Navigating the Currents: Analyzing the House Energy & Commerce Committee's Draft Reconciliation Text
The policy landscape is always shifting, and this past weekend brought a significant tremor with the release of the House Energy & Commerce Committee's initial draft text for its contribution to the Republican Party's major reconciliation bill. Set for markup tomorrow, Tuesday, May 13, 2025, this legislation represents a substantial proposed restructuring of federal Medicaid regulation and funding, alongside notable provisions touching upon artificial intelligence (AI). For CTeL members operating at the intersection of health policy and technological innovation, understanding these changes is crucial.
If enacted in its current form, it would introduce profound changes with wide-ranging implications for providers, states, and crucially, patient access and the operational environment for digital health technologies.
The Core of the Proposal: A Major Medicaid Overhaul
The most impactful element of the E&C Committee's draft centers on significant reductions in federal Medicaid spending. The Health subtitle alone is estimated to cut federal expenditures by at least $715 billion (House Energy & Commerce Committee, 2025). The Congressional Budget Office (CBO) projects that, as a direct result of this legislation, at least 8.6 million people would lose health insurance coverage (Congressional Budget Office, 2025).
This fiscal shift is driven by several key policy changes:
Budget Neutrality for Section 1115 Demonstrations: The text mandates that any state seeking or operating a Section 1115 demonstration waiver must ensure the program results in less federal expenditure than would have occurred without the waiver (House Energy & Commerce Committee, 2025). Section 1115 waivers have historically served as critical tools for states to pilot innovative approaches to Medicaid delivery, often including managed care reforms, behavioral health integration, or programs addressing social determinants of health (Kaiser Family Foundation, 2023). Requiring strict budget neutrality could significantly constrain states' ability to experiment with or expand innovative programs, potentially impacting the adoption of digital health solutions within state-specific initiatives.
Stricter Enrollment and Eligibility Scrutiny: The bill proposes measures designed to tighten eligibility determination and verification processes, likely slowing enrollment and increasing churn.
It explicitly delays the implementation of recent CMS rules aimed at streamlining Medicaid, Children's Health Insurance Program (CHIP), and Basic Health Program enrollment and renewal processes. These rules, “Medicaid Program; Streamlining the Medicaid, Children's Health Insurance Program, and Basic Health Program Application, Eligibility Determination, Enrollment, and Renewal Processes” and “Streamlining Medicaid; Medicare Savings Program Eligibility Determination and Enrollment” were designed to simplify access and reduce administrative burden (Centers for Medicare & Medicaid Services, 2023a, 2023b). Delaying these reforms could maintain or exacerbate existing barriers to enrollment and retention.
It mandates increased frequency of eligibility determinations for individuals covered by the Affordable Care Act's (ACA) Medicaid Expansion (House Energy & Commerce Committee, 2025). This could lead to more frequent disenrollments for administrative reasons, even if individuals remain eligible.
It prohibits federal financial participation (FFP) in Medicaid for individuals whose citizenship, nationality, or immigration status has not been verified (House Energy & Commerce Committee, 2025). While verification is already standard practice, the specific phrasing and enforcement mechanisms proposed could create additional hurdles.
It imposes a ten-percent Federal Medical Assistance Percentage (FMAP) reduction for Medicaid Expansion states that provide coverage for undocumented migrants (House Energy & Commerce Committee, 2025). FMAP is the percentage of Medicaid program costs paid by the federal government (Medicaid.gov, 2024). This reduction creates a significant financial disincentive for states covering this population.
It establishes "community engagement requirements" for "able-bodied adults without dependents," mandating at least 80 hours per month of combined work, community service, a work program, and/or an educational program (House Energy & Commerce Committee, 2025). While similar requirements have been attempted and faced legal challenges in the past (Musumeci et al., 2023), this provision seeks to codify them federally, potentially leading to coverage losses for those unable to meet the requirement.
AI and Cybersecurity Provisions
Beyond Medicaid, the draft text includes provisions relevant to the digital health ecosystem concerning AI and cybersecurity:
It allocates half a billion dollars ($500 million) to the Department of Commerce specifically for deploying AI systems and enhancing the federal government's cybersecurity posture (House Energy & Commerce Committee, 2025). Given the increasing frequency and sophistication of cyberattacks targeting healthcare IT systems and patient data, this federal investment signals a recognition of the critical need to bolster defenses (U.S. Department of Health & Human Services, 2024).
