2025.

Resources

Federal and State Policy Resources

Learn about Medicaid in Colorado

Stay informed

Contact

Submit a question or contact hcpf_HR1@state.co.us.