WASHINGTON — The 2026 tax filing season closed Wednesday with the Trump administration and Republicans on Capitol Hill hailing success under last year’s massive tax cuts law, while Democrats said any benefits have been wiped out by skyrocketing gas prices, inflation and more.

More than 53 million Americans claimed at least one new benefit, averaging a tax cut of $800, under the tax cuts and spending package passed by congressional Republicans and enacted by President Donald Trump on July 4, according to the Department of the Treasury.

Originally titled the One Big Beautiful Bill Act, but rebranded by Republicans as the Working Families Tax Cuts law, the measure made permanent Trump’s 2017 reduced tax brackets. 

It also quadrupled the state and local tax deduction cap and increased the child tax credit by $200.

Democrats marked Tax Day by criticizing the law and pointed to increasing inflation and tariff costs as wiping out the value of tax relief, as both sides try to gain the advantage in messaging ahead of crucial midterm elections that will determine control of Congress.

Tips, car loans, overtime

The new law cut taxes on tips until 2028 and on qualifying car loan interest until 2029. 

As for Trump’s campaign promise for no tax on overtime, the law applies the advantage on up to $12,500 in overtime earnings for individuals, and $25,000 for joint filers, through 2028. 

Additionally, eligible senior citizens can now deduct up to $6,000 for individuals, $12,000 for couples, until 2029.

Treasury Secretary Scott Bessent said in a Tax Day statement that Trump’s leadership upholds “the foundational principle that hardworking Americans should be rewarded, not punished with tax hikes, and the results of this tax season prove it.”

According to Internal Revenue Service statistics to date and made public Wednesday:

• Six million filers claimed no tax on tips, with an average deduction of $7,100.
• Twenty-five million filers claimed no tax on overtime, averaging a $3,100 deduction.
• Thirty million seniors claimed the enhanced senior deduction, receiving an average break of $7,500.
• One million Americans deducted car loan interest, getting a $1,800 break on average.

Bessent, acting IRS commissioner after a turnover of six IRS commissioners in 2025, said the agency has “worked tirelessly to ensure our tax system works for the people it is meant to serve.”

“From the shop floor to the kitchen table, taxpayers are feeling the difference of the largest tax cuts in our nation’s history, and millions of Americans are keeping more of what they earn and seeing their paychecks go further than ever before,” Bessent said.

The White House circulated a collection of statements from taxpayers Tuesday praising the new deductions. 

Trump also held a photo opportunity Monday, when he received a McDonald’s delivery from a self-proclaimed “DoorDash Grandma” who lauded tax relief on her tips in a planned event. Trump subsequently pulled cash from his pocket and handed it to the woman, Sharon Simmons of Arkansas, who represented the tech delivery service. 

Simmons, no newcomer to such GOP appearances, also testified before the U.S. House Ways and Means Committee in late July 2025, following the passage of the tax law, to praise the no tax on tips policy.

134 million income tax returns

Frank Bisignano, IRS chief executive officer, told Senate tax writers on Capitol Hill Wednesday that the 2026 filing season was the “most successful tax filing season in IRS history.”

Trump created the IRS CEO position last year. Bisignano also serves as the commissioner of the U.S. Social Security Administration.

“This landmark legislation forms the cornerstone of the administration’s growth agenda. The latest numbers tell the story,” Bisignano told the Senate Committee on Finance during the panel’s annual oversight hearing examining tax collection.

The agency to date has seen over 134 million income tax returns filed for 2025 earnings, with 98% of them done electronically, according to IRS data. Bisignano hailed the issuance of 80 million refunds that on average totaled $3,400, up by 11% compared to 2024. 

Senate Democrats on the panel panned the cost of the new tax regime and questioned whether a shrinking IRS staff will contribute to less enforcement. 

Sen. Michael Bennet, D-Colo., said “the lack of cops on the beat at the IRS is going to cost the Treasury in the United States $646 billion in unpaid taxes by the wealthiest people in America.”

According to reports, roughly 26,000 employees left the IRS last year as part of Trump’s civil service reduction incentives and firings.

“I remember you saying when you and I met before your confirmation that you are deeply concerned about the level of national debt in this country,” Bennet said to Bisignano. “It is $38 trillion and a lot of that is because of the completely unpaid-for tax bill that is the Trump tax bill.”

The cost of the tax bill will be realized in years to come, according to congressional scorekeepers.

The nonpartisan Congressional Budget Office and Joint Committee on Taxation estimated the law will cost $3.4 trillion over the next 10 years —  more than $4 trillion if accounting for interest that will accumulate on the nation’s debt.

An analysis by the Tax Foundation, which generally advocates for lower taxes, found tax revenue coming into U.S. coffers will drop by nearly $5.2 trillion over the next decade. Individual income taxes have been the government’s largest single source of revenue since 1944, according to data compiled by the Tax Policy Center, a partnership between the Urban Institute and Brookings Foundation.

How the tax cuts were offset

Lawmakers who wrote the massive tax law accounted for some of the lost revenue by overhauling eligibility and work requirements for government health and food assistance for low-income Americans. 

According to a recent report from the progressive Center on Budget and Policy Priorities, roughly 2.5 million Americans have lost Supplemental Nutrition Assistance Program, or SNAP, benefits since the tax law came into effect.

The CBO estimated the law’s changes to work requirements for Medicaid, the government’s low-income health care program, will result in millions of Americans losing health insurance. 

Senate Republicans defended the law, saying it helped Americans by avoiding “the largest tax increase in American history.”

“Had the 2017 tax cuts expired, taxpayers earning less than $400,000 would have faced a more than $2.6 trillion tax hike over the next decade,” said Senate Finance Committee Chair Mike Crapo, R-Idaho. 

