Practice managers do not usually follow Washington closely, and for good reason: most of it does not reach the claim. The first quarter of 2025 is different, because three things happened in quick succession that touch the programs a practice bills every day. None of them changes a fee schedule or a claim edit this month. All of them are worth understanding, because the second and third quarters will be shaped by them.
We are writing this the day after the HHS announcement, so some details will change. What will not change is the practical question underneath: how much of your revenue depends on Medicaid, and how quickly could that move. Most practices cannot answer it today. By the end of this piece you should be able to.
Key takeaways
- Robert F. Kennedy Jr. was confirmed as HHS Secretary on February 13, 2025. The CMS Administrator nominee, Dr. Mehmet Oz, cleared the Senate Finance Committee on March 25 and awaits a floor vote.
- The House budget resolution of February 25 instructs the Energy and Commerce Committee to find at least $880 billion in savings over ten years, a figure the Congressional Budget Office has said cannot be reached without touching Medicaid or Medicare. Medicare has been declared off the table.
- The March 27 HHS restructuring cuts about 20,000 positions and consolidates 28 divisions into 15. Medicare claims processing sits with contractors, not HHS staff, and is not part of the announcement.
- For a practice, the exposure is Medicaid: eligibility churn, state rate decisions and enrollment administration. Know your Medicaid share this month.
What happened, with dates
| Date | Event | Status as of March 28 |
|---|---|---|
| February 13, 2025 | Senate confirms Robert F. Kennedy Jr. as Secretary of Health and Human Services, 52 to 48. Sworn in the same day. | In office |
| February 21, 2025 | Senate adopts its own, narrower budget resolution focused on border and defense spending. | The two chambers have not agreed on a single framework |
| February 25, 2025 | House passes its budget resolution, 217 to 215, instructing Energy and Commerce to find at least $880 billion in savings over ten years. | Instruction only; no bill text yet |
| March 5, 2025 | Congressional Budget Office letter concludes the Energy and Commerce target cannot be met from programs other than Medicare and Medicaid. | Frames the Medicaid debate |
| March 14 and 25, 2025 | Senate Finance Committee hearing for CMS Administrator nominee Dr. Mehmet Oz, then a 14 to 13 committee vote to advance the nomination. | Floor vote expected in April |
| March 27, 2025 | HHS announces a restructuring: about 20,000 fewer positions (roughly 10,000 layoffs plus 10,000 earlier departures and buyouts), bringing the department to about 62,000 employees; 28 divisions consolidated into 15, including a new Administration for a Healthy America; regional offices reduced from ten to five. | Announced; implementation details pending |
HHS said the cuts are concentrated in administrative functions and that Medicare and Medicaid services would continue. CMS itself was described as losing about 300 positions, a small share of the total, with the largest reductions at FDA, CDC and NIH. The regional office consolidation is the piece most likely to be felt by practices, because the regional offices handle some provider-facing questions and complaint intake.
What this does not change today
Medicare claims are processed by Medicare Administrative Contractors, which are private companies under contract, not HHS employees. Medicaid claims are processed by states and their managed care plans. Neither the restructuring nor the budget resolution changes a payment rate, a coverage policy or a filing deadline. The 2025 Medicare Physician Fee Schedule, the telehealth extension through September 30 and the MIPS submission deadline of March 31 all stand as they were. Timely filing limits, appeal levels and the twelve-month Medicare filing window are set in statute and contractor rules, and a reorganization of the department's headquarters does not touch them.
We think it is worth saying plainly: if your practice runs on Medicare fee-for-service and commercial plans, the first quarter's news is background. If your practice has a large Medicaid or Medicaid managed care population, it is not.
Where the exposure is: Medicaid
Any reconciliation bill that meets the $880 billion instruction would have to change how Medicaid is financed or who is eligible. The options being discussed publicly include per-capita caps on federal payments to states, a lower federal match for the expansion population, work requirements for adults without disabilities, more frequent eligibility redeterminations, and limits on the provider taxes that states use to fund their share. Each of those works through the states, and states respond by tightening eligibility, cutting rates or delaying payments. That is the channel through which a federal budget decision reaches a claim, and it is a slow channel: a bill passed in the summer would mostly show up in state budgets for fiscal years starting July 1, 2026, with eligibility changes arriving earlier where states act on their own.
