The eligibility wall: When staying covered becomes a challenge

The OBBBA introduces what we define as the "eligibility wall." This means people will have to prove their eligibility for coverage more often. The goal is to make sure federal funds go only to those who meet stricter, ongoing requirements. But in practice, it could lead to 12 to 15 million people losing their insurance.

Starting in 2027, able-bodied adults will need to show they are working at least 80 hours a month. They will also have to regularly confirm details like their address and income. Over time, this makes it harder to stay in the system, where even small paperwork errors can result in lost coverage.

The churn machine

Because of these new rules, coverage will no longer be stable, and that means, from here on, we enter the new “churn” era. In a traditional setup, once someone is qualified for Medicaid, they usually stay on it. Now, people are likely to move in and out of coverage more often.

Think of it like a revolving door. A person may have insurance one month, lose it the next due to procedural disenrollment, i.e., even if someone is technically eligible for Medicaid, they can be dropped for failing to respond to a piece of mail or for a change in a digital portal. This back-and-forth makes it hard for doctors to follow a patient’s care over time. It also creates confusion for everyone—patients, doctors, and insurers—about who is actually covered at any given moment.

The end of preventive care?

For decades, healthcare has focused on “population health”—keeping people healthy through regular check-ups, so small issues don’t turn into serious, expensive problems later. But the OBBBA makes this harder to sustain. Preventive care depends on steady coverage, and that becomes difficult when people keep moving in and out of the system. As a result, care may shift back to reacting to problems instead of preventing them early.

Furthermore, as subsidies under the Affordable Care Act (ACA) are phased out, we may face a "death spiral" in the insurance market. As prices rise, young and healthy people will likely drop their insurance first. This leaves behind a group of older, sicker members who will be forced to stay in the traditional ACA-compliant exchanges because they need comprehensive coverage (e.g., cancer treatment, surgeries).

Category

Medicaid

Medicare

ACA Individual

Rural Health

Eligibility &
Enrollment / Access

Work requirements for ongoing eligibility

More frequent redeterminations

Partial ACA expansion rollbacks

Tightened residency rules

CMS/SSA notification before termination

Enhanced upfront credit verification

Pre-enrollment limits auto re-enrollment

Loss of credits for some SEP scenarios

Coverage disruptions from cuts

Disproportionate impact on low-income

Benefits &
Coverage / Services

Tightening of optional benefits

Risk of coverage gaps for low-income

Core benefit design preserved

Targeted policy adjustments

Essential health benefits preserved

Shift to lower-AV products

New Rural Health Transformation programs

State activity flexibility

Financial Impact

Federal Medicaid spending reductions

Rural hospitals face reimbursement declines

Temporary ~2.5% physician fee increase

Short-term revenue boost

Drop in subsidized enrollment

Plans face revenue volatility

~$50B rural health fund

Medicaid cuts strain hospitals

Ops / Compliance

Complex eligibility verification

Higher admin load for appeals

Member outreach for eligibility changes

Updated billing assumptions

Stronger front-end verification

Increased member education

States administer rural initiatives

Nondiscrimination and telehealth nav

TrumpRx: A new way to buy medicine

One of the most significant shifts in the healthcare landscape is the introduction of TrumpRx, a government-backed program that allows people to pay cash for medicines rather than going through insurance or middlemen.
For example, GLP-1 medications (such as popular weight-loss and diabetes drugs), which are currently very expensive, could be available for a flat cash price of 199-350 USD per month under TrumpRx. If a patient can get their life-saving meds cheaper through a government cash-pay system than through their own insurance, the value of having that insurance will start to disappear. If more patients choose to pay out of pocket, insurance companies will lose both money and visibility into how people are being treated.

