Study Finds Arizona Uniquely Hit by OBBBA Medicaid Reforms

The One Big Beautiful Bill Act (OBBBA) of 2025 made heavy cuts to the bottom line of state Medicaid programs through a number of small directives aimed at curbing federal spending. Most obvious is the implementation of work requirements for Medicaid eligibility, but state-directed payments and provider taxes are also under reform. A new study analyzes the impact this series of policy changes will have on individual states.

In total, state Medicaid funds will be reduced by $665 billion from 2025 to 2034, according to the RAND analysis published late last week called “State-level Impacts of Key Medicaid Provisions in the One Big Beautiful Bill Act.” Notably, it found that states that authorized Medicaid expansion that rely heavily on state-directed payments — states like Arizona — will be at risk of seeing reductions up to 15% of their total Medicaid funds. In total, 26 states can expect to see reductions of 5% or more.

Subsequently, the study anticipates that Arizona will rank sixth among states and the District of Columbia for estimated percentage change in Medicaid enrollment anticipated by 2034, with Arizona losing over 17% of its enrollees.

Adjustments to the provider tax provision in the OBBBA are anticipated to lose states $139 billion in aggregate for State Medicaid funds and state general funds for the period between 2025 and 2034. Arizona is anticipated to lose 4% of its provider tax budget, all of which comes from hospitals.

On Wednesday, the Paragon Health Institute published a study of its own on provider taxes, arguing that the system has facilitated rising health insurance premiums by tying Medicaid reimbursements to commercial insurance rates. It notes California as an extreme example, and compares prices between 2008 and 2012, at a period when the state implemented the taxes and found that although hospital prices were already on the rise after 2008, the inflationary increase remained consistent after the tax was implemented.

Last week, the American Hospital Association filed an amicus brief in a case filed in the U.S. Fifth Circuit Court of Appeals on the subject of Medicaid financing and provider taxes filed by the state of Texas against the U.S. Department of Health and Human Services and the Centers for Medicare and Medicaid Services (CMS). The AHA argues that the agency purposely disregarded federal statute on guaranteed arrangements for payments and improperly expanded the scope of “hold harmless” in a 2023 informational bulletin on healthcare-related taxes.