Trump Signed a Law That Could Cut $536 Billion from Medicare - Here's What Beneficiaries Need to Know

Millions of older Americans depend on Medicare to help cover medical expenses in retirement. That is why changes tied to the One Big Beautiful Bill Act (OBBBA) are drawing attention from policy experts and retirees focused on protecting their long-term financial fitness.

While President Donald Trump has repeatedly pledged to protect Medicare, several provisions in the new law could affect parts of the system over time. According to the Congressional Budget Office (CBO), the law was projected to trigger automatic Statutory Pay-As-You-Go Act (PAYGO) sequestration that could have reduced Medicare spending by roughly $45 billion in 2026 alone and about $536 billion through 2034.

However, Congress later canceled those projected Medicare cuts after resetting the statutory PAYGO scorecards. The potential sequestration did not take effect.

Here are the Medicare-related changes beneficiaries should understand.

Automatic Medicare spending cuts were projected for 2026

One of the biggest concerns surrounding the law involved automatic federal spending reductions tied to PAYGO budget rules. Under federal law, legislation that increases deficits can trigger mandatory spending cuts unless Congress intervenes.

The OBBBA was projected to trigger substantial Medicare sequestration cuts of as much as $45 billion in 2026 alone. These reductions would have affected payments to providers and insurers rather than directly reducing standard Medicare eligibility. However, lower reimbursement rates could potentially have affected access, plan offerings, or provider participation over time.

However, those cuts never took effect. The continuing appropriations law that reopened the federal government set the statutory PAYGO scorecards to zero for all years. As a result, no PAYGO sequestration order was required for 2026.

The roughly $45 billion and $536 billion figures therefore represent CBO projections of potential Medicare sequestration under PAYGO, not cuts beneficiaries are currently facing. A separate 2% Medicare sequestration remains in place under existing law.

Some expensive drugs may stay costly longer

The OBBBA also changes parts of Medicare's prescription drug negotiation framework. Specifically, certain orphan drugs — medications developed to treat rare diseases — may remain exempt from Medicare drug price negotiations under revised rules.

Under the new rules, drugs designated for one or more rare diseases or conditions can qualify for the orphan-drug exclusion when their only approved indications are for those rare conditions. The change applies to drug selection beginning in 2026 for negotiated prices available in 2028.

That could mean some high-cost specialty medications remain outside Medicare's price-negotiation program for longer periods. The provision changes the scope of the existing orphan-drug exclusion rather than eliminating Medicare's drug price negotiation program.

The Biden-era Inflation Reduction Act originally expanded Medicare drug price negotiation authority. The OBBBA subsequently changed the rules governing the orphan-drug exclusion.

Extra Help and Medicare Savings Program expansions were delayed

The law also postpones a planned expansion of Medicare assistance programs for lower-income beneficiaries until 2034. 

The affected changes were part of a 2023 CMS rule intended to reduce barriers to enrollment in Medicare Savings Programs, which help eligible low-income Medicare beneficiaries with premiums and cost-sharing. The law prohibits implementation of certain provisions of that rule that had not yet taken effect until Oct. 1, 2034.

The law did not, however, delay the separate Extra Help program itself. Extra Help remains available to qualifying Medicare beneficiaries to help with prescription drug costs.

Nursing home staffing rules may not move forward

Another provision affects nursing home oversight. The law blocks implementation of new federal minimum staffing requirements that had been proposed for nursing homes participating in Medicare and Medicaid until 2034.

The 2024 federal rule included minimum staffing requirements for long-term care facilities. The new law prohibits the federal government from implementing, administering, or enforcing those minimum staffing levels until Oct. 1, 2034.

Dual-eligible seniors could face additional pressure

The law's Medicaid-related changes may also affect seniors who rely on both Medicare and Medicaid coverage. These beneficiaries are known as "dual eligibles."

An earlier CBO estimate for the House-passed version of the legislation projected that about 1.3 million fewer dual-eligible individuals would be enrolled in Medicaid in 2034. However, that estimate was based on the House-passed bill, and KFF notes that the number affected could be lower under the final enacted law.

These beneficiaries often depend on Medicaid to help cover services that Medicare does not fully pay for, including certain long-term care services and other health care costs.