Pilot program canned

The panel’s highest-ranking Democrat, Sen. Ron Wyden, D-Ore., slammed the new law for terminating a free alternative for tax filing, IRS Direct File, enacted under former President Joe Biden’s own budget reconciliation megabill.

The limited pilot program offered a free filing portal directly through the IRS and was available to 19 million taxpayers in 2024.

“Direct File in America died on Mr. Bisignano’s watch,” Wyden said, adding the program’s termination again puts taxpayers at the mercy of “tax software giants who overcharge for a service that ought to be free.”

Rather, the IRS offers Free File, an option available to taxpayers under a certain income level, now capped at $89,000, via a handful of tax preparation software companies that contract with the federal government.

A 2019 Treasury Inspector General for Tax Administration report described the program as “fraught with complexity and confusion.” Estimates show roughly 14 million free-file-eligible taxpayers were led to pages where they were prompted to pay for add-ons and extra services.

Taxpayers at any income level have the option to file for free via fillable PDF forms, but that option requires manual entry without guided prompts.

Wyden said the arrangement is a “multi-billion dollar rip-off.”

Bisignano called Direct File an “unnecessary and less popular duplicate of programs.”

Dems continue ‘affordability’ argument

The Democratic National Committee pounced on Tax Day to highlight Trump’s policies and use of taxpayer funds. Affordability is front and center in the upcoming midterm elections.

Though Trump campaigned on lowering prices and taxes, DNC Chair Ken Martin said in a statement the president has so far given Americans “a reckless trade war that has hiked prices, and a deadly and costly taxpayer-funded war with Iran.”

“This Tax Day, Americans are seeing lower-than-promised refunds hit their bank accounts that won’t even cover the higher costs Trump has forced them to shoulder. It couldn’t be clearer: Trump and the Republican Party are on the side of billionaires, big corporations, and wealthy special interests,” Martin said.

At least 2.5 million low-income people quickly lost help affording groceries under a Republican-passed law that added new requirements for the nation’s largest nutrition program and shifted hundreds of millions of dollars in costs from the federal government to states, according to a study the Center on Budget and Policy Priorities published Wednesday.

Some 6% of the 41 million Americans enrolled in the Supplemental Nutrition Assistance Program, or SNAP, when President Donald Trump signed the One Big Beautiful Bill Act on July 4, 2025, were no longer receiving benefits by the end of the year. 

The left-leaning think tank’s report was based on U.S. Department of Agriculture and state agency data from July to December 2025. 

Arizona was the largest outlier in the data, with a whopping 47% of people in the program — about 424,000 Arizonans — losing benefits in 2025, according to the think tank, which cited more recent state agency data in addition to last year’s USDA numbers.

Full-year 2025 data from the USDA, which operates the federal side of SNAP, shows an even bigger drop of 3.4 million people, or roughly 8% of the program’s total, CBPP said. SNAP is federally funded and administered by states, though that cost-share will change under the law.

In a late Wednesday email, a USDA spokesperson applauded the drop in SNAP participation, noting the program’s rolls had fallen below 40 million for the first time since the pandemic. The spokesperson said the program would continue “to serve those with the greatest need while also strengthening program integrity.”

“This change reflects several factors, including the most comprehensive work requirement reform since 1996, the One Big Beautiful Bill of 2025, as well as USDA initiatives that expand access to employment services, career and technical education, and case‑management support through USDA’s More Than a Job campaign,” the spokesperson wrote.

Incentives for states

The study did not intend to find a cause for the decline, co-author Joseph Llobrera, CBPP’s senior director of research for food assistance, said in an interview. But he noted the law created incentives for states to limit participation in the program. 

Under a provision of the law that is not yet in force, the share of the program’s cost that states must shoulder is tied to the state’s “error rate” — payments a state makes that were either more or less than the beneficiary should have received.

That motivates states to restrict access to the program, without providing a corresponding reward for expanding access, Llobrera said.

“So the incentive structure that’s in place, it really pushes states to make it harder to get onto the program for people who need that assistance,” he said.

The drop in participation happened without improving economic conditions, such as a decline in the unemployment rate, the researchers said. 

That indicates people are moving off the rolls due to changes in the program, not because their circumstances have improved to the point they no longer need food assistance, the study said.

Many provisions of the law have not yet gone into effect. The error rate penalties, for example, start in fiscal year 2028.

Design, not a bug

In part, though, that restriction is by design, as the law’s supporters intended to cut SNAP benefits for recipients who met certain criteria and to control what they portrayed as fraud and waste at the state level. 

The cuts in the federal share of SNAP funding helped pay for massive tax cuts and a boost to military spending in other parts of the megabill, which Republicans passed without any Democratic support through a process known as budget reconciliation.

The proponents of the agriculture section of the megabill championed provisions to make beneficiaries report their eligibility more often, boost work requirements, disqualify certain categories of legal immigrants, raise the age of children at which parenting would cease to qualify as work and otherwise tighten the availability of the program.

The provisions would help ensure only those who truly needed the federal assistance would get it, advocates said. 

It would also create an incentive for states to control erroneous payments, which was not the case when the federal government took on the entire cost of the program before the bill’s enactment.

“It is a disservice to the truly needy to rely on SNAP,” House Agriculture Chairman Glenn “GT” Thompson, a Pennsylvania Republican, said as the committee marked up the bill last year. “Clearly, SNAP is not working as Congress intended. We must ensure the proper incentives are in place for states to administer the program more effectively for those it serves.”

Llobrera said he understood members of both parties would engage in rhetoric about restrictions on SNAP, but that the center at the time was “raising the alarm that the bill was going to hurt people.”

A spokesperson for Thompson did not respond to a request for comment Wednesday.

Arizona

The CBPP report included a breakout section on Arizona, where the SNAP enrollment dropped much further than any other state.

