Congress Passes the Final Version of One Big Beautiful Bill Act: Impact on Occupational Therapy Practitioners and Students

This is directly pasted from AOTA’s Website! These are not my words. For the direct source also visit: https://www.aota.org/advocacy/advocacy-news/2025/senate-passes-new-version-of-the-one-big-beautiful-bill-act-impact-on-occupational-therapy-practitioners-and-students

“Congress Passes the Final Version of One Big Beautiful Bill Act: Impact on Occupational Therapy Practitioners and Students

Heather Parsons, Abe Saffer, Ryan Yeager 07/03/2025

This article is an update to one published on 7/1/25 after the bill passed the Senate.

On July 3rd, the House of Representatives passed the One Big Beautiful Bill Act, sending it to the President to be signed into law. Provisions in this bill are wide-ranging and cover a range of topics, including energy policy, tax policy, immigration, and healthcare. This article focuses on the provisions with the most direct impact on occupational therapy professionals, occupational therapy students, and our clients.

AOTA is currently planning to hold a live webinar about the bill, our advocacy efforts, and next steps, later in July. Please continue to check the AOTA events page for the latest updates.  

Throughout the legislative process, AOTA collaborated with its congressional contacts to inform them about the impact that various policies would have on occupational therapy practitioners (OTPs), occupational therapy education programs, the broader healthcare system, and vulnerable populations in need of care. Additionally, more than 2,000 advocates sent more than 5,000 messages on these issues to Capitol Hill through AOTA’s Legislative Action Center.

Now that the One Big Beautiful Bill Act has passed, subsequent significant actions will occur at the state level, as states determine how to respond to reduced federal funding and healthcare systems decide how to provide services to the newly uninsured. We will work closely with state associations to help minimize the impact on access to occupational therapy services at both the state and local levels. We will also continue to advocate for policies at the federal level that help to expand access to OT and other healthcare services and have access to financial aid for higher education. 

Below are more details about parts of the bill that will have the most significant impact on occupational therapy practitioners and students. To follow the latest advocacy news, please visit our Advocacy News page. 

Medicaid

The bill includes roughly $930 billion in Medicaid cuts over the next decade. It retains and expands several significant policies, including mandatory work requirements, more frequent eligibility redeterminations, and structural changes that reduce federal funding to the states. According to the Congressional Budget Office (CBO), these provisions, along with others affecting eligibility for Affordable Care Act programs, could result in 11.8 million people losing health insurance coverage, including more than 10% of the current Medicaid population.

Medicaid is a critical program that provides healthcare coverage to over 70 million Americans, including children, individuals with disabilities, and those requiring long-term care services. Medicaid funding also supports behavioral health services and substance use disorder treatment, ensuring access to essential care for vulnerable populations. The program is crucial to ensuring that Americans receive necessary healthcare services, such as occupational therapy, and it supports individuals who may not have other options for health insurance.

Some of the cuts to Medicaid spending come from a reduction in the amount of money the federal government provides to states for Medicaid services. The bill reduces Medicaid payments to states by more than $300 billion over 10 years. Occupational therapy services are classified as an “optional” benefit under Medicaid, except for children ages 0–21, leaving OT services particularly vulnerable if states reduce Medicaid benefits. AOTA will work with state associations to help mitigate any adverse impacts of these cuts on OT and OT services. Additionally, AOTA is collaborating with coalition partners on long-term advocacy strategies to designate OT and other therapy services as mandatory benefits under Medicaid to help preserve access to therapy services for all Medicaid recipients.

AOTA remains extremely concerned by the number of people who may no longer have access to occupational therapy and other healthcare services as a result of this legislation. While the bill includes new funding for Home and Community-Based Services, rural hospitals, and skilled nursing facilities, these investments are unlikely to offset the broader cuts or the projected increase in the number of uninsured individuals.

Financial Aid for Higher Education

The One Big Beautiful Bill Act also significantly changes higher educational financial aid for undergraduate and graduate students. Starting in 2026, all subsidized student loans—where the government currently pays the interest while the student is in school and for six months after graduation—will be eliminated. These loans will be converted to unsubsidized loans, where interest will accrue immediately for undergraduates and graduate students. Additionally, the Graduate PLUS loan program—one of the primary ways students finance their graduate education—will be eliminated for new graduate borrowers starting in the 2026–2027 academic year and will be eliminated entirely for the 2029–2030 academic year. Eliminating Graduate PLUS Loans could severely limit access to graduate education, particularly for students who cannot secure student loans from the commercial market.

Other changes in the legislation include changes to the current Income-Driven Repayment (IDR) plans. Under the current system, borrowers can have their loan balances forgiven after 10 to 25 years. The bill changes the IDR plan to be forgiven after 360 qualifying payments, or 30 years. It also sets a lifetime limit of $200,000 for a single borrower for federal student loans of any type.

Medicare Part B Payments

The Medicare Fee Schedule (MFS), the mechanism through which Medicare outpatient therapy services are paid, has faced year-over-year cuts and is not currently adjusted for inflation. While the flawed payment system has also hurt other healthcare providers, therapy providers have received some of the steepest reductions.

Due to ongoing advocacy by groups like AOTA, the bill includes a 2.5% increase to the MFS, in addition to the previously scheduled 0.25% increase. This means that payments for Medicare outpatient occupational therapy services will increase by 2.75%—the first increase since 2020.

AOTA continues to strongly advocate for comprehensive reforms to the Medicare Physician Fee Schedule to address the decades-long erosion of payment for occupational therapy services. We view this provision in the One Big Beautiful Bill Act as a first step that offers some relief from ongoing cuts and gives Congress time to pursue more comprehensive reform.

No Taxes on Overtime Bonus Pay

The bill includes a “No Tax on Overtime” provision allowing certain workers to deduct qualifying overtime pay from their federal taxable income for tax years 2025 through 2028. This deduction applies to overtime compensation required under the Fair Labor Standards Act (FLSA), which generally mandates that hourly, nonexempt employees receive time-and-a-half pay for hours worked beyond 40 per week.

This provision could offer meaningful year-end tax relief for occupational therapy practitioners (OTPs) who are paid hourly. According to AOTA’s 2023 Workforce and Compensation Survey Report, 72% of occupational therapy assistants who responded to the survey and 38.5% of occupational therapists were compensated through hourly pay. However, this new benefit may vary depending on employment setting and classification. Many salaried or exempt OTPs may not qualify for overtime under the FLSA and, therefore, would not be eligible for the deduction.

The proposed deduction would be capped at $12,500 for individuals and $25,000 for married couples filing jointly. It would begin to phase out for higher earners, starting at $150,000 for individuals and $300,000 for joint filers. Additionally, this exemption would apply only to federal income taxes; workers would still owe Social Security and Medicare taxes on their overtime income, as well as any applicable state or local taxes.

AOTA’s advocacy news section and checking out the latest opportunities for advocacy at AOTA’s Legislative Action Center.”