EXPLAINER: How the Tax Bill Impacts Your Health Care, in Bite-Size Terms

UPDATED July 3, 2025 — The Trump tax cut bill passed 51-50 in the U.S. Senate session earlier this week, with Republican Senators Susan Collins of Maine, Rand Paul of Kentucky and Thom Tillis of North Carolina joining Democrats to vote no. It passed the House 218-214 on July 3. It is estimated it will increase deficits by around $3.4 trillion over the next ten years, while increasing the budget for ICE deportations.

The following is a story to explain the implications on physical and mental health care.

Photos from a July 1 public rally outside the Minnesota Department of Health building in St. Paul (photos by Olivia Worcester).

The House Reconciliation Bill or HR1 — referred to as the “One Big Beautiful Bill” by Republicans — has significant impacts on federal programs like Medicaid and the Supplemental Nutrition Assistance Program (SNAP). In Minnesota, 1.16 million people depend on Medicaid for health coverage; an additional 454,000 Minnesotans receive food assistance on SNAP. HR1 would cut funding to these programs nationwide, making work requirements for receiving Medicaid much stricter — with a much more burdensome process of red tape — and discontinue enhanced premium tax credits, which help middle to low-income families afford Medicaid. 

We talked with local advocates who explained the impact in simple terms if these changes happen: Laura Mortenson,  communications director for the Minnesota Budget Project, helps oversee the organization’s primary policy areas, including affordable health care; Sue Abderholden, executive director of the Minnesota National Alliance on Mental Illness (NAMI), has worked in mental health advocacy for 24 years. 

Both women talked with us about the basics of Medicaid’s functions, how its existence is essential for millions of Minnesotans and why these changes would be detrimental to most Americans. 

What does Medicaid do?

Medicaid, known as ‘Medical Assistance’ in Minnesota, provides individuals with access to affordable health insurance. Started almost 60 years ago, it supports access to health care in all 50 states, and functions as a shared partnership where the federal government pays a certain percentage for funding healthcare; state governments make up the cost difference. 

“Between a partnership of the federal government and states, we should have at least a baseline access to health care so that folks have medicines that they can afford,” says Mortenson. “They can afford to go to the doctor. If they are pregnant, they have care through that pregnancy. Babies have care those first few years after being born.” 

Importantly, while programs like Medicare pay for health care for people 65 and older, Medicaid is specifically designed for additional needs that fall outside of Medicare. 

States have taken varied paths to extend that health care to other people. For example,  after the Affordable Care Act (ACA) passed in 2010, states could use Medicaid waivers in different ways to extend health coverage for more people. “There’s a strict income ceiling for people who can access Medicaid, for folks who are not disabled, and folks who are not older. So states can use their own resources to meet other folks’ needs,” Mortenson explains. There can still be gaps to fill to access preventative care, annual visits, medications and mental health care.

Abderholden adds, “Medicaid is one of the largest funders of mental health treatment and services, partly because, honestly, mental health parity is still a dream and not a reality. So many people have to turn to Medicaid in order to get the treatment and services they need to be well in the community.”

Why is Medicaid being targeted?

“I think that it’s viewed as an easy target,” Abderholden says. “Some people say, ‘Oh, Medicaid, it’s for poor people in the cities,’ but it’s not. It’s throughout the whole state of Minnesota. Sometimes the percentage of the population that’s on Medicaid is higher in rural areas.” 

Hospitals in rural areas rely heavily on Medicaid, Abderholden continues. “If they lose that [payment option] because they have more people who are uninsured, and they have higher uncompensated care, those hospitals will close. Then people on private insurance are also impacted, because now they’ve lost access.” 

“You don’t realize the extent that hospitals and nursing homes in rural parts of our states are more vulnerable to these cuts and can’t make up for the cuts,” Mortenson adds. “When the federal government doesn’t hold up their part of the shared bargain of paying for care for the most vulnerable populations of low-income folks, people with disabilities, and older folks needing care in a nursing home or in their homes, the states and nonprofits and private systems don’t have enough funds to make up for that care.”

Much of the stated justification for cutting funds is to prevent fraud and abuse. Yet “every state has a fraud and abuse program for Medicaid,” Abderholden says. “There’s a federal fraud and abuse program. The managed care companies also are watching for fraud and abuse as well.” 

Mortenson cites a statistic provided by the Center on Budget and Policy Priorities. a nonpartisan research and policy institute. “A 60-year old Minnesota couple making about $82,000 would see their annual premiums for a basic plan increase from about $7,000 annually to $18,000 annually.” 

Sue Abderholden, director of National Alliance on Mental Illness Minnesota. (photo Sarah Whiting)

How will Medicaid users be impacted by these federal changes?

“I think one of the biggest impacts will be the work requirements, and that’s because a lot of people with mental illnesses struggle to become certified as disabled by the Social Security Administration,” Abderholden says. “It takes about eight months to process an application, and that was before the cuts to the Social Security Administration. Over 70 percent of first-time applications are denied, so then you have to appeal, and sometimes submit a new application. It can take three to four years. So when they say only people who are ‘able-bodied’ will be required to go to work, that’s not going to help.”

According to Abderholden, when Medicaid expansion was adopted in Minnesota, a lot of young people with mental illnesses qualified for coverage without needing to take the long route of becoming certified as disabled. “They didn’t have any money, under $20,000 a year, basically. They were able to access the treatment and the medications they need.”

Many mental illnesses manifest between teenage years and before the age of 30. Says Abderholden, “A first episode of psychosis, even with the intensive programs that we have in Minnesota, it can still take two years before they’re ready to work. Those teams actually have someone to help that young person get back to school or work.”

It also should not be the goal, she continues, to send a 21-year-old to get certified by the Social Security Administration as disabled and unable to ever work again. “I just think that’s a horrible thing to do. We want people to have the health care they need in order to do well in the community. I am, frankly, really worried about that.”

Even if a process is created to help young people with mental illness be diagnosed and treated with an exemption from the federal requirement that they be working in order to qualify for benefits, Abderholden adds, “My guess is that process is going to be complex. Even to get all the paperwork and medical records to become certified as disabled, you need insurance to pay for those different exams. I think it will hit the mental health community very hard.”

Why this is important to discuss 

Many people who are currently on Medicaid may not even know it. The federal Medicaid program has a different name in every state: for example, ‘Medical Assistance’ in Minnesota, or ‘Badger Care’ in Wisconsin.

Mortenson notes that HR1 does not make health care more affordable for anybody. “Instead, it just makes getting health insurance through Medicaid much more difficult. It increases costs for people who get health insurance through the ACA marketplace. It shifts many costs back to the states.”

Calls to action

On Tuesday, July 1, Indivisible Twin Cities hosted a Defend Public Health rally at the Minnesota Department of Health Building near the Saint Paul Capitol. 

Speakers included the parent of a child with an immune-deficiency disorder, who fears for their medical coverage; Medicaid enabled the family to pay for e life-saving surgeries. Other community members, including doctors and a former Commissioner of the Minnesota Department of Health,, spoke out against the legislation. 

Organizer Kate Havelin closed the rally with a call to action, encouraging those in attendance to call U.S. Representatives Brad Finstad (202-225-2472) and Pete Stauber (202-225-6211) to urge them to vote against the bill.

“Showing up is great,” Havelin stated, “but sometimes we need to do more.” 

The vote this week would impact funding cuts that would take effect in January 2027, after the mid-term elections — likely a presumption that voters in some areas won’t know what effect this bill has on their lives until after they have re-elected people who voted for it.

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