As in other states, economic gains did not explain the changes in Arizona, the case study said.

“This dramatic drop cannot be explained by a rapid improvement in people’s economic well-being or reduced need for help affording food,” the report said, noting that Arizona’s unemployment rate rose over the period of the study, while the cost of groceries rose about 4% in 2025.

The state’s Democratic governor, Katie Hobbs, and state agency spokespeople have blamed the GOP law for the drastic reduction in benefits, the study said, but the decline goes beyond what would be expected based on the law’s provisions. 

That suggests that state administrators — even under Democratic leaders — are going beyond the minimum requirements of the law to restrict access, the authors said.

“Thus, it appears that a combination of factors, including the megabill and the state’s response to it, are contributing to the sharp decline in the number of Arizona families getting SNAP,” they wrote.

Because the law also raises the costs to states of administering the program, in addition to requiring states pay for some portion of benefits, some, including Arizona, cut staff ahead of the law’s enactment, Llobrera said. 

“With the cuts to the administrative funding for states due to that megabill, those are only just going to accelerate,” he said.

Shutdown

Such changes to SNAP rules added to an already tumultuous period for the program’s recipients. Over the course of a then-record-long partial government shutdown last year, benefits were constantly turned off and on as the Trump administration said it could not spend SNAP funds during a shutdown and federal courts held that benefits must be paid.

Spokespeople for the White House did not return messages seeking comment Wednesday.

States are paying contractors such as Deloitte, Accenture, and Optum millions of dollars to help them comply with the One Big Beautiful Bill Act — a law that will strip safety-net health and food benefits from millions.

State governments rely on such companies to design and operate computer systems that assess whether low-income people qualify for Medicaid or food aid through the Supplemental Nutrition Assistance Program, commonly referred to as food stamps. Those state systems have a history of errors that can cut off benefits to eligible people, a KFF Health News investigation showed.

These benefits, provided to the poorest Americans, can mean the difference between someone obtaining medical care and having enough to eat — or going without.

States are now racing to update their eligibility systems to adhere to President Donald Trump’s sweeping tax and domestic spending law. The changes will add red tape and restrictions. They are coming at a steep price — both in the cost to taxpayers and coverage losses — according to state documents obtained by KFF Health News and interviews.

The documents show government agencies will spend millions to save considerably more by removing people from health benefits. While states sign eligibility system contracts with companies and work with them to manage updates, the federal government foots most of the bill.

The law’s Medicaid policies will cause 7.5 million people to become uninsured by 2034, according to the nonpartisan Congressional Budget Office. Roughly 2.4 million people will lose access to monthly cash assistance for food, including those with children.

In five states alone, company estimates developed for state officials and reviewed by KFF Health News show that changes will cost at least $45.6 million combined.

“This is a pretty big payday,” said Adrianna McIntyre, an assistant professor of health policy and politics at Harvard’s T.H. Chan School of Public Health.

The law, which grants tax breaks to the nation’s wealthiest people, requires most states to tie Medicaid coverage for some adults to having a job, and imposes other restrictions that will make it harder for people with low incomes to stay enrolled. SNAP restrictions began to take effect in 2025. Major Medicaid provisions begin later this year.

Documents prepared by consulting company Deloitte estimate that a pair of computer system changes for Medicaid work requirements in Wisconsin will cost nearly $6 million. Two other changes related to the state’s SNAP program will cost an additional $4.2 million, according to the documents, which Deloitte drafted for the Wisconsin Department of Health Services.

In Iowa, changes to its Medicaid system are expected to cost at least $20 million, according to an estimate prepared by Accenture, a consulting company that operates the state’s eligibility system.

Optum — which operates the platform Vermont residents use for Medicaid and marketplace health plans under the Affordable Care Act — estimated that it could cost roughly $1.8 million to evaluate and incorporate new health coverage restrictions.

Initial changes in Kentucky, which has had a contract with Deloitte since 2012, have cost the state $1.6 million. And in Illinois, Deloitte estimated modifications will cost at least $12 million.

A historic mandate

For six decades after President Lyndon Johnson created the government insurance program in 1965, Congress had never mandated that Medicaid enrollees have a job, volunteer, or go to school.

That will change next year. The tax and spending law enacted by Trump and congressional Republicans requires millions of Medicaid enrollees in 42 states and the District of Columbia to prove they’re working or participating in a similar activity for 80 hours a month, unless they qualify for an exemption. The CBO projected, based on an early version of the bill, that 18.5 million adults would be subject to the new rules — nearly half of those enrolled.

Vermont Medicaid officials expect it will cost $5 million in fiscal 2027 to implement changes in response to the federal law, said Adaline Strumolo, deputy commissioner of the Department of Vermont Health Access. About $1.8 million is for Optum to make eligibility system adjustments. Optum is a subsidiary of UnitedHealth Group.

The One Big Beautiful Bill Act will subject nearly 55,000 Vermont Medicaid recipients to work requirements — about a third of the state’s enrollees.

The law forced the state “to essentially drop everything else we were doing,” Strumolo said in an interview. “This is a big, big lift.”

Optum’s contract with the state was worth $125.6 million as of October.

Nearly two-thirds of adult Medicaid enrollees nationally are already working, according to KFF. Advocacy groups for Medicaid recipients say work requirements will nonetheless cause significant coverage losses. Enrollees will face added red tape to prove they’re complying. And eligibility systems already prone to error will have to account for employment, job-related activities, and any exemptions.

An estimated 5.3 million enrollees will become uninsured by 2034 due to work requirements, the CBO reported.

In Wisconsin, state officials estimate roughly 63,000 adults could lose coverage after work requirements take effect. Not covering those people would save $532.6 million in Medicaid spending for one year.

