Arizona’s Medicaid System Could Collapse
‘One Big Beautiful Bill’ would gut Medicaid, end coverage for 500,000 Arizonans, and push half the state’s hospitals into the red.
The U.S. Senate on July 1 narrowly passed the “One Big, Beautiful Bill,” a sweeping Republican-backed budget and tax package that slashes Medicaid by more than $900 billion — threatening to dismantle Arizona’s Medicaid expansion and devastate the state’s hospital system, especially in rural and tribal communities.
Vice President J.D. Vance cast the tie-breaking vote after 27 hours of negotiations, with three Republicans defecting (Tillis, Paul, Collins) and every Democrat opposing the measure. The legislation, a centerpiece of President Donald Trump’s second-term agenda, now heads back to the House for final approval.
While Senate GOP leaders made last-minute changes to comply with budget reconciliation rules, the final bill preserves deep Medicaid cuts that experts warn could push millions of Americans off health coverage — and unravel Arizona’s safety-net system in the process.
Republican lawmakers have defended the bill as a necessary step to curb federal spending and promote long-term sustainability, arguing that it reins in waste while preserving safety net programs for those most in need.
More than two million Arizonans rely on Medicaid, including 40% of the state’s children. That lifeline is now in jeopardy due to a little-known 2013 Arizona law requiring the state to end its Medicaid expansion if the federal match rate falls below 80%.
What is Arizona’s Medicaid trigger law?
A 2013 state law requires Arizona to roll back its Medicaid expansion if the federal government ever covers less than 80% of the cost. The current match is 90%. Under the new bill, it would drop below 80% by 2031. That would freeze new enrollment and eventually kick hundreds of thousands off the program — unless the Legislature acts.
New enrollment could freeze as early as 20271 once the match dips below 80%.
Under current law, the federal government pays 90% of expansion costs. A 2013 Arizona law requires the state to end its Medicaid expansion if that match rate falls below 80%. While H.R. 1 includes deep Medicaid cuts, it does not lower the federal match rate — a proposed amendment to do so was ultimately left out of the final bill. Still, advocates warn that similar provisions could reappear in future legislation, and that the law remains a looming threat unless repealed.
The Congressional Budget Office projects the bill would reduce federal Medicaid spending by more than $900 billion over the next decade, with up to 17 million Americans potentially losing coverage if states scale back enrollment or eligibility in response.
Despite the looming impact, Arizona’s GOP-controlled Legislature failed to repeal or amend the trigger this year. No such proposals were introduced during the session.
The bill also limits the use of “provider taxes,” a critical mechanism states use to draw down federal dollars. While the House bill sought to freeze provider taxes at current levels and prohibit new ones, the Senate’s version lowers the allowable threshold from 6% to 3.5% — a move that could strip $2 billion from Arizona hospitals by 2032, according to the Arizona Hospital and Healthcare Association (AzHHA).
That provision nearly got tossed. The Senate parliamentarian ruled against the initial language, but GOP leaders adjusted the proposal’s timeline to phase in cuts more gradually. While the final rate remains at 3.5%, the implementation now extends to 2032.
“This is a life-or-death issue for our communities.”
— Jackie Lundblad, CEO of Wickenburg Community Hospital, on how Medicaid cuts in the 'One Big Beautiful Bill' could shutter rural hospitals and delay emergency care for vulnerable patients.
To soften the blow, the bill includes a $25 billion rural hospital stabilization fund. Still, AzHHA warns that average hospital operating margins would plummet from +6.1% to -1.5%, pushing over half of the state’s hospitals into the red.
“Without these supplemental payments, many hospitals would face immediate and difficult choices, including scaling back essential services or closing entirely,” AzHHA CEO Ann-Marie Alameddin, and other health care leaders, wrote in a June 12 letter to Senate Republican leadership.
That’s already a looming reality for some rural providers. Jackie Lundblad, CEO of Wickenburg Community Hospital, told AZFamily in April that losing Medicaid expansion would force some hospitals to shut down entirely, potentially requiring patients to travel an additional 40 miles or more to reach emergency care.
Rural and tribal providers say the cuts would devastate care in already underserved areas. “This is a life-or-death issue for our communities,” Lundblad said.
Dave Cheney of Northern Arizona Healthcare emphasized the disproportionate burden on tribal populations, while leaders from community clinics warned of mass disruptions to behavioral health, prenatal care, and chronic illness treatment.
“This plan puts that lifeline at risk,” said Amy Taylor of Mariposa Community Health Center.
And Arizona’s largest coalition of behavioral health and social service providers is sounding the alarm. The Arizona Council of Human Service Providers warned that deep Medicaid cuts, the elimination of essential benefits, and new administrative hurdles like work reporting requirements would gut care for the state’s most vulnerable — from people with disabilities to families in crisis.
“This bill is out of step with the realities on the ground,” said Candy Espino, the Council’s CEO. “It puts life-saving care out of reach for many and will drive up uncompensated care costs that our state cannot absorb.”
