Congress passed, largely along party lines, and President Trump signed into law on July 4, HR 1, the One Big Beautiful Bill Act (OBBB) – a major legislative package aligned with President Donald Trump’s priorities. Of interest to OMSs, the bill includes tax reform, student loan reform, Medicare payment updates, and changes to Medicaid eligibility and funding that will likely have implications for states. The summary below provides more details on these issues. AAOMS has weighed in with committees and leaders in both chambers throughout the process. Those comments are available at AAOMS.org.
Business Tax Reform
- Makes permanent 100% bonus depreciation for property acquired and placed in service on or after Jan. 19, 2025.
- Makes permanent the Section 199A qualified business income deduction and maintains the current deduction rate of 20 percent. It also limits the phase-in range for certain businesses by increasing the amount from $50,000 to $75,000 for non-joint tax returns and from $100,000 to $175,000 for joint returns as well as provides an inflation-adjusted minimum deduction of $400 for taxpayers who have at least $1,000 of QBI from one or more active trade or businesses in which they materially participate.
- Reinstates the (EBITA) definition, which adds back depreciation and amortization to adjusted tax income when calculating the business interest limitation under Section 163(j).
- Increases the maximum amount a taxpayer may expense under Section 179 for qualifying equipment purchases from $1.25 million to $2.5 million and raises the threshold for which the phase out begins from $3.13 million to $4 million.
- Retains the full Pass-Through Entity Tax (PTET) deduction, keeping current tax law in place. This is the best-case scenario on PTET, and it represents a huge win for small businesses (including OMS practices) structured as pass-through entities. Under the House bill, these healthcare professionals would have incurred a 1.5-5 percent tax hike without the deduction.
- Expands Section 529 savings plan eligibility to include qualified postsecondary credentialing programs.
- Permanently extends the $5,250 tax exemption for employer-paid student loan repayment assistance for employees.
- Makes permanent the Section 45S tax credit for employers who provide paid family and medical leave.
The permanent extension of these tax cuts, combined with the avoidance of a proposed tax increase, is expected to enhance financial predictability and operational stability for OMS practices, allowing them to plan long-term investments, staffing, and possible practice expansion with greater confidence. AAOMS advocated for the permanent extension of these tax cuts as well as retention of the full PTET deduction throughout the legislative process.
Student Loan Provisions
- Eliminates the Grad Plus loan program effective July 1, 2026, with legacy provisions for current borrowers. The Grad Plus program allows graduate students to borrow up to the cost of attendance.
- Establishes a $200,000 aggregate federal borrowing limit for professional loans (e.g., dentistry, medicine, law) and a $257,500 aggregate borrowing cap for all federal loans, including undergraduate effect July 1, 2026, with a legacy provision included for current borrowers to borrow under current limits for the remainder of their expected time to credential.
- Borrowers with new loans made on or after July 1, 2026, can be repaid using only two plans: a new standard repayment plan with fixed monthly payments and fixed terms ranging from 10 to 25 years based on the amount borrowed and the new income-based repayment assistance plan, RAP.
- Borrowers with no new loans made on or after July 1, 2026, can continue to enroll in the current Standard, current Income-Based, Graduated, and Extended repayment plans or could also opt in to the new RAP. Current borrowers enrolled in ICR, PAYE, or SAVE plans must transition to a new repayment plan by July 1, 2028. If no selection is made by that date, they will be moved into RAP.
While lower federal borrowing caps already exist for professional students than what was in the final OBBB, their implications were minimal because dental and medical students could take out Grad Plus loans. The combined effect of the borrowing limits with the elimination of the Grad Plus loan program will likely force more dental and medical students into the private loan system, which often has higher interest rates and fewer borrower protections. The effect will be particularly acute for borrowers from economically challenged backgrounds. AAOMS advocated against the elimination of the Grad Plus program as well as the loan limits throughout the legislative process. The borrowing caps in the final OBBB are higher than what the House originally proposed. The final version of the OBBB excluded the Resident Education Deferred Interest (REDI) Act, which had been part of the original House-passed bill. This provision would have allowed medical and dental residents to defer interest accrual on their federal student loans for up to four years while in residency, easing their financial burden during training. AAOMS strongly supported the inclusion of this language and advocated for its retention throughout the legislative process. The final version of the package did not make changes to the Public Service Loan Forgiveness (PSLF) program. The House-passed version, and an earlier Senate version, removed time spent in dental and medical residencies from qualifying for that program. AAOMS opposed this alteration to PSLF and it was removed before final passage.
Medicare
- Provides a temporary 2.5 percent Medicare physician payment fix for calendar years 2026 and 2027.
Physicians, including OMSs, began incurring a 2.83 percent cut on Medicare payments on Jan. 1, which comes on top of a 1.69 percent cut in 2024. While the final version of the OBBB provides some temporary relief, it falls short of delivering the long-term reforms that AAOMS and other Medicare physician groups have long supported. The original House-passed bill proposed tying the fee schedule to inflation by establishing a permanent, annual update based on the Medicare Economic Index, starting the next calendar year. AAOMS advocated, in coordination with other Medicare provider groups, for inclusion of the House language in the final bill.
Medicaid
- Establishes work, volunteer or study requirements for Medicaid expansion enrollees – defined as those earning more than 100 percent of the federal poverty level – who meet certain conditions.
- Increases cost sharing by Medicaid expansion enrollees for certain services.
- Increases the frequency of eligibility verification and redetermination.
- Requires additional screening requirements for providers.
- Limits the use of state-directed provider payments, which states can use to increase reimbursement up to average commercial rates for certain providers to improve access to care.
- Prohibits states that did not expand Medicaid from increasing provider tax rates after OBBB enactment, and phases in a more restrictive rate for states that have expanded Medicaid. States frequently use a provider tax to increase federal matching rates to provide payment updates to providers.
- Allocates $50 billion to support rural hospitals in response to concerns about the bill’s effects on Medicaid.
- Limits the categories of noncitizens eligible for Medicaid and the Children’s Health Insurance Program to lawful permanent residents; certain nationals from Cuba or Haiti; and individuals from Micronesia, the Marshall Islands, or Pala
AAOMS expressed concerns to both House and Senate leaders regarding several provisions that could restrict access to dental care and increase administrative burdens, notably that that work requirements and more frequent eligibility verification and redeterminations could disrupt care continuity and negatively impact employment readiness. AAOMS recommended the adoption of a centralized provider enrollment and screening system to reduce the burden on dental providers. Additionally, AAOMS advocated for dental services to be exempt from increased cost-sharing requirements for Medicaid expansion enrollees and from proposed caps on provider-directed payments, emphasizing the need for states to maintain flexibility in setting appropriate reimbursement rates for dental services. Patient advocacy groups have expressed concern that the limits on provider taxes—which states use to increase the federal match rate—could lead to a reduction in federal funding. As a result, states may be forced to find alternative revenue sources or cut benefits, which could include dental benefits or provider rates.