The bill includes a ten-year preemption of any state laws regulating AI, prohibiting states and other jurisdictions from enacting or enforcing any laws concerning AI models or systems (House Energy & Commerce Committee, 2025). This provision, however, faces significant uncertainty. The Senate's strict rules for reconciliation bills, particularly the Byrd Rule, require provisions to directly affect the federal budget or expenditures to avoid being struck down as "extraneous" (Congressional Research Service, 2019). A broad preemption of state AI law is unlikely to meet this standard and may not survive the Senate process. Nevertheless, its inclusion signals a potential federal interest in establishing a uniform regulatory framework for AI, a topic of growing importance in healthcare AI development and deployment.
What's Missing? Telehealth
Notably absent from the current draft text are direct references to telehealth policy. Telehealth provisions were reportedly circulated among budget leaders earlier this year, suggesting they were under consideration. While their exclusion from this specific E&C draft doesn't preclude them from appearing in other parts of the reconciliation bill or future legislation, it means the significant, albeit temporary, telehealth flexibilities expanded during the public health emergency are not addressed here.
Implications for CTeL Members and the Digital Health Ecosystem
The policies outlined in this draft have several potential implications for organizations involved in digital health:
Financial Strain on Providers: Reduced federal Medicaid funding and significant coverage losses (8.6 million people) will likely place substantial budget strain on hospitals, clinics, and other healthcare providers, especially those serving a large proportion of low-income or uninsured patients. This could impact their capacity to invest in new technologies, including digital health tools.
Impact on Care Access and Models: Stricter eligibility and enrollment processes may lead to a less stable insured population, potentially disrupting continuity of care. The limitations on Section 1115 waivers could stifle state-level innovation in care delivery models that might otherwise incorporate digital health components.
Cybersecurity Focus: While limited in scope, the funding for Commerce highlights the federal government's focus on cybersecurity, which is paramount for protecting patient data and ensuring trust in connected health technologies.
AI Regulatory Uncertainty: The proposed (though likely non-starter) state preemption signals ongoing debate about the appropriate level and source of AI regulation. Organizations developing or deploying healthcare AI need to monitor this evolving landscape closely, as future state or federal action remains possible.
Looking Ahead
The markup scheduled for tomorrow marks a critical next step for this bill. The provisions discussed here are subject to change as the legislative process unfolds, particularly given the complexities of reconciliation rules and potential negotiations.
CTeL will continue to closely monitor this bill as it makes its way through Congress, providing members with timely updates and analysis. Understanding the potential funding and regulatory shifts is essential for preparing your organization and advocating effectively in this dynamic environment.
References
Centers for Medicare & Medicaid Services. (2023a). Medicaid Program; Streamlining the Medicaid, Children's Health Program, and Basic Health Program Application, Eligibility Determination, Enrollment, and Renewal Processes (CMS-2421-F).
Centers for Medicare & Medicaid Services. (2023b). Streamlining Medicaid; Medicare Savings Program Eligibility Determination and Enrollment (CMS-2437-F).
Congressional Budget Office. (2025). [Estimated Effects of the Health Subtitle of the House Energy and Commerce Committee's Reconciliation Legislation - Specific Report Title/Link Needed]. Washington, D.C.: Author.
Congressional Research Service. (2019). The Budget Reconciliation Process: The Senate's "Byrd Rule". Retrieved from https://www.congress.gov/crs-product/RL30862
House Energy & Commerce Committee. (2025). [Draft Text of the Committee's Contribution to the Reconciliation Bill - Specific Title/Link Needed]. Retrieved from https://energycommerce.house.gov/posts/chairman-guthrie-introduces-budget-reconciliation-text-to-be-marked-up
Kaiser Family Foundation. (2023). Medicaid Section 1115 Waivers: A Look at Approved and Pending Projects. Retrieved from https://www.kff.org/medicaid/issue-brief/medicaid-waiver-tracker-approved-and-pending-section-1115-waivers-by-state/
Medicaid.gov. (2024). Federal Medical Assistance Percentage (FMAP). Retrieved from https://www.congress.gov/crs-product/R43847
Musumeci, M., Garfield, R., & Hinton, E. (2023). Medicaid Work Requirements: A Brief History and Overview. Kaiser Family Foundation. Retrieved from https://www.kff.org/medicaid/issue-brief/an-overview-of-medicaid-work-requirements-what-happened-under-the-trump-and-biden-administrations/
Disclaimer: This analysis is based on the draft text available as of May 12, 2025. The legislative process is dynamic, and provisions may change. This information is for informational purposes and does not constitute legal or financial advice.