Will Medicare Be Cut Under PAYGO? | 2025-2026 Medicare Funding Explained
Understanding PAYGO and Its Impact on Medicare
With the passage of large federal legislation—like the One Big Beautiful Bill (H.R. 1)—there is growing concern about how it could affect Medicare. While the bill aims to reduce healthcare costs and improve transparency, it could unintentionally trigger automatic cuts under a budget rule called PAYGO.
Here’s what you need to know about how PAYGO works, the impact on Medicare, and whether cuts are likely to happen.
What Is PAYGO?
PAYGO, or Pay-As-You-Go, is a budget rule that requires Congress to offset the cost of new legislation that increases the federal deficit. If Congress passes a law that adds to the deficit and does not waive PAYGO, the Office of Management and Budget (OMB) is required to apply across-the-board cuts to certain federal programs to compensate.
How Medicare Is Affected by PAYGO
If PAYGO is not waived:
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Medicare provider payments would be cut by up to 4%.
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This does not reduce Medicare benefits, eligibility, or coverage for beneficiaries.
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Cuts would apply to payments to hospitals, doctors, nursing homes, and Medicare Advantage plans.
In practical terms, this could mean:
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Lower reimbursement for providers
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Potential strain on rural or underfunded facilities
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Possible reluctance from some providers to accept new Medicare patients
History: When Has PAYGO Affected Medicare?
Despite many bills triggering PAYGO over the years, Congress has never allowed the Medicare cuts to take effect. Here’s a look at recent history:
| Year | Legislation Triggering PAYGO | Did PAYGO Apply? | Congressional Action | Medicare Cuts? |
|---|---|---|---|---|
| 2013 | Taxpayer Relief Act | Yes | Waived | No |
| 2017 | Tax Cuts and Jobs Act | Yes | Waived | No |
| 2021 | American Rescue Plan | Yes | Waived | No |
| 2023 | Inflation Reduction Act | Yes | Waived | No |
This consistent pattern shows that while PAYGO is a real budget rule, Congress has always intervened to protect Medicare from automatic reductions in provider funding.
Will Medicare Be Cut Because of the One Big Beautiful Bill?
If the One Big Beautiful Bill increases the federal deficit and PAYGO is triggered, the potential Medicare cut would be about $36 billion annually.
However, based on history and bipartisan pressure from seniors’ advocates and provider groups, it is very likely that Congress would waive these cuts, just as they have done every time in the past.
The Bottom Line
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No Medicare benefits will be cut directly.
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PAYGO could lead to a 4% cut in provider payments, but Congress has always waived this in the past.
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Seniors are unlikely to see any disruption in coverage, but it’s important to monitor how Congress responds to future budgetary pressures.