The practical question for a practice is not "will this pass" but "how much of our revenue depends on Medicaid, and how fast could that change". The second half has a partial answer already. States resumed eligibility redeterminations in 2023 and 2024 after the pandemic pause, and coverage churn has been high since; a patient who was covered in January can be uncovered in March without knowing it. Any new federal requirement would add to that churn, and churn is a front-desk problem before it is a policy problem.
Know your number: a worked example
A fictional pediatric practice pulls twelve months of payments by payer. Medicaid fee-for-service is 11 percent. Three managed care plans with commercial-sounding names, which the practice had been counting as commercial, turn out to be Medicaid managed care products and add another 27 percent. The real Medicaid share is 38 percent, about $1.1 million of $2.9 million in annual collections. The practice's eligibility denials for those plans run at 9 percent of claims, against 3 percent for commercial payers, and two of its four providers have Medicaid revalidation dates in the next six months that nobody had on a calendar.
None of that came from Washington. All of it is worth knowing before Washington does anything, because a 10 percent rate cut on 38 percent of revenue is a $110,000 question, and a lapsed revalidation on one provider stops that provider's Medicaid payments entirely until it is fixed. The report takes an hour. The credentialing team at Revelrex sees Medicaid revalidation lapses as one of the most common causes of a sudden stop in payments, and they are entirely preventable with a calendar.
What we are watching next
| Item | Why it matters | Expected timing |
|---|---|---|
| A single budget resolution agreed by both chambers | Starts the clock on actual bill text | April 2025 |
| Reconciliation bill text from Energy and Commerce | First look at actual Medicaid provisions | Spring 2025 |
| CMS Administrator confirmation | Sets direction on Medicare Advantage, prior authorization and the 2026 fee schedule | April 2025 |
| Details of HHS division consolidation | Which offices handle provider-facing functions and how the five regional offices are organized | April to June 2025 |
| State legislative sessions and Medicaid rate setting | Where rate cuts and payment delays appear first | Most sessions end by June; fiscal years start July 1 |
| 2026 Physician Fee Schedule proposed rule | Conversion factor and any change to telehealth or G2211 | Usually July |
| Telehealth flexibilities expiration | Another extension or a cliff | September 30, 2025 |
Questions we hear
Will the HHS layoffs delay our Medicare payments?
We do not expect it. MACs process claims and are not part of the announced reductions. Watch for slower turnaround on enrollment applications that require CMS review, on Office for Civil Rights complaint handling, and on responses from regional offices, which are being halved. Submit complete applications and keep reference numbers.
Should we stop accepting new Medicaid patients?
That is a business decision each practice makes, and nothing has changed in the program yet. What we would do now is know the number, verify eligibility every visit, and make sure the practice is paid correctly for the Medicaid work it already does. An RCM audit that breaks out Medicaid denials and underpayments is a reasonable first step, because in our experience Medicaid managed care underpayments against the state fee schedule are common and rarely worked.
Where should we get updates?
Your state medical society and specialty society will track the reconciliation bill closely, and your state Medicaid agency posts provider bulletins on rate and eligibility changes. KFF publishes running analyses of the Medicaid proposals that are readable by non-specialists. We will cover anything that changes a billing rule as it happens.
What to do this month
- Pull twelve months of payments by payer and group Medicaid fee-for-service with every Medicaid managed care plan, so the practice knows its true Medicaid share.
- Run eligibility before every Medicaid visit, not monthly, and capture the managed care plan assignment, which changes without notice.
- Confirm every provider's Medicaid effective date and revalidation due date and put the dates on a shared calendar.
- Compare Medicaid managed care payments for your top ten codes against the state fee schedule and list the underpayments.
- Find out when your state legislature sets Medicaid rates for the fiscal year beginning July 1 and who at the state medical society tracks it.
- Note any open enrollment application, OCR matter or regional office request and record the reference numbers, in case responses slow during the reorganization.