Wisconsin’s eligibility system for Medicaid and SNAP — known as CARES — was implemented statewide in 1994, and initially was a transfer system from Florida, according to a 2016 state document.

Deloitte submitted its cost estimates for Medicaid and SNAP changes to the state in September and December. Elizabeth Goodsitt, a spokesperson for the Wisconsin Department of Health Services, declined to answer questions about whether additional changes will be needed, how much it will cost to make all eligibility system changes to comply with the new federal law, and whether the state negotiated prices with Deloitte.

Bobby Peterson, executive director of the public interest law firm ABC for Health, said Wisconsin has invested “very little” to help people navigate the Medicaid eligibility process, which soon will become more difficult.

“But they’re very willing to throw $6 million to their contractors to create the bells and whistles,” Peterson said. “That’s where I feel a sense of frustration.”

New hurdles for vets and homeless people

Medicaid work requirements are only one change required by Trump’s tax law that will make it harder to obtain safety-net benefits.

Starting in October, the law prohibits several immigrant populations from accessing Medicaid and ACA coverage, including people who have been granted asylum, refugees, and certain survivors of domestic violence or human trafficking. Beginning Dec. 31, states must verify eligibility twice a year for millions of adults — doubling state officials’ workload. And the law restricts SNAP benefits by requiring more adult recipients to work and by removing work exemptions for veterans, homeless people, and former foster youth.

Days after Trump signed the bill in July, Kentucky health officials raced to make changes to the state’s integrated eligibility system, which verifies eligibility for Medicaid, SNAP, and other programs. Deloitte operates the system under a five-year contract worth more than $157 million. According to documents obtained by KFF Health News, initial changes costing $1.6 million were labeled a “high priority” and approved on an “emergency” basis, with some of the changes to the nation’s largest food aid program going into effect almost immediately.

Officials with Kentucky’s Cabinet for Health and Family Services declined to answer a detailed list of questions, including how much it will cost to make all the modifications needed.

Deloitte spokesperson Karen Walsh said the company is working with states to implement new requirements but declined to answer questions about cost estimates in several states. “We are delivering the value and investments we committed to,” Walsh said.

In most states, government agencies rely on contractors to build and run the systems that determine eligibility for Medicaid. Many of those states also use such computer systems for SNAP. But the federal government — that is, taxpayers — covers 90% of state costs to develop and implement state Medicaid eligibility systems and pays 75% of ongoing maintenance and operations expenses, according to federal regulations.

“Five, 10 years ago, I’m not sure if you would hear much mention of SNAP from a Medicaid director,” Melisa Byrd, Washington, D.C.’s Medicaid director, said in November at an annual conference of Medicaid officials. “And particularly for those with integrated eligibility systems — as D.C. is —­ I’m learning more about SNAP than I ever thought.”

The federal law was the topic du jour at last year’s gathering in Maryland, held at the Gaylord National Resort and Convention Center, the largest hotel between New Jersey and Florida.

Consulting companies had taken notice. Gainwell, an eligibility contractor and one of the conference’s corporate sponsors, emblazoned its logo on hotel escalators. Companies set up booths with materials promoting how they could help states and handed out snacks and swag.

“Conduent helps agencies work smarter by simplifying operations, cutting costs and driving better outcomes through intelligent automation, analytics, and innovation in fraud prevention,” read one such handout from another contractor. “Together, we can better serve residents at every step of their health journeys.” Conduent holds Medicaid eligibility and enrollment contracts in Mississippi and New Jersey, their Medicaid agencies confirmed to KFF Health News.

In handouts, Deloitte touted its role in “building a new era in state health care” and as “a national leader in Medicaid program and technology transformation, building a strong track record across the federal, state, and commercial health care ecosystem.” KFF Health News found that Deloitte, a global consultancy that generated $70.5 billion in revenue in fiscal 2025, dominates this slice of government business.

“With Medicaid Community Engagement (CE) requirements, states are tasked with adding a new condition of Medicaid eligibility to support state and federal objectives,” added another brochure. “Deloitte offers strategic outreach and responsive support to help states engage communities, lower barriers, and address access to coverage.”

A $20.3 million bill in Iowa

Before Trump signed the One Big Beautiful Bill Act, Iowa lawmakers wanted to impose their own version of work requirements. They would have applied to 183,000 people before any exemptions. The new law would necessitate a change to Iowa’s Medicaid eligibility system, according to documents prepared by Accenture, which operates Iowa’s system through a contract worth more than $60 million.

Adding the ability to verify work status would cost up to $7 million, an Accenture estimate from March 2025 showed. By July, the cost to implement the One Big Beautiful Bill Act’s work requirements and other Medicaid provisions skyrocketed to roughly $20.3 million. Accenture’s analysis said the federal law necessitated additional changes to Iowa’s system. Making employment a condition of Medicaid benefits could cause an estimated 32,000 Iowans to lose coverage, according to a 2025 state document.

Cutting 32,000 people from coverage could save $183 million in one year, a fraction of the $8.9 billion Iowa and the federal government spend on Medicaid in a given year.

In Cedar Rapids, most of Eastern Iowa Health Center’s patients rely on Medicaid, CEO Joe Lock said. He questioned the government’s logic of spending tens of millions of dollars on a policy to remove Iowans from Medicaid.

Most of the health center’s patients live at or below the federal poverty level — currently $33,000 for a family of four.

“There is no benefit to this population,” Lock said.

Danielle Sample, a spokesperson for Iowa’s Department of Health and Human Services, did not answer questions about how much it will cost to implement changes to the state’s separate SNAP eligibility system.