The Council warned the cuts would ripple beyond healthcare, destabilizing the state’s budget and forcing reductions in housing, child welfare, and education. It called on Arizona’s House Republicans to reject the legislation’s “harmful provisions” and support a version that reflects “common sense, compassion, and fiscal responsibility.”
A working paper from the National Bureau of Economic Research released in May underscores what’s at stake: Medicaid expansion significantly reduces mortality among low-income adults.
Researchers found that expansion increased Medicaid coverage by 12 percentage points and reduced mortality by 2.5%, which translates to a 21% reduction in the mortality hazard for new enrollees.
Mortality reductions occurred not only among older adults, but also among younger adults, who accounted for nearly half the life-years saved.
The study estimated the cost per life-year saved at $179,000, which is more cost-effective than many government safety regulations like automobile inspections ($311K) or pesticide controls ($405K).
All of Arizona’s Republican members of Congress voted for the bill2, while all Democrats opposed it. However, one Republican lawmaker appears to be distancing himself from aspects of the legislation.
U.S. Rep. Juan Ciscomani (R-Tucson), who faces a tough re-election in one of the nation’s most competitive districts, has voiced concern about Medicaid cuts but still voted for the House version of the bill.
That version froze provider taxes and slashed Medicaid spending, but didn’t include the steeper caps later added by the Senate. In June, Ciscomani joined 15 Republicans in urging leaders to adopt the House’s “more pragmatic and compassionate” approach.
“We cannot support a final bill that threatens access to coverage or jeopardizes the stability of our hospitals,” the group wrote.
Still, Ciscomani’s approach has drawn criticism from advocates who say his actions don’t match his rhetoric. While he’s publicly warned against Medicaid cuts, he still voted for a bill that slashes funding and opens the door to major coverage losses in Arizona.
Even before Congress finalized the bill, Arizona Republicans sought to shrink the program. Rep. Justin Olson (R-Mesa) introduced legislation to freeze enrollment in both the 2013 and 2000 Medicaid expansions — cutting $108 million in state funding. The measure didn’t have enough Republican support in the House since it was down a few members. The 29 Republicans present that day all voted in favor, bills need 31 votes to pass.
“I do not know why we would preemptively give up millions of federal funds... because Congress may or may not pass a bill that basically defunds our health care system,” said Rep. Nancy Gutierrez (D-Tucson).
Olson defended the proposal saying, “We’ve got to get under control the out-of-control spending.”
In a May 29 news release, Gov. Katie Hobbs, along with hospital and clinic leaders, warned of serious consequences from the proposed cuts to Medicaid.
“Congress must change course, or Arizona will suffer the consequences,” Hobbs said. “These cuts threaten to kick hundreds of thousands of Arizonans off their health insurance and could devastate clinics and hospitals throughout Arizona, especially in rural areas.”
Christopher Hansen of Canyonlands Healthcare said the system is already stretched thin.
“Cuts mean doing less with nothing — and that’s not something our communities can afford.”
— Christopher Hansen, CEO, Canyonlands Healthcare (Coconino, Gila, Graham, Greenlee, Mohave, and Navajo Counties)
What else is in the bill?
Dubbed the “One Big, Beautiful Bill,” the legislation does far more than cut Medicaid:
Tax Cuts: Permanently extends much of the 2017 Trump tax law.
Work Requirements: Expands Medicaid and SNAP work requirements to age 64.
Border & Defense: Adds billions in border enforcement and military spending.
Child Tax Credit: Raises the child tax credit to $2,200 — lower than House’s $2,500 proposal.
Debt Limit: Raises the federal debt ceiling by $5 trillion.
Tipped Worker Tax Break: Creates deductions for tipped workers.
SALT Deduction: Temporarily increases the state and local tax deduction cap to $40,000.
The House must now take up the Senate’s amended version of the bill, with a final vote expected in the coming days. If it passes, President Trump is likely to sign it into law — setting off a race for Arizona leaders to determine how to manage steep Medicaid cuts and avoid triggering automatic coverage losses. Legal challenges and waiver requests could also be on the table, but time is running out for state policymakers to act.
Correction: A previous version of this article stated that H.R. 1 would reduce the federal Medicaid match rate (FMAP), which could trigger the repeal of Arizona’s Medicaid expansion under a 2013 state law. While an amendment by Sen. Rick Scott proposed lowering the FMAP to 70%, it was not included in the final bill. The bill still includes sweeping Medicaid cuts, but it does not change the FMAP.
Who holds the governor’s office in 2027 could decide the fate of Medicaid expansion. Hobbs has championed the program — but if someone like Andy Biggs wins, it’s a different story. He tried to kill Medicaid outright in 2011 and fought Brewer’s 2013 expansion every step of the way.
Rep. David Schweikert (R-Scottsdale) apparently fell asleep as the House was voting so he was one of two not voting in the chamber, but said afterwards had he made it to the floor on time he would have supported it.