We are proud to announce the addition of The Innova Group to the Healthcare Practice at Forvis Mazars.
The One Big Beautiful Bill Act (OB3), signed into law on July 4, 2025, marks a pivotal shift in Medicaid policy. For Tribal health organizations, the stakes are immediate: the new law will reshape the funding pipeline that underpins clinics, workforce, and community health outcomes.
Tribal health organizations stand to be significantly impacted by the new law on two fronts. First, OB3 cuts federal spending on Medicaid by roughly $1 trillion over 10 years, meaning payments to hospitals, clinics, or nursing facilities will decrease in the coming years. Medicaid is a critical source of revenue for Tribal health organizations, making up more than 60% of a facility’s budget in some cases. The federal government reimburses states 100% of payments made to Indian Health Service (IHS) and Tribal health facilities for Medicaid-eligible patients, but this will not shield Tribal systems from the effects of overall program cuts. This will directly impact a Tribal health organization’s budget and bottom line.
The second issue is access. OB3 significantly reduces the number of people eligible for Medicaid, which will have a disproportionate impact on Tribal health organizations. Nearly three million1 Native Americans are enrolled in Medicaid or the closely related Children’s Health Insurance Program (CHIP). The Kaiser Family Foundation2 estimates that 35% of non-elderly patients, including 52% of children, served by Tribal health entities are insured through Medicaid or CHIP. In many Tribal organizations, Medicaid currently accounts for about two-thirds of third-party revenue.3 Tribal members also rely on Medicaid to afford care beyond the Tribal clinic without going into significant debt.
How Will OB3 Medicaid Cuts Affect Tribal Health Organization Finances?
Cuts to Medicaid eligibility and Medicaid access will impact the financial health of a Tribal health organization. Medicaid reimbursements, as outlined in the Memorandum of Understanding between the CMS and IHS, have not been specifically targeted. However, patients’ eligibility to qualify for Medicaid has been. The IHS Federal Register notice for calendar year 2026 includes the following published rates:
IHS CMS Reimbursement Rates, CY 2026
| Lower 48 States | Alaska | |
|---|---|---|
| Inpatient Hospital Per Diem Rate (Excludes Physician/Practitioner Services) | $5,707 | $5,208 |
| Medicare Part B Inpatient Ancillary Per Diem Rate | $1,289 | $1,617 |
| Outpatient Per Visit Rate (Excluding Medicare) | $826 | $1,222 |
| Outpatient Per Visit Rate (Medicare Only) | $733 | $1,233 |
| Outpatient Surgery Rate (Medicare) | Established Medicare rates for ambulatory surgery centers (ASCs) | |
These reimbursement rates (or encounter rates) are considered all-inclusive, and all ancillary services provided to the patient during that visit, such as laboratory work, radiology, or pharmacy visits, are covered as part of the all-inclusive rate. At the same time, Medicaid patients may have multiple encounters on a given day. For example, if a patient visits the clinic for an appointment with a primary care physician for an annual wellness exam and then sees a dermatologist, the visit will be counted as two separate encounters. Each state’s Medicaid agency regulates the maximum number of encounters per day, typically ranging from three to five reimbursable encounters per day.
Which OB3 Provisions Will Have the Greatest Impact on Tribal Health?
Based on our experience and analysis of the OB3 provisions, we have categorized the risks to Tribal health organizations by likelihood of financial impact. Higher risks have the potential to be more financially detrimental to Tribal healthcare organizations. Mixed risks contain both positive and negative effects. Lower risks are still worth tracking; however, at this time, we believe their impact on budgets and bottom lines to be minimal.
Highest Risk: Access
The most significant impact of the law on Tribal health organizations comes from the numerous provisions that reduce the number of adults who qualify for Medicaid, particularly in Medicaid expansion states. The legislation limits eligibility in several ways.
First, it is now unlawful for Medicaid-insured undocumented immigrants to remain enrolled. This will create more uninsured patients for clinics that have been serving undocumented patients. Second, adults aged 19 to 67 who are in the expansion group (those residing in states that have adopted Medicaid expansion under the Affordable Care Act (ACA) and have incomes between 100% and 138% of the federal poverty level) must meet new work requirements. The bill includes provisions that exempt Native Americans from this additional requirement; however, for clinics serving non-Native beneficiaries, this requirement could be significant.
Another significant impact on clinics’ financial sustainability is the provision that requires states to impose cost sharing of up to $35 per service to Medicaid expansion adults with incomes between 100% and 138% of the federal poverty level beginning October 1, 2028. While most Tribal clinics provide only primary care and behavioral health services, which are exempt from the requirement, those clinics with visiting specialists will be affected.
On a positive note, this could result in fewer Native beneficiaries seeking healthcare services from non-Tribal community clinics. However, it could also result in increased Purchased/Referred Care (PRC) expenditures, affecting the Native beneficiaries’ referrals to outside specialists.