In Illinois, the state’s work this year is largely focused on meeting major provisions of the One Big Beautiful Bill Act. The state estimates that as many as 360,000 residents could lose Medicaid, largely due to the work requirements, said Melissa Kula, a spokesperson for the Illinois Department of Healthcare and Family Services.

Kula confirmed that most of the work detailed in one of Deloitte’s estimates — priced at $12 million — is related to Trump’s law. The estimate also mentions other work. Kula said Deloitte is charging the state a $2 million fixed fee related to work requirements.

The Trump administration has acknowledged that the work is coming at a cost. In January, top officials for the Centers for Medicare & Medicaid Services said government contractors, including Deloitte, Accenture, and Optum, have promised to offer discounts and reduced rates through 2028 to help states incorporate system changes.

“The companies were extremely excited to do this,” said Daniel Brillman, the top CMS Medicaid official. “Everyone’s really focused on getting to work.”

CMS spokesperson Catherine Howden declined to answer questions about the discounts.

Goodsitt, the Wisconsin Medicaid spokesperson, declined to answer questions about whether Deloitte has discounted its rates. Officials with Kentucky’s Cabinet for Health and Family Services did not answer a detailed list of questions, including whether Deloitte extended discounts to make these changes.

It’s unclear what discounts, if any, Deloitte and Accenture have offered to individual states. Walsh, the Deloitte spokesperson, declined to answer detailed questions about the discounts the Trump administration announced this year. Accenture did not respond to repeated requests for comment.

Strumolo, the Vermont health official, said state officials discussed the announcement with Optum “in detail.”

Optum pledged to offer discounts for a specific module related to Medicaid work requirements. That product is unworkable for Vermont because it would mean “moving to a new system when we don’t have to.” When asked about whether the company offered discounts, Strumolo said “not explicitly.”

In a statement, UnitedHealth Group spokesperson Tyler Mason said Optum supports state implementation of new federal requirements “with a range of options to meet their unique cost and policy needs.”

He declined to specify whether Optum discounted Vermont’s rates and how it calculated the costs of doing its work. “Optum is helping mitigate upfront implementation expenses so states can focus on approaches that reduce duplication, accelerate implementation, and manage costs over time — supporting better outcomes for individuals covered by Medicaid,” Mason said.

Strumolo said Optum’s initial changes in Vermont cover items that take effect this year and in 2027 — Medicaid work requirements, checking eligibility every six months, and prohibiting certain immigrants from qualifying for health programs.

“There’s a lot more that could come,” she said.

KFF Health News is a national newsroom that produces in-depth journalism about health issues and is one of the core operating programs at KFF—an independent source of health policy research, polling, and journalism. Learn more about KFF.

Subscribe to KFF Health News’ free Morning Briefing.

This article first appeared on KFF Health News and is republished here under a Creative Commons Attribution-NoDerivatives 4.0 International License. 

Federal Medicaid cuts could exact a heavy toll on psychiatric units at hospitals across the country, many of which are already struggling to keep their doors open but provide essential mental health care to people who need it.

Psychiatric units are costly and, like labor and delivery services, typically lose money for hospitals and tend to be reimbursed at lower rates than other health services. In contrast, some specialty units, such as cardiovascular care, are lucrative: Cardiologists can generate up to seven times their salaries for hospitals.

Between 2023 and 2024, 126 hospitals across the U.S. shut down their inpatient psychiatric units, according to data provided to Stateline by the American Hospital Association.

“(Psychiatric units) are often in the red, and, for lack of a better word, kind of subsidized by the rest of the health system,” said Sarah Steverman of the National Association for Behavioral Healthcare. Steverman oversees regulatory affairs and is the liaison for a committee of hospital psychiatric unit administrators and clinicians.

The One Big Beautiful Bill Act that President Donald Trump signed into law last year will add to the strain, Steverman and other experts say.

The law is projected to cut federal Medicaid spending by an estimated $886.8 billion over the next decade, largely because new work requirements will push people off the rolls, according to estimates by the Congressional Budget Office. CBO estimates that it could increase the number of people without health insurance by 7.5 million in 2034.

Those cuts will have a significant effect on mental health care because Medicaid, jointly funded by the federal government and the states, covers more people with mental illness than any other public or private insurer — roughly 29% of the estimated 52 million nonelderly adults with mental illness, or about 15 million people, according to health research group KFF.

Behavioral health policy experts say the Medicaid changes will force hospital psychiatric units to provide care to many more people who don’t have insurance. Even before the law, Medicaid often didn’t fully reimburse hospitals for the cost of mental health care, unit administrators said.

Along with increasing the number of people without insurance, the One Big Beautiful Big Act places new limits on states’ ability to maximize federal funding and reimburse providers.

The federal government allows states with contracted Medicaid managed care organizations running their Medicaid programs to direct them to pay providers more. But beginning in 2028, the One Big Beautiful Bill Act will cap these state-directed payments, forcing state Medicaid programs to reduce reimbursement rates by 10 percentage points each year until they reach either 100% or 110% of what Medicare pays.

The federal law also caps provider taxes, a strategy states have used to boost the Medicaid dollars they get from the federal government.

As a result, states will face the choice of replacing the lost federal money with state dollars, scaling back services or providing coverage to fewer people.

Conservatives who have backed the Medicaid cuts say such tools are accounting tricks that states have used to draw down more federal money. Some have even called the provider taxes a “money laundering” scheme. Eliminating them, they say, will force states to be more accountable for their Medicaid spending.

“States are gaming the system — creating complex tax schemes that shift their responsibility to invest in Medicaid and rob federal taxpayers,” Dr. Mehmet Oz, the administrator of the federal Centers for Medicare & Medicaid Services, said in a news release last year.

But Angela Kimball, chief advocacy officer at Inseparable, a mental health advocacy organization, said the tools are essential, and that the cuts will be detrimental.

