Healthcare Changes in the New Tax Law: HSAs Expand, But Medicaid Faces Major Cuts

When new tax laws make headlines, most people think about refunds, deductions, or child credits. But buried in the fine print of the One Big Beautiful Bill are some major changes that affect something even more personal:

Your health care.

Some updates offer more flexibility for people with private insurance. Others bring significant reductions to safety-net programs like Medicaid — changes that could impact millions of families over the next decade.

Let’s break it down in plain language.

✅ Health Savings Accounts (HSAs): More People Can Qualify Starting in 2026

Health Savings Accounts have long been one of the most powerful tools for saving on medical costs.

They come with what’s often called a triple tax advantage:

• Contributions are tax-deductible

• Growth is tax-free

• Withdrawals for qualified medical expenses are tax-free

That part remains unchanged.

What is changing?

Starting in 2026, the law expands who can contribute to an HSA.

New Eligibility: Bronze and Catastrophic ACA Plans Now Count

Before this law, you generally needed a traditional high-deductible health plan (HDHP) to qualify.

That excluded many people enrolled in:

• ACA Bronze plans

• Catastrophic marketplace plans

Now, those plans will be treated as HSA-eligible.

Real-life example

Maria is self-employed and buys a Bronze plan through Healthcare.gov because it’s the only affordable option. Until now, she couldn’t open an HSA.

Starting in 2026, she can contribute pre-tax dollars to an HSA and use that money for doctor visits, prescriptions, or unexpected medical bills.

That’s a meaningful win for gig workers and families buying insurance on their own.

Telehealth and Direct Primary Care Are Now HSA-Eligible

Another big update: HSAs can now permanently cover expenses that modern healthcare actually uses.

Starting in 2026, qualified expenses include:

• Telehealth visits

• Direct primary care membership fees

Real-life example

If you pay $75/month for a virtual primary care subscription or use telehealth for therapy or urgent care, you can now pay for those services using tax-free HSA funds.

That’s especially helpful for rural families or busy parents who rely on virtual care.

What Didn’t Change: Medicare Still Excluded

One thing many hoped for — expanded HSA eligibility for Medicare enrollees — was not included.

So if you're on Medicare, you still cannot contribute new money into an HSA, even though you may use existing funds.

⚠️ Medicaid Cuts: The Largest Reduction Since 1965

While HSAs are expanding, the same legislation includes the most sweeping cuts to Medicaid in the program’s history.

Medicaid is the primary source of health coverage for:

• Low-income families

• Seniors in nursing care

• People with disabilities

• Rural residents

• Children in vulnerable households

Funding Reductions

Over the next decade, Medicaid funding is projected to shrink by:

18% — roughly $600 to $800 billion

The Congressional Budget Office estimates that:

10 to 12 million people could lose Medicaid coverage in the next 10 years.

New Work Requirements

Most adults — including parents of children age 14 and older — will be required to work at least:

80 hours per month

To keep coverage.

Real-life example

James is a single dad working part-time while caring for his teenager. Under the new rules, if his hours fluctuate or paperwork is delayed, he could lose coverage even though he’s still working.

More Frequent Eligibility Checks

States must now reassess Medicaid eligibility every:

6 months instead of once a year

That means more paperwork, more administrative hurdles, and a higher risk of people being dropped due to technical issues.

Higher Out-of-Pocket Costs

States may impose co-pays of up to:

5% of household income

And require monthly income verification.

Real-life example

For a family living paycheck to paycheck, even small co-pays can mean delaying doctor visits or prescriptions.

SNAP Cuts: Healthcare’s Silent Partner

Although SNAP is a food program, it directly affects health.

Food insecurity increases risk for:

• Diabetes

• Heart disease

• Childhood developmental issues

• Mental health struggles

The bill cuts SNAP funding by about:

20% — roughly $230 billion over 10 years

Work requirements expand to adults up to age 64 and parents with children 14+.

Advocates warn these changes could push millions into deeper food insecurity.

The Big Picture: A Split System

This law creates a clear divide:

For middle-income families with private insurance:

✔ More access to HSAs

✔ Expanded eligible healthcare expenses

✔ More flexibility in how care is paid for

For low-income families relying on Medicaid and SNAP:

⚠ Reduced funding

⚠ More work requirements

⚠ Increased administrative barriers

⚠ Higher likelihood of losing coverage or assistance

What You Can Do Now

Here are practical next steps:

If you have an ACA Bronze plan:

• Ask in 2026 whether you can open an HSA

If you already have an HSA:

• Consider using it for telehealth or primary care memberships

If you or someone you love relies on Medicaid:

• Stay alert for new reporting rules

• Expect more frequent eligibility checks

If you work with vulnerable populations:

• Prepare for increased gaps in coverage and care access

Final Thoughts

Healthcare changes in this bill are a mix of opportunity and concern.

HSAs are expanding in ways that reflect modern care — telehealth, direct primary care, marketplace plans.

But Medicaid and SNAP cuts may leave millions facing harder choices about basic health and survival.

As always, the key is understanding what applies to your household and planning ahead — because healthcare policy isn’t abstract.

It shows up in real life: prescriptions, doctor visits, groceries, and peace of mind.