A wide-ranging bill passed by the House of Representatives and currently being debated in the Senate could reshape key aspects of Medicare, the federal health insurance program serving nearly 68.5 million Americans.
Officially titled the One Big Beautiful Bill Act, the legislation outlines four significant modifications that touch on savings accounts, rural hospital classifications, payment integrity, and beneficiary eligibility.
According to Kiplinger, these proposed changes form part of a broader fiscal strategy tied to automatic budget controls. If approved without amendment, the bill would also reduce Medicare funding by 4%, amounting to roughly $500 billion in cuts over eight years starting in 2026.
Working Seniors Could Continue Hsa Contributions Under Proposed Rule
Among the bill’s most significant provisions is a change to the rules governing Health Savings Accounts (HSAs) for older Americans. Under current law, individuals who enroll in Medicare Part A are no longer eligible to contribute to an HSA, even if they are still working and covered under a high-deductible health plan (HDHP).
The proposed legislation would allow working seniors enrolled in both Medicare Part A and a qualified HDHP to continue contributing to their HSA accounts. This shift would provide greater financial flexibility for older workers who wish to set aside funds for medical expenses.
The bill also includes increased HSA contribution limits for lower-income households. Individuals earning less than $75,000 annually would be permitted to contribute an additional $4,300, while families earning under $150,000 could contribute up to $8,550 annually. These amounts would be adjusted for inflation over time. The added contributions would phase out at $100,000 for individuals and $200,000 for families.
The expanded use of HSAs could help retirees manage costs such as Medicare premiums and co-pays, which are eligible expenses under existing HSA rules.
Rural Emergency Hospital Program May Expand
The legislation also seeks to address the closure of rural hospitals, which has become an ongoing concern in underserved communities. Between 2005 and 2023, 146 hospitals in rural counties across the United States closed entirely, and 81 others transitioned to non-acute care facilities.
The bill would amend eligibility for the Rural Emergency Hospital (REH) designation under Medicare. As of now, only hospitals enrolled in Medicare as of December 27, 2020, can apply for REH status.
The new provision would expand eligibility to include hospitals that were open at any point between January 1, 2014, and December 26, 2020, but have since closed.
This retrospective provision could potentially enable shuttered hospitals to reopen with REH status, allowing them access to federal funding and potentially restoring medical services in regions that have lost acute care access.
AI-Based Audits Would Target Medicare Advantage Overpayments
The bill introduces a new initiative to combat Medicare overpayments, especially within the Medicare Advantage program.
It allocates $25 million to the Department of Health and Human Services, authorizing the Secretary to contract with AI developers and data scientists to identify and recover improper payments.
This effort builds on a broader campaign within the Centers for Medicare & Medicaid Services (CMS) to address billing errors and fraud. The CMS has already launched an audit process aimed at reviewing every Medicare Advantage plan and eliminating the current backlog by 2026.
According to the bill, the Secretary must also submit progress reports to Congress detailing how AI tools are being used to reduce waste and improve the integrity of Medicare payments.
Medicare Eligibility Rules Clarified for Non-citizens
Another provision in the bill refines who may receive Medicare benefits. While the current law excludes undocumented immigrants, the proposed legislation provides a more detailed framework specifying which non-citizens can qualify for the program.
The bill reaffirms the standard eligibility requirements: to enroll in Medicare, an individual must be 65 years old, have worked in the U.S. for at least 10 years, and either be a U.S. citizen or have lived in the country as a permanent resident for five consecutive years.
The bill further limits eligibility to Lawful Permanent Residents, certain categories of Cuban immigrants, and individuals from Micronesia, the Marshall Islands, and Palau, who reside in the U.S. under Compacts of Free Association agreements.
