What changes and what doesn’t

by Dave Soulia, for FYIVT.com

The “Big Beautiful Bill”—officially HR1—has stirred up a hurricane of headlines. On July 3, the House voted 218–214 to accept the Senate’s version of the bill without changes, sending it to the President’s desk. Critics warn that millions of Americans, including thousands of Vermonters, are about to lose Medicaid. Others are celebrating tax relief for seniors and workers. So what’s real? What’s hyperbole? Let’s break it down, especially for Vermonters trying to make sense of how this legislation affects them.

Medicaid: What Changes and Who’s Affected?

Vermont expanded Medicaid under the Affordable Care Act (“Obamacare”) in 2014. Since then, about 65,000 Vermonters—many of them otherwise healthy adults without children—have relied on the program as de facto free health insurance.

HR1 keeps Medicaid intact but attaches new strings to it:

Work Requirement

• Starting January 2027, otherwise healthy Vermonters aged 19–64 without dependents must work, volunteer, or participate in job training at least 80 hours per month to remain eligible for Medicaid.
• Exemptions include:
  • Pregnant women
  • Seniors (65+)
  • Disabled individuals
  • Caregivers for young children or dependent adults
  • People in rehab or certain hardship situations
• Those who don’t meet the requirement—and don’t file proper exemptions—will lose coverage.

Semi-Annual Eligibility Reviews

Currently, Vermonters on Medicaid go through annual eligibility checks. HR1 changes that to every six months.

The goal: tighten oversight and reduce fraud.
The risk: people falling through the cracks because they forget to file paperwork or don’t respond in time.

So What Does This Really Mean?

For Vermonters already putting in at least 80 hours a month working, volunteering, or training, the only change under HR1 is that you’ll now have to report it twice a year.

For those not currently working, Medicaid coverage will now hinge on participating in some kind of work or community engagement to meet the new threshold.

Vermont’s Role in Making This Work

To avoid unnecessary loss of coverage, the state of Vermont needs to get the reporting system right. Since Vermonters already use online systems to file for unemployment benefits on a weekly basis, it shouldn’t be a stretch to create a mobile-friendly app or website where Medicaid recipients can log in and report their work or exemptions twice a year. But it has to be simple, reliable, and user-friendly—or the reform will collapse under its own red tape.

Will Vermonters Lose Coverage?

According to federal projections, about 50% of Vermont’s expansion enrollees—roughly 30,000 people—could temporarily lose Medicaid.

But here’s the nuance:

• Many may already be working but get tripped up on paperwork.
• Others may be able-bodied adults who simply haven’t been required to work or volunteer to maintain coverage.

Before ACA expansion, this group wouldn’t have been on Medicaid at all. HR1 essentially returns Medicaid to its original mission: covering the most vulnerable, not providing permanent free health insurance for healthy adults.

Medicaid vs. Medicare: Solvency Myths and Realities

You’ll hear people equate Medicaid’s “budget problems” with Medicare or Social Security’s looming insolvency. That’s not quite right:

• Medicare and Social Security have trust funds. Once those run dry (projected for 2031 and 2033 respectively), benefits get automatically cut.
• Medicaid has no trust fund. It’s paid from general tax revenue. It won’t go “insolvent,” but it can grow unchecked and strain federal and state budgets.

In Vermont, Medicaid already eats up a significant chunk of the state budget. HR1’s reforms—by reducing enrollment and costs—slow spending growth by an estimated $900 billion nationwide over 10 years, easing pressure on taxpayers.

Federal Funding Pause for Planned Parenthood and Similar Clinics

HR 1 also includes a one-year ban on federal Medicaid funds going to Planned Parenthood and other clinics that provide abortions (except for rare exceptions). This affects Medicaid patients who use these providers for a wide range of services beyond abortion, including cancer screenings, birth control, and STI testing.

In Vermont, where Planned Parenthood operates clinics in Burlington, Rutland, Barre, and beyond, the funding restriction could force some Medicaid patients to seek care elsewhere—or pay out of pocket during the ban. Critics call it a “backdoor attack” on reproductive health services. Supporters argue taxpayer dollars shouldn’t subsidize any organization performing abortions, even indirectly.

This provision is temporary—it sunsets after one year—but it underscores the broader ideological fights baked into HR 1.

Social Security: No Benefit Cuts, Some Tax Relief

Some Vermonters feared HR1 would target Social Security benefits. It doesn’t. Your monthly check is safe.

But it does include a temporary tax break for retirees:

• Vermonters aged 65 and older can deduct up to $6,000 of income from Social Security benefits when calculating federal income tax.
• This applies through 2028 and phases out for higher earners ($75K single/$150K joint).

For most low-income seniors, this changes little—they already don’t pay tax on Social Security. But middle-income retirees could see hundreds of dollars in tax savings annually.

Two other headline-grabbing provisions in HR1:

No Tax on Tips

• Up to $25,000 in tips annually will be excluded from federal income tax through 2028.
• Applies to Vermonters in industries like restaurants, bars, and hospitality.
• Note: this only affects income tax—payroll taxes (Social Security and Medicare) still apply.

No Tax on Overtime

• Overtime wages (time-and-a-half for hours beyond 40/week) get an above-the-line deduction of up to $12,500 per worker ($25K joint).
• Again, only through 2028.

For Vermont’s service workers, firefighters, nurses, and hourly laborers, these provisions could mean a real boost in take-home pay—at least while they last.

Bottom Line for Vermonters

HR1 isn’t the doom-and-gloom scenario some headlines suggest, but it’s also not a free ride. For Vermonters on Medicaid, the message is clear: if you can work, you’ll need to show it—or risk losing coverage. For seniors and workers, the bill brings tax relief—but only for now.