Insurance status	Value assessment	Impact
Uninsured / underinsured	High value	Provides direct access to life-saving drugs (e.g., GLP-1s, speciality meds) previously out of financial reach due to lack of coverage.
High-deductible plans (HDHP)	High value	If a patient has a 5,000 USD deductible, paying the approximately 350 USD TrumpRx cash price is significantly better than paying the 1,000 USD list price until the deductible is met.
Standard employer insurance	Low value	Most individuals with good employer coverage maintain co-pays between 25 and 50 USD, which remains cheaper than the TrumpRx cash price.

Can rural hospitals survive the change?

While all parts of the system are affected, rural hospitals face the most immediate pressure. These hospitals already operate on thin margins. Many depend heavily on Medicaid funding to keep operating. Under OBBBA, the government plans to cut nearly 1 trillion USD from Medicaid over the next 10 years.

For rural hospitals, this is a massive hit. They could lose between 137 billion and 155 billion USD—money they depend on to stay open. In many areas, these hospitals are the only option in an emergency. If they can’t replace this lost funding, many may have to shut down permanently.

To mitigate the impact, the government is establishing a 50 billion USD fund called the Rural Health Transformation Program.

But this money comes with a condition. It’s not meant to support the traditional way of working. Hospitals will only receive this support if they show they are transforming how they deliver care: by adopting technology, expanding telehealth, and finding lower-cost ways to reach patients.

The traditional model, built around large facilities, inpatient care, and manual processes, is becoming too costly to sustain. Running this system now costs more than hospitals can earn from reduced Medicaid funding. As a result, rural hospitals are being forced to change how they operate.

Hospitals need to move from a “bed-first” model to a “digital-first” model, where care is faster, more flexible, and less dependent on physical infrastructure.

This also means reworking how they manage finances and operations, including upgrading systems such as Revenue Cycle Management (RCM) and Provider Lifecycle Management (PLM) to handle new grant-based funding and address a projected 25% increase in uncompensated care. For rural healthcare, this is a turning point.

In simple terms, rural healthcare cannot survive if it continues as it is. It has to transform to stay viable.

Value chain pillar	The old way	The OBBBA reality
Sales & marketing	Focused on growth and expanding membership.	Shifting to retention tools and helping members navigate the "eligibility wall".
Enrollment	Stable, automatic re-enrollment for years.	The churn machine: 6-month checks and work requirements mean 12-15M people could cycle in and out of care.
Provider networks	Reliable reimbursements and predictable networks.	Narrower networks: 1 trillion USD in Medicaid cuts mean hospitals may exit networks or demand higher rates to survive.
Claims & billing	Steady, rule-based processing.	A 20% denial surge: Complexity from eligibility mismatches and shorter windows for backdated coverage.
Care management	Long-term population health and prevention.	High-acuity reactivity: Moving to digital-first and AI-driven tools to manage gaps in care.

The 15–20% rise in claim denials

OBBBA makes the claims process much more complex, especially with new payment rules such as State-Directed Payment (SDP) caps, which are now closely tied to Medicare rates. As a result, claims processing will face greater friction.

We expect a 15% to 20% increase in claim denials in the first two years after OBBBA is implemented.

This will happen mainly for three reasons:

Eligibility mismatches: Patients may receive care while their coverage is temporarily inactive due to missing documents or delays in processing.
Coding complexity: New federal rules must be aligned with state Medicaid rules, making billing more complicated.
Shorter retroactive coverage: The window for backdated coverage is reduced from 90 days to about 30 days.

Most claims systems today are built for a stable, predictable setup. But OBBBA introduces constant changes and exceptions.

Because of this, systems that rely on manual reviews and appeals will struggle to keep up. Healthcare organizations will need more automation—like AI tools and real-time rule engines—to process claims quickly and accurately.

From compliance to resilience

The traditional healthcare model was built for stability, with predictable policies and steady coverage growth. OBBBA changes that.
Now, policies can shift often, and coverage is no longer guaranteed. This is a major structural change for the industry.

For healthcare organizations, this is both a challenge and a turning point.

Those that succeed will be the ones that understand that technology is no longer just a support function—it is critical to staying financially stable.

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