“For the mental health system, and particularly for facility-based care, it (Medicaid) is the financial foundation. And when you simultaneously reduce who’s covered, what providers get paid, and limit the tools states have to make up the difference, you’re not just trimming around the edges; you’re undermining the whole structure,” Kimball said.

The mental health field is also struggling with workforce shortages across states, especially in rural areas. As of December 2024, more than 122 million Americans lived in designated mental health professional shortage areas.

Dr. Arpan Waghray, a psychiatrist and CEO of Providence’s Well Being Trust, serves as a member of the American Psychiatric Association’s Council on Healthcare Systems and Financing. Providence has 16 psychiatric units across Alaska, California, Oregon and Washington state, and Medicaid and Medicaid HMOs account for 42% of patients across those units. That number increased as the states expanded eligibility under Obamacare.

In contrast, Medicaid pays for roughly 13% of oncology inpatients and about 10% of cardiology inpatients across the hospital systems.

“Inpatient psychiatric units, especially when they’re part of larger hospitals and academic centers, like our community hospitals … they generally tend to operate on a loss,” Waghray said. “We are no exception to that.”

He noted that estimates show psychiatric units have a negative operating income of about 37%.

“We don’t want to make a profit on psychiatric units,” he said, adding the goal is to at least “break even.”

Waghray said if more units are forced to shutter, that will lead to more crowding in emergency rooms and jails. Often, jails and prisons — facilities with inadequate care — end up being mental health care providers for people who lacked access to care. People in crisis also may be forced to wait for a psychiatric bed to open up elsewhere.

“It has this cascading effect that touches everyone’s lives,” Waghray said. “The two places where people get care if they don’t get care in the right setting is the inpatient (psychiatric) unit, and you cut that, then essentially you have emergency departments that are overcrowded or jails that are overcrowded.”

Health economist John McConnell, director of the Center for Health Systems Effectiveness at Oregon Health and Sciences University, said “the whole mental health system is really going to get hit with a shock here.”

“Crisis care funding is all over the place, and there’s not really a consistent way of funding it, and it’s often underfunded,” he said. “You had a fragile system … made more fragile with a lot of the executive orders from the Trump administration — and then (the new federal law) has sort of further chipped away at it.”

Steverman said that people with severe mental health emergencies — such as acute psychosis, mania or suicidality — who need urgent treatment after emergency room intake often require multiple clinical staff and observation.

Gretchen Clark Bower, senior director of Behavioral Health Services at Providence Regional Medical Center Everett, in Washington state, said the hospital’s inpatient psychiatric unit, which opened about five years ago, relies heavily on Medicaid: Roughly 80% of psychiatric inpatients are covered by Medicaid, and many have severe illnesses.

“It has been a stretch financially for a long time,” Bower said. “The costs of providing care are far more than what we’re getting reimbursed. And that is extremely challenging.”

Everett’s average psychiatric hospitalization is about 16 days. But sometimes, insurers will only cover up to a certain number of hospitalization days for mental health, Bower said. That leaves the hospital to absorb the rest of the costs.

“We want to make sure that we are discharging people when they are safe to discharge — not just when their insurance stops paying,” Bower said.

Bower said she worries the cuts will destabilize people if their care gets interrupted after losing coverage, putting more pressure and costs on the health system.

“It worries me a lot,” she said. “How do we continue to take care of our community into the future, and how do we sustain ourselves financially as we do that? It’s an incredibly difficult task.”

A report from the American Psychiatric Association found that states that had expanded Medicaid eligibility saw smaller increases in suicide compared with nonexpansion states: Medicaid expansion was associated with about 0.4 fewer suicides per 100,000 people yearly.

“Combined with workforce shortages and long-standing insufficient reimbursement for psychiatric services, further reductions in Medicaid will increase pressure on already struggling facilities,” said Ben Teicher, spokesperson for the American Hospital Association. “Our members have been worried about their psych units for a long time, and any further erosion of what Medicaid pays for would make it even worse.”

Stateline reporter Nada Hassanein can be reached at nhassanein@stateline.org.

State officials across the country are looking to crack down on fraud and mistakes in the nation’s largest food assistance program, spurred by looming federal rules that will force states with high error rates to pay more.

But the Republican proposals mostly focus on more frequently verifying the eligibility of individual households that participate in the Supplemental Nutrition Assistance Program (SNAP), rather than on broader administrative shortcomings that allow most of the waste and fraud to occur.

Policies such as verifying recipients’ eligibility each month — which can involve cross-checking multiple databases or collecting extra documentation — might increase state agencies’ workloads without lowering error rates. This is especially likely if states don’t boost funding to handle the extra paperwork, investigate fraud or resolve recipient and agency errors.

Eliza Kinsey, an assistant professor at the University of Pennsylvania’s Perelman School of Medicine who focuses on hunger, said staffing shortages, outdated technology and changes to eligibility rules that require oversight are making it harder for state agencies to avoid overpaying or underpaying recipients — the errors that will cost states money under the new federal rules.

“The fact that we’re seeing error rates that are higher really makes sense, given the context of what’s going on in SNAP right now,” Kinsey said.

SNAP, formerly known as food stamps, is a federal-state program that provides recipients with a debit card that can be used to purchase food at grocery stores and other retailers. SNAP errors and fraud often get conflated, but they’re largely separate issues: Errors are unintentional mistakes by SNAP agencies or recipients, while fraud is intentional theft.

SNAP errors occur when the state overpays or underpays SNAP recipients. They’re caused either by unintentional recipient mistakes — forgetting to report a change in how many people live in the household, for example — or by an agency processing error, such as incorrectly calculating a household’s expenses.

