Hospitals could lose billions of dollars in revenue if states roll back Medicaid expansions due to potential Medicaid cuts.
House Republicans proposed hundreds of billions of dollars in Medicaid cuts, potentially including per capita caps, work requirements and eliminating enhanced federal payments for states that expanded Medicaid coverage. Hospitals may lose $32 billion in 2026 revenue if Medicaid expansion is curtailed, an analysis released Tuesday by the left-leaning think tank Urban Institute shows. Coverage losses could also increase providers' uncompensated care costs.
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Forty-one states expanded Medicaid under the Affordable Care Act of 2010, extending healthcare coverage to millions of low-income adults. A dozen of those states, including Arizona, Illinois and North Carolina, have trigger laws that either automatically end Medicaid expansion when the federal government reduces Medicaid reimbursement, or require some state action in that scenario. Other states, such as Montana, must reauthorize Medicaid expansions every few years.
The federal government pays 90% of the healthcare costs for Medicaid enrollees in states that expanded the program. Republicans proposed reducing that rate to as low as 50%, depending on the state.
If the federal government pulls its funding and states that extended Medicaid coverage unwind their expansions, an estimated 11 million people would lose insurance coverage, according to the Urban Institute research brief, which was funded by the Robert Wood Johnson Foundation. Limiting Medicaid funding and coverage could decrease hospital revenue by $31.9 billion in 2026 and increase hospital uncompensated care costs by $6.3 billion, Urban Institute researchers found.
The researchers’ estimates are within the realm of possibility, said Mark Pascaris, senior director at credit ratings agency Fitch Ratings.
In addition to the short-term financial implications, hospitals may treat sicker uninsured patients who forgo care, which would increase costs, Pascaris added.
“That is more difficult to quantify, but still very much a concern,” he said.
Medicaid cuts could limit access to care, potentially leading to hospital closures and providers treating fewer Medicaid patients, a recent KFF analysis found. Rolling back Medicaid expansion could wipe out $1.9 trillion in Medicaid spending over 10 years, according to KFF.
Safety-net and rural hospitals that treat a disproportionate number of Medicaid patients would acutely feel the impact, said Darbin Wofford, senior health policy advisor at Third Way, a centrist Democratic think tank.
“The healthcare providers that would suffer the most would be those in rural and low-income communities through increases in uncompensated care and possible declines in reimbursement,” he said.
Hospitals would struggle to keep their doors open as patients lose coverage and uncompensated care costs rise, Charlene MacDonald, executive vice president of public affairs for the Federation of American Hospitals, said in a statement.
However, it is not a foregone conclusion that all states will end Medicaid expansion programs if the federal government reduces funding, as the Urban Institute research brief models, said Joseph Antos, a senior fellow emeritus at the American Enterprise Institute, a right-leaning think tank.
“I don’t think that is the way it would really work,” he said.
States are more likely to crack down on enrollees who may not be eligible for Medicaid benefits, among other more targeted strategies, Antos said.
But if the researchers' estimates come to fruition, Medicaid coverage losses could squeeze physicians, home health companies and others, according to the analysis.
If states drop Medicaid expansions, office-based physicians could receive $6.4 billion less in 2026 revenue, Urban Institute researchers found. Dentists, home health companies and other providers could see a $20.7 billion decrease in 2026 revenue, according to the brief.
"Medicaid cuts could have a trickle down effect on providers throughout the country," said Fredric Blavin, senior fellow at the Urban Institute and lead author of the research.