Premiums serve as a barrier to obtaining and maintaining Medicaid coverage for low-income individuals. Cost sharing is also associated with reduced use of care, poorer health outcomes, and increased medical debt. The copay could force many currently enrolled patients to defer or postpone care, potentially impacting their future eligibility. The added fee could also burden clinic staff, who will need to be trained to check upfront eligibility and implement more aggressive upfront payment practices or back-end collection practices.
Native Americans are exempt from the new requirement that a patient’s Medicaid status be verified at least biannually to remain eligible for coverage.
Mixed Risk: Program Cuts
Tribal healthcare systems are not exempt from the overall Medicaid funding cuts; therefore, these reductions may force difficult decisions regarding staffing, services offered, and program growth.
On the positive side, the bill offers Tribal healthcare organizations the opportunity to apply for funds through the Rural Health Transformation Program (RHTP), a federal-level program that makes $50 billion available from 2026 through 2030 to support more effective and sustainable rural healthcare across the country. However, this funding is unlikely to fully offset Medicaid losses.
Existing Medicaid cost-sharing exemptions for services through IHS, Tribal, or urban Indian health providers remain in place.
Low Risk: Encounter Rates
OB3 gives no indication that the IHS/CMS negotiated encounter rate will be reduced or changed. Similarly, we do not expect the definition of what constitutes a Medicaid-reimbursable encounter to change. In addition, because they are covered through other federal programs, clinics should not expect to see any changes to the number of Medicaid-eligible children and pregnant women.
How Will OB3 Affect Long-Term Care Reimbursement for Tribal Health Organizations?
The most significant financial impacts of OB3 on Tribal health organizations will come from serving fewer Medicaid-eligible patients. Reimbursement rates for Tribal health organizations generally are not affected by this legislation, but the one exception is long-term care. While long-term care is not a covered benefit with IHS, some tribes provide these services using their own Tribal funds. Tribal health organizations typically fund this care through “enhanced” reimbursement rates, a mechanism employed by specific states that have modified federal reimbursement rates to benefit service lines or groups of facilities. Under OB3, those reimbursement rates will return to federal rates.
For example, in Arizona, regular Medicaid pays an average of $422 per day for long-term care patients. With Arizona’s enhanced long-term care reimbursement to Tribal organizations, the average per-day rate jumps to $725 for Tribal nursing homes. With decreased reimbursement, the financial burden of operating these Tribal nursing homes will fall to the tribes.
To illustrate the potential impact, we recently assisted with a financial feasibility study for a proposed new nursing home for a Tribal organization, which showed that 80% of the revenue generated by the nursing home comes from Medicaid. With a $725 per-day rate, a 60-bed facility would have a positive annual cash flow; however, it would not be sufficient to completely retire the debt needed to build the facility. With the decrease to $422 per day, this facility would result in a net negative or zero annual cash flow from operations.
Making Strong Financial Decisions in Response to OB3 Changes
The passage of OB3 signals a new era of challenge and change for Tribal health organizations. Medicaid funding cuts and shifting eligibility requirements threaten to erode the financial stability that underpins quality care for Native communities. The likely rise in uninsured patients and the mounting administrative demands on clinics underscore the urgency for decisive, strategic action.
In this environment, a robust strategic financial plan is not just prudent—it is essential. Such a plan helps Tribal leaders:
- Anticipate & Manage Risk: By modeling various funding and reimbursement scenarios, organizations can proactively identify vulnerabilities and prepare targeted responses.
- Align Priorities & Resources: A detailed plan helps bring clarity and cohesion to align investments and initiatives with the tribe’s mission and long-term goals.
- Support Informed Decision Making: Data-driven analysis provides a framework for evaluating growth opportunities, improving resource allocation, and avoiding misaligned investments.
- Strengthen Advocacy: Clear financial projections and risk assessments empower Tribal leaders in negotiations with federal and state partners, reinforcing the case for sustained support.
How Forvis Mazars Can Help
We support Tribal health organizations through a multistage strategic financial planning process. The first step is conducting data-rich analyses that inform the clinical future over both the short and long term. Our work strikes a balance between data-driven rigor and intuitive, experience-backed thinking, honoring Tribal realities while helping organizations provide care in settings that align with patient needs and organizational priorities.
We help organizations establish enterprisewide financial goals with an understanding of how to balance their capital needs with capital sources. We also help organizations develop service line strategies to improve access, quality, and cost. We also assess provider needs to help address supply and demand imbalances and support aligned growth strategies across specialties and geographies.
If you have questions about the impact of OB3 on your organization or need assistance with your strategic response, please reach out to our team today.
- 1“An Overview of the Impact of Medicaid on Health Care of American Indians and Alaska Natives,” ncuih.org, 2023.
- 2“Health and Health Care for American Indian or Alaska Native People: Key Issues,” kff.org, December 19, 2025.
- 3“Tribal Health Leaders Say Medicaid Cuts Would Decimate Health Programs,” kffhealthnews.org, March 19, 2025.