Changes to Medicaid funding, eligibility, and enrollment could affect supplemental coverage in some states. The impact may vary depending on how states respond to the changes and how they implement the provisions.

The administration says core Medicare benefits remain protected

Administration officials have maintained that core Medicare benefits themselves remain intact under the law. Traditional Medicare eligibility, hospital coverage, and physician benefits have not been eliminated.

The OBBBA legislation focuses on broader fiscal and health care changes rather than directly eliminating standard Medicare coverage. However, the indirect effects of some Medicare and Medicaid provisions could still affect beneficiaries over time.

For retirees, the distinction between direct changes to Medicare benefits and changes affecting providers, drug pricing, or Medicaid assistance may matter.

Bottom line

The One Big Beautiful Bill Act (OBBBA) does not eliminate Medicare, but it changes several parts of the health care system that could matter to beneficiaries.

One of the biggest potential changes — the projected Medicare sequestration tied to Statutory PAYGO — was ultimately canceled after Congress reset the PAYGO scorecards. The previously projected $45 billion reduction in 2026 and roughly $536 billion through 2034 therefore did not take effect.

Other changes remain in place, including revisions to the orphan-drug exclusion from Medicare price negotiations, a delay affecting certain Medicare Savings Program rules, a delay in federal nursing home staffing requirements, and Medicaid changes that could affect some people who qualify for both Medicare and Medicaid.

Retirees may want to review their current Medicare coverage, prescription costs, and supplemental senior benefits carefully in the coming years. Staying informed about future rule changes could help you better prepare as Medicare and Medicaid policies continue evolving.

You May Also Like

23 Ways To Get Money Without Getting A Second Job

By FinanceBuzz Editors

How To Save Money on Car Insurance: 12 Ways to Lower Rates

By Elyssa Kirkham

10 Things Seniors Born Between 1941-1969 Could Take Advantage Of

By FinanceBuzz Editors

19 Dumbest Things Smart People Waste Money On

By Team FBZ

7 Moves If You Want to Stop Living Paycheck to Paycheck

By FinanceBuzz Editors

7 Clever Ways to Crush Your Debt

By FinanceBuzz Editors

Up To 5% Cash Back

Discover it^® Cash Back

Benefits Card Details

• Intro APR on purchases and balance transfers
• $0 annual fee
• Apply Now

• Get a 0% intro APR for 15 months on purchases and balance transfers; balance transfer fee applies. Then 17.49% to 26.49% Standard Variable Purchase APR applies, based on credit worthiness
• INTRO OFFER: Unlimited Cashback Match for all new cardmembers. Discover will automatically match all the cash back you’ve earned at the end of your first year! There’s no minimum spending or maximum rewards. You could turn $150 cash back into $300
• Earn 5% cash back on everyday purchases at different places you shop each quarter like grocery stores, restaurants, gas stations, and more, up to the quarterly maximum when you activate. Plus, earn unlimited 1% cash back on all other purchases
• Redeem cash back for any amount. No annual fee
• Terms and conditions apply

4.7

FinanceBuzz writers and editors score cards based on a number of objective features as well as our expert editorial assessment. Our partners do not influence how we rate products.

Apply Now

on Issuer's secure website

Rates and fees

Read Card Review

Intro Offer

INTRO OFFER: Unlimited Cashback Match for all new cardmembers. Discover will automatically match all the cash back you’ve earned at the end of your first year! There’s no minimum spending or maximum rewards. You could turn $150 cash back into $300

Annual Fee

$0

+ -

Why we like it

• The Discover it^® Cash Back is ideal for anyone who loves flexible rewards options.

• Cardholders can redeem their cash back for any amount.

• Earn 5% cash back on rotating bonus categories up to the quarterly maximum when you activate, along with 1% cash back on all purchases. Categories may include places like gas stations, grocery stores, restaurants, and more.

• Apply Now

---

Subscribe Today

Learn how to make an extra $200

Get vetted side hustles and proven ways to earn extra cash sent to your inbox.

or

Subscribe Now →

By submitting this form you agree to receive emails from FinanceBuzz and to the privacy policy and terms