How the One Big Beautiful Bill Act Affects Physician Compensation

The One Big Beautiful Bill Act was signed into law on July 4, 2025, by President Donald Trump. The bill cuts taxes and reduces government spending, particularly in healthcare programs like Medicaid and Medicare. Its goal is to lower the federal deficit while changing how healthcare is funded and delivered across the U.S. These changes could lead to tighter hospital budgets and greater pressure on physician pay, particularly in lower-income and rural areas.

Cuts to Medicaid

A 15 percent reduction in federal Medicaid funding, estimated at nearly $1 trillion over ten years, could result in lower reimbursement rates for physicians treating Medicaid patients, the largest of these cuts going into effect in 2027. The bill also tightens eligibility requirements for both Medicaid and Affordable Care Act (ACA) subsidies. According to the Congressional Budget Office (CBO), these changes could increase the number of uninsured Americans by 16 million by 2034. As a result, healthcare providers may face an estimated $36 billion in uncompensated care costs, which could indirectly negatively affect physician compensation.

2.5% Increase to the Medicare Physician Fee Schedule

Provides a one-year 2.5 percent increase to the Medicare Physician Fee Schedule. On July 14, 2025, the Centers for Medicare & Medicaid Services (CMS) released the proposed 2026 Medicare Physician Fee Schedule and Quality Payment Program rule, which incorporates this requirement along with additional increases. Most physicians would see an average 3.6 percent increase in the conversion factor, while qualifying Alternative Payment Model (APM) participants would receive an average 3.83 percent increase. However, many sources claim the proposal does not address the long-term instability of the Medicare payment system.

$50 billion to Rural Hospitals

Allocates $50 billion to the Rural Health Transformation Program, which will be available in 2026, aimed at stabilizing rural hospitals and improving access to care. While this may have an indirect impact on physician compensation, the effect will vary by state depending on how funds are distributed. States may choose to allocate funding toward base salary increases, recruitment and retention bonuses, or expanded benefits. However, anticipated Medicaid cuts are still expected to lower physician income in underserved areas due to fewer covered patients and tighter budgets.

Permanent Pre-Deductible Telehealth Coverage

OBBBA permanently reinstates the "telehealth safe harbor," retroactively effective to plan years beginning on or after December 31, 2024. This allows HDHPs to cover telehealth and other remote care services before the deductible is met without affecting the individual's HSA eligibility.

Health Savings Account

The One Big Beautiful Bill (OBBBA) allows Direct Primary Care (DPC) arrangements to be compatible with Health Savings Accounts (HSAs), effective January 1, 2026. This means that individuals can use their HSA funds to pay for DPC services without jeopardizing their HSA eligibility. The bill also specifies that DPC fees, up to certain limits ($150/month for individuals, $300/month for families, indexed for inflation), are considered qualified medical expenses that can be paid for with HSA funds.