States have encountered instances of individual recipient fraud, though they can go uninvestigated when resources are scarce. Large sums, in the millions, have been stolen by sophisticated crime rings that electronically “skim” money from the debit cards that SNAP recipients use to purchase food.

State SNAP error rates include recipient fraud, recipient errors, and state agency errors.

Alabama earned local and national media attention last year when initial U.S. Department of Agriculture data from early 2025 showed it leading the nation in stolen SNAP benefit claims, ahead of much more populous California and New York.

“There’s a lot of talk about SNAP fraud, and a lot of it is misrepresented,” Nancy Buckner, commissioner of the Alabama Department of Human Resources, which administers Alabama’s SNAP program, told state lawmakers at a January budget hearing. “The biggest SNAP fraud in this country are those people that are doing it electronically.”

In recent years, her department noticed SNAP purchases being made in states nowhere near Alabama, she said, including New York, Pennsylvania, Massachusetts and Maine.

“It was obvious to us we don’t have that many Alabama clients shopping in those other states,” she said. This month, Alabama became the second state, behind California, to issue SNAP debit cards to recipients with the kind of microchips that are standard on commercial debit cards. Chipped cards are harder to steal from than those with magnetic strips only.

In the middle of it all, states are staring down massive cuts in federal funding. President Donald Trump’s One Big Beautiful Bill Act puts states on the hook for more administrative costs and forces states to pay a higher share of benefits, in some cases hundreds of millions of dollars, if they have higher error rates.

“The federal government is telling states, you have to pay more in administrative costs, and you have to bring your error rates down simultaneously,” said Kinsey. “It feels like those two changes are in opposition with each other.”

Error prone

Last month, Alabama state lawmakers grilled Buckner, demanding to know her plan for lowering the state’s error rate.

Under Trump’s new law, Alabama’s SNAP administrative costs will rise by $39 million. Meanwhile, the state’s error rate, which Buckner expects to be about 9%, is below the national average, but high enough to allow the feds to force the state to cover 10% of its SNAP benefits starting in fiscal 2028.

All told, Alabama could be on the hook for an additional $200 million or more per year by 2028.

“Is there anything that can be done to prevent running into that $200 million wall?” Alabama state Sen. Greg Albritton, a Republican, asked Buckner during a budget hearing in January. “Right now I think that the train’s got the light on, heading straight for us.”

Buckner said she hoped for some extra wiggle room from the feds, but provided few details on how the department could lower Alabama’s error rate enough to avoid financial penalties.

Currently, the federal government pays for SNAP benefits and splits administration costs 50/50 with states. But starting in October, under the One Big Beautiful Bill Act, all states will be on the hook for 75% of their own administrative costs. And the new law allows the feds to penalize states for their SNAP errors, requiring them to pay from 5%-15% of their SNAP benefit costs if their error rates are over 6%.

The only states under the 6% threshold, per the most recent data available from USDA, which oversees the program, were Idaho, Nebraska, Nevada, South Dakota, Utah, Vermont, Wisconsin and Wyoming.

Republicans say these new rules will reduce the federal government’s investment in SNAP while giving states some “skin in the game” when it comes to being responsible with federal money.

“One of the problems is the federal programs don’t mandate the prevention, detection and prosecution of fraud,” said Dawn Royal, with the United Council on Welfare Fraud, a national membership group focused on fraud in public assistance programs. “And so states are unwilling to spend state money in order to protect federal money.”

In Alabama, the USDA replaced nearly $16 million in stolen benefits from fiscal 2023 to fiscal 2025, according to federal data.

The Alabama Senate is currently considering a bill that would require state agencies to conduct monthly checks of other state databases to make sure SNAP enrollees remain eligible.

Buckner told state lawmakers that increasing eligibility checks for SNAP benefits would “shoot that error rate up, way up.” The state’s Legislative Fiscal Office estimated the additional work for both Medicaid and SNAP under the pending bill could cost $16.7 million per year.

“Monthly reporting is not the answer to that, at all,” she said.

But other states are looking at similar measures.

Lawmakers in states including Idaho, Kansas and Wyoming have introduced bills to require their state SNAP administrators to check eligibility of SNAP recipients more frequently. Missouri, Oklahoma and Utah bills would require verification of citizenship or legal immigration status before approving applicants for SNAP benefits. A Wisconsin bill would require the state’s Democratic governor to bow to a White House demand to turn over state data on SNAP recipients.

And in Arizona, GOP lawmakers wanted to go even further than the new federal requirements. Last week Democratic Gov. Katie Hobbs vetoed a package of Republican bills that would have required the state agency administering SNAP to get its error rate below 3% by 2030 or face financial penalties, and cut an additional 10% from its budget if the state failed to take corrective action.

States target fraud

SNAP fraud has made state and national headlines in recent years, but there’s not a broad consensus on the scale of the problem nor how to address it.

Some SNAP fraud is perpetrated by recipients who lie in order to get SNAP benefits for which they’re not eligible. But there’s also organized electronic SNAP theft, which involves thieves taking control of EBT accounts through electronic methods such as card skimming or cloning, bot attacks and phishing scams. Skimming is a form of theft where devices are illegally installed inside sales terminals at a store and capture card data. That data is then used to make unauthorized purchases or steal from the victim’s account.

In December, a longtime USDA employee was sentenced to two years in prison for her role in what the U.S. Department of Justice called a “sprawling fraud and bribery scheme” that generated more than $66 million in unauthorized SNAP transactions. The same month, two Romanian nationals were indicted for their role in allegedly stealing more than $160,000 in benefits in Oregon and elsewhere. In 2025, California reported more than $100 million in stolen funds from California SNAP recipients’ EBT cards.

