GOVERNMENT

2026 brings tough dental decisions for states

The "One Big Beautiful Bill Act" (OBBB) signed last July is now a reality hitting state budgets this month. Medicaid cuts and new work requirements are kicking in, forcing governors into high-stakes decisions that could spell trouble for dental practices. 

Catch up: Through the OBBB, the federal government has tightened the purse strings on state budgets, ending enhanced funding for Medicaid expansion and capping the taxes states use to pump up reimbursement rates.

• Shortfalls in funding for Medicaid are forcing states to either raise new revenue, reduce the scope of the program (either by restricting who is eligible or optional benefits), or lower reimbursement rates for providers.

• Because adult dental benefits are optional under federal law, they are often the first target of cuts for states looking to find savings.

• Beyond cuts to dental benefits specifically, the Congressional Budget Office estimates around five million adults will lose Medicaid coverage altogether under new eligibility rules. 

Why it matters: There’s a good chance Medicaid changes that will impact your business are coming to a state you operate in this year. What those changes are will depend on geography, with states’ policy responses diverging into three camps:

• The Cutters: California is the biggest state eyeing major cuts, with a proposal to eliminate dental coverage for undocumented adults and divert Proposition 56 funds (which supported rate increases) to plug budget holes. Idaho is planning to cut adult dental benefits, and Washington has already enacted rate reductions. North Carolina planned deep cuts but has since walked back that plan amid court challenges.

• The Restrictors: Nebraska leads the charge on implementing the OBBB’s work requirements (eighty hours per month), aiming to have them in place by May 2026. Florida is tightening immigrant eligibility and piloting restricted programs. Expect these states to shed patients from their Medicaid rolls through bureaucratic hurdles and layers of eligibility restrictions.

• The Investors: Surprisingly, some states are doubling down on certain aspects of Medicaid. Michigan is hoping to replace funding lost from federal cuts with a new tax in order to maintain Medicaid spending. Illinois is weighing bills to hike child dental rates by up to 50%. Pennsylvania is moving to restore root canal and perio coverage for adults. 

Why it matters: Cuts and more stringent eligibility requirements are likely to show up in your clinic as patient churn and a margin squeeze. 

• With six-month redeterminations and work requirements, your Medicaid patient base is volatile. A patient approved in January might be dropped by July.

• Cuts could make Medicaid participation financially unsustainable for many clinics. The California Dental Association warns 49% of dentists might drop the program if cuts proceed as planned in that state.

What you can do: If a meaningful segment of your patients are on Medicaid, don’t wait until cuts show up on your P&L. Here are a few things you can do right now to prepare:

• Understand the playing field: Build a state exposure dashboard including visits, revenue, and margin, and tag each market’s risk level.

• Automate eligibility: You cannot rely on monthly batch checks anymore. You need "day-of-service" verification. Invest in tools that check eligibility in real time before the patient sits in the chair.

• Diversify your payer mix: If you are in a "Cutter" state, analyze your exposure and don't let Medicaid exceed a percentage of revenue you can afford to lose.

• Explore other payment architectures: It may be worth looking into service agreements with Federally Qualified Health Centers—which aren’t exposed to Medicaid cuts in the same way—to protect volume.

Bottom line: If your organization serves patients on Medicaid, 2026 will be the year the effects of OBBB cuts and eligibility restrictions really start to bite. Preparing ASAP can soften the impact. If Medicaid is a pillar of your model, 2026 is your stress test.