OBBBA: Impact on Medicaid, Legal Immigrants, and ABLE Accounts

The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025. It made sweeping changes to the tax code which impacts individual taxpayers, taxation of trusts and estates, and taxation of businesses. It also made changes to programs like Medicaid (MaineCare in Maine), Medicare, and the Supplemental Nutrition Assistance Program (SNAP). This article will focus on the changes to public benefit programs which primarily benefit individuals who are elderly or disabled.

Medicaid

Medicaid is financed through a combination of federal and state dollars. One of the biggest changes for the Medicaid program relates to the way states finance their share of the program. OBBBA places limits on the options for states to raise funding, for example, by reducing the amount that states may tax healthcare service providers. If states reduce their portion of the funding, they receive less federal funding as a result. With less funding, the states will be required to cut or reduce existing benefits for both individuals and providers, resulting in less access to providers overall.

Starting January 1, 2027, there will be three big changes to Medicaid eligibility and enrollment:

1. Work requirements will be implemented as a condition of eligibility. Please note, there are exceptions for individuals who are disabled or elderly. The work requirements will primarily impact non-disabled adults who are under the age of 65.
2. For this same group of Medicaid recipients, eligibility reviews will be conducted every 6 months instead of every 12 months, and retroactive coverage will be limited to one month prior to the application.
3. For other Medicaid recipients, retroactive coverage will be limited to two months prior to the application.

OBBBA also expands work requirements for SNAP for beneficiaries ages 18 – 64 and caregivers with dependents ages 14 and up. Again, there are exceptions for individuals with disabilities.

Impact on Legal Immigrants

OBBBA restricts the categories of legal immigrants who are eligible for Medicaid, Medicare, and SNAP. Only lawful permanent residents (green card holders), some Cuban and Haitian immigrants, and individuals living in the US through a Compact of Free Association (COFA migrants) will remain eligible. For Medicaid, lawfully residing children and pregnant adults in states that cover them under the existing state plan option will also remain eligible. These new restrictions are effective upon enactment for SNAP, October 1, 2026 for Medicaid, and January 1, 2027 for Medicare.

ABLE Accounts

OBBBA also made permanent certain provisions related to ABLE accounts that were previously temporary:

1. ABLE to Work: Employed ABLE account beneficiaries may contribute more than the annual contribution limit, as long as they do not also have a workplace retirement plan. Currently, the annual contribution limit is $19,000. Employed beneficiaries may contribute an additional $15,650 each year.
2. Saver’s Credit: This is a tax credit available to lower income individuals who make contributions to an ABLE account.
3. 529 Rollovers: This allows unused funds from 529 college savings plans to be rolled over into an ABLE account tax free.