Enactment of the OBBB Is Just the End of the Beginning

There are years of fighting to come over how the law should be implemented, how it should be revised, and how voters should feel about it.

Dear readers,

The big Republican fiscal bill is now law. It’s a really poor piece of legislation — it will manage to achieve the remarkable feat of taking away health insurance coverage from millions of Americans without even materially reducing government spending, because the bill’s enormous tax cuts stand to massively increase government borrowing and also push interest rates upward. Instead of paying for health care, we’ll be paying more interest to more bondholders.

Going well beyond the overall fiscal impact, this law is full of bad policy. I don’t like it, and the polling shows voters don’t like it either.

Medicaid cuts are particularly unpopular — sufficiently unpopular that President Trump is pretending the bill doesn’t contain them. And the bill provides what I think will be Democrats’ main argument for the 2026 midterm elections: Republicans have voted to take away health care from millions of Americans, while exploding the federal debt, in order to give huge tax breaks to corporations and the wealthy.

But I am skeptical of a related claim some Democrats are starting to make, which is that the direct effects of the bill, as felt by ordinary Americans, are going to bury Republicans politically. Here, for example, is Hawaii Sen. Brian Schatz making that argument on Twitter the day after the the bill passed the Senate: “It is entirely possible that we win the Senate if they pass a bill with such unspinnably terrible consequences across society. The impacts will be inescapable and it will be obvious who to blame.”

I don’t think this is quite right. While it is true that some of the cuts, particularly the ones affecting the individual health insurance market, will be felt pretty acutely and promptly by those affected, a lot of the cuts won’t be so obvious. Either they will come with a significant lag, or they will have a non-obvious nexus to the law, or they are packaged in a way that may insulate Republicans politically.

Consider:

• Most of the bill’s Medicaid cuts are delayed until after the midterm elections, and some do not even begin until 2028. Some of the cuts may be undone in future legislation, and some will be backfilled by state governments.

• Republicans believe they are on relatively strong political ground in imposing work requirements on Medicaid benefits, which is one of the main ways the bill cuts Medicaid spending. Even Republicans who have been squeamish about the bill’s Medicaid cuts overall have been eager to openly defend the bill’s work requirements, and Democrats have generally relied on an oblique argument against the work requirements: Rather than arguing that health care is a human right that should not be subjected to conditions, they have tended to point out, first, that most non-disabled adults on Medicaid already work, and second, that the work requirements will create large administrative burdens that cause many Americans to lose their Medicaid coverage even if they meet the work requirement, or even if they’re supposed to be exempt from the requirement (for example, because of pregnancy or medical frailty). Democrats’ rhetorical choices here reflect the fact that poll respondents often show openness to work requirements even when they otherwise oppose cuts to Medicaid.¹ Given the experience in states that have experimented with work requirements, I think Democrats are broadly correct that the policy is going to be very difficult to administer well — indeed, the forecasted savings contemplate the idea that many eligible people will be kicked off the program due to administrative burdens or errors — but “this will have unintended consequences” is a tough political argument to advance before the cuts have actually taken effect. And states do not have to start enforcing work requirements under the law until 2027.

• Besides the work requirements, a lot of the bill’s Medicaid spending cuts come from changes to the joint state-federal program’s byzantine funding practices, such as restricting state governments’ use of specialized taxes on providers to inflate the federal government’s share of Medicaid expense. These restrictions aren’t slated to come into effect until 2028, and if and when they do, the choices about how to deal with them will be made in state capitals. Some of the harms visited on the public will be quite indirect: States may make cuts to non-health care programs to backfill the Medicaid budget; they may make complex changes to eligibility and benefits; they may raise taxes. Much of this will upset some voters, but I’m not optimistic they will find it “obvious” that this 2025 law and the Republicans who passed it are to blame.

• While Democrats’ expansions of the health care safety net have come to poll well — and while voters have tended to strongly support Medicaid expansion when the policy is put directly on the ballot, even in red states — there is little evidence of voters rewarding Democratic candidates (or punishing Republicans) over the parties’ different approaches to Medicaid. Voters have repeatedly re-elected Republican governors in states that have declined the Medicaid expansion, including in states that are supposed to be competitive between the parties, like Florida and Georgia. These non-expansion states also continue to gain population briskly, showing that while voters favor Medicaid availability, it’s not necessarily that big a driver of their behavior.

The law does contain some cuts that will be directly noticeable before the midterm election. It makes changes to the individual health insurance markets that will make insurance more expensive for millions of Americans, starting next year.² Some of the SNAP (food stamp) cuts will come into effect before the election. And electric vehicle tax credits will go away this year (although that’s probably actually a good issue for Republicans). And states are likely to react preemptively to Medicaid cuts that begin in 2027 by adjusting their budgets earlier — most states have fiscal years that begin on July 1, and so they’ll need to make some adjustments that begin in 2026 for Medicaid rules that change in 2027. States will also have to communicate to Medicaid beneficiaries in 2026 about new restrictions so they can be imposed at the start of 2027.