States reported replacing more than $360 million in stolen benefits from fiscal 2023-2025, according to federal data. Experts and state officials differ on whether recipients or organized crime rings are the biggest threats to SNAP. But since the federal government stopped reimbursing stolen SNAP benefits at the end of 2024, more states are looking at ways to address fraud.

States including Arkansas, Maryland, Massachusetts, Michigan, New Jersey, Oklahoma and Virginia are joining Alabama and California in rolling out chip cards to make it harder for skimmers to steal SNAP benefits.

“SNAP fraud is rampant,” said Royal, of the United Council on Welfare Fraud. “If anybody tells you that there’s not SNAP fraud out there, they’re trying to pull the wool over your eyes. It exists in all 50 states. It is definitely a plague on the taxpayers.”

Stateline reporter Anna Claire Vollers can be reached at avollers@stateline.org.

Advocates are urging state lawmakers to help Wisconsin absorb new administrative costs as a result of federal changes to the nation’s primary food assistance program.

Changes made to Supplemental Nutrition Aid Program (SNAP) benefits in the mega bill signed by President Donald Trump last year will add $69.2 million to the cost of Wisconsin’s FoodShare program in the current two-year budget, according to the Wisconsin Department of Health Services. The agency administers the FoodShare program.

The federal mega bill, which Trump signed on July 4, cut taxes along with spending on some federal programs, including SNAP.

A letter from 165 participating groups asks legislators “to take immediate action to provide funding for these changes. Additional delays in providing this funding will put Wisconsin taxpayers at risk of paying for increased costs and will negatively impact communities, businesses, and SNAP recipients across Wisconsin.”

The coalition of social service, food industry and advocacy organizations held a press conference Wednesday to call for the added state support.

“At an average of $6 per person per day, SNAP supports nearly 700,000 Wisconsinites, and also supports local economies with each dollar in SNAP benefits, generating between $1.50 and $1.80 in economic activity,” said Jackie Anderson, executive director of Feeding Wisconsin.

The press conference coincided with a lobbying day for the Wisconsin Cheesemakers Association, one of the coalition members

“FoodShare brings more than a billion dollars of spending power into our state every year, and a large share of that is returned to Wisconsin producers, and in particular, dairy producers, that flows not only through grocery stores, but back through cheese plants and into dairy farms like the one my family owns,” said Andy Hatch, the owner of Uplands Cheese in Dodgeville and the cheesemakers’ association’s policy chair.

“This is a bipartisan issue” — one that the association’s members, Republicans and Democrats alike, “have all agreed on,” Hatch added. “Our core mission is to feed people and to support our communities, rural and urban, and is why we’ve come together with people across the state to ask our lawmakers to fund the requested $69 million and make sure that there is not a disruption to FoodShare.”

The request includes funding to add administrative staff to avoid errors in the state’s operation of the program. Among the changes to SNAP is a penalty that would require states to pick up some of the benefit costs if their errors exceed 6%. State officials have said that could cost Wisconsin up to $205 million.

The $69 million that the state has estimated it will require to implement those changes was not included in the 2025-27 state budget. Gov. Tony Evers’s office said he had told lawmakers about the need last August, and Evers highlighted the coalition’s call in a statement Thursday.

“Because of President Trump’s so-called ‘Big Beautiful Bill,’ Wisconsin taxpayers will already be on the hook for over a quarter of a billion dollars in new costs in future budgets,” Evers said.

“And if we don’t get the resources we’ve been asking for in order to keep our FoodShare error rate low, Wisconsinites could have to pay hundreds of millions even more in penalty fees each year,” he added. “That just cannot happen—it will cripple future state budgets. This funding is critical, and the Legislature must get this done.” 

The request includes $16.1 million to add staff in order to ensure that FoodShare is administered accurately. The new federal law requires states with SNAP error rates exceeding 6% to cover from 5% to 15% of the benefit costs starting in October 2027.

Wisconsin’s error rate in 2024 was 4.47%, the state health department said in a news release in August. The error rate flags instances when recipients get too much or too little SNAP aid or the state makes other mistakes in the program.

“However, rates naturally fluctuate, and even more so when the federal government changes program policies and standards with virtually no notice and is inconsistent with its definition of an error,” the health department release stated.

If the error rate rises and requires Wisconsin to start paying some of the benefit costs, that could cost the state up to $205 million a year, according to the Wisconsin DHS.

To hold down the state’s “historically low error rate while implementing the other provisions” in the federal law and to maintain quality control in administering FoodShare, the state and Wisconsin counties combined will need to add 56 employees, according to the health department.

The new federal law also increases the state’s share of administrative costs for SNAP from 50% to 75%, starting Oct. 1, 2026. That will cost the state an additional $32.4 million.

In addition, the law expanded work requirements for people who receive SNAP, which the Wisconsin DHS estimates would affect about 43,700 Wisconsin FoodShare recipients.

The new requirements affect anyone ages 18 to 64 without a child under 14 at home, including parents with children ages 14 to 17, who were previously exempt from work requirements. Previously work requirements applied to adults age 54 or younger without any children under 18 at home.

The state has estimated it would need an additional $20.7 million to increase participation in the FoodShare employment and training program for recipients who have work requirements and aren’t working already.

Reno Wright, public policy and advocacy director at the Hunger Task Force in Milwaukee, said more than 40% of FoodShare recipients are children, with about one in four Wisconsin children living in a household that uses FoodShare sometime during the year.

“Research shows that SNAP reduces child poverty by nearly 30% and is linked to long-term health and educational outcomes, but those outcomes depend on a system that functions efficiently,” Wright said. The funding sought for the program “ensures that the department has the staffing and the infrastructure needed to prevent delays and disruptions as new federal requirements take effect.”

There is not a stand-alone bill in the Legislature currently for the additional funding, but advocates hope an amendment could be added to another piece of  legislation that would fund SNAP.

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