TOPLINE:
The One Big Beautiful Bill (OBBB) drastically restricts federal taxpayers’ tab for improper payments in the two largest state-administered federal welfare programs: Medicaid and Food Stamps (SNAP).
BACKGROUND:
The federal government issued $1.9 trillion in improper payments over the past decade, including $184 billion—roughly $1,400 per household—in FY 2025 alone. Actual amounts are significantly higher—Medicaid, for example, may have had $541 billion more than reported over the past decade. Improper payments are especially high in state-administered programs because states are detached from the costs, shielded from the consequences, and rewarded for increasing spending rather than safeguarding taxpayers’ dollars.
What OBBB Does in Medicaid:
- Requires states, by the end of 2026, to conduct eligibility redeterminations every six months instead of every 12 months for “expansion enrollees,” who are able-bodied adults without dependents, and for whom the federal government pays 90% of Medicaid costs.
- Restricts states, beginning in 2030, from receiving “good faith” waivers for their eligibility-related improper payments that exceed three percent.
What OBBB Does in Food Stamps:
- Requires states, beginning in 2028, to pay for a portion of SNAP benefits when their improper payments exceed specified thresholds.
- Increases states’ share of administrative costs from 25% to 50%, beginning in FY 2027.
Why It Matters?
- Improper payments are enormous, incentives are misaligned, and taxpayers should not have to pay for fraud, abuse, and reckless errors.
- CBO estimated 10-year savings of $62.6 billion from Medicaid redeterminations, $7.6 billion from waiver restrictions, and $68.6 billion from SNAP cost sharing.
Where Can I Find Changes?
OBBB Sections 10105, 71106, and 71107; 7 U.S.C. § 2025 and 42 U.S.C. § 1396a–b.
BOTTOMLINE:
Thoughtful improvements to the business tax code—like changing how the limitation on business interest is calculated to not penalize investment—are helping drive the economic successes of the One Big Beautiful Bill.
This memo is part of the One Big Beautiful Booklet, a collection of more than 60 memos that examine and summarize the major aspects of the One Big Beautiful Bill – the signature legislative achievement of President Trump and the 119th Congress.