Of course, voters will also feel effects before the midterms that will be popular, like the increased standard deduction, increased child tax credit, and new tax exclusions for tips and overtime.

This mixed picture complicates a key task for Democrats over the next year: getting voters to notice the spending cuts in this bill, understand that Republicans imposed them, and care enough to punish Republicans at the polls.

President Donald Trump, surrounded by Republican officials, banged a gavel after signing his signature bill of tax breaks and spending cuts — the "One Big Beautiful Bill" — on the South Lawn of the White House in Washington, DC, on July 4, 2025. (Photo by Jim Watson/AFP via Getty Images)

While Medicaid has been the headline in the media coverage to date, the changes to individual insurance markets will probably provide the first big opportunity for Democrats to blame Republicans for a negative impact on consumers. Consumers who buy insurance in these markets are going to see price increases for two reasons: subsidies for buying insurance will be less generous; and smaller subsidies will discourage relatively healthy people from buying insurance, leaving a sicker pool of costlier insureds, for whom insurers will have to charge higher pre-subsidy premiums. There will also be logistical annoyances: Rules aimed at preventing improper enrollments will require consumers to provide more documentation more often to get their subsidies.

That will bother people. But it’s worth noting that people have a lot of experience with being unsatisfied with the price and convenience of health insurance, and a lot of the frustrating interactions that consumers are about to have will be with private insurers, not the government. It’s on Democrats to get voters to understand why their insurance got more expensive — that it’s not so much a matter of “greedy insurance companies” as it is of Republicans who intentionally made the market worse so they could find money to give tax breaks to billionaires.³

Later, we will begin to see the effects of the Medicaid work requirements come into effect. As the Kaiser Family Foundation notes, there are a lot of open questions here about implementation — states and federal agencies will make choices that determine how much more difficult it is for eligible people to access Medicaid. These choices will also determine how much the law actually cuts Medicaid spending, and how much money states will need to find in order to backfill federal cuts to the program, if they choose to do so. These effects will be large, but they will roll in gradually and I don’t think members of the public will necessarily find the effects (or their nexus to the 2025 law) to be obvious. Convincing voters this is all rooted in the OBBB will be a significant messaging challenge for Democrats. Republicans, meanwhile, face a major implementation challenge — they’re currently saying Democrats have invented a problem here and their law won’t become a major barrier to Medicaid access. Politically, it would behoove them to prove themselves right.

Perhaps the most politically important “inescapable” effect of this law relates to its deficit expansion. Wildly increasing the budget deficit is an inflationary policy that restricts the Federal Reserve’s ability to cut interest rates. This law is going to make it more expensive to get a mortgage and harder to finance business investment, and it’s going to raise consumer prices. I doubt many voters will draw the nexus, but I also doubt that it matters — Republicans are the incumbents, and a less favorable inflation and interest rate environment will hurt them politically, even if voters have no idea why interest rates aren’t falling as they would like.

Finally, one broad political consequence of this law may be that Republicans now “own” the health insurance system in the way that Democrats did after the 2010 passage of the Affordable Care Act. Health insurance and health care rules and prices and requirements and coverage change all the time, often in ways that bother people, and when things went wrong in the early 2010s, a lot of people ascribed those problems to Obamacare even if they were for other reasons. Democrats may stand to gain simply by pointing out that our health care system is now operating under Republican rules.

All of this is to say that I do think OBBB is a serious political liability for Republicans, in large part because of its health care provisions, but there’s going to be a lot of room for both parties to influence how people interpret the changes that come over the next few years and who they blame for any problems. Both parties are also going to have opportunities to fix the problems that arise, which will both blunt the negative substantive impacts and also reduce the law’s political importance. We can’t assume the problems created by the law are going to be manifestly obvious and inescapable, and there’s going to be an awful lot of education to do — and an awful lot of legislative fights to be had — for many years to come.

Very seriously,

Josh

1. Whether work requirements are popular or merely less unpopular than other ways of cutting Medicaid depends on the poll you look at.

2. The law also fails to renew temporary enhancements to the health insurance subsidies that Democrats enacted under Biden and had hoped to continue. Notably, that Biden-era program is another example of Democrats expanding the health care safety net and getting no apparent reward for it from voters.

3. I should also offer some advice here to Republicans. The key political challenge they face is to make this implementation work as well as possible. One purpose of the new paperwork requirements related to individual insurance is to make it harder for consumers to game the system by waiting until they get sick to buy coverage. If Republicans actually achieve their goal of improving the risk pool — and more broadly, if they work effectively with insurers to limit the extent that pre-subsidy premiums rise — they will blunt Democrats’ line of political attack here. Still, the withdrawal of subsidies will be very noticeable and upsetting even if the pre-subsidy premiums don’t spike. And consumers tend to be loss-averse — they may have a stronger reaction to the negative surprise of rising premiums than they had to the positive surprise of enhanced premium subsidies under Biden.