Medicaid Expansion Cuts Threaten $80B Loss for Healthcare Providers

What You Should Know: 

– A new analysis by the Urban Institute, supported by the Robert Wood Johnson Foundation, reveals that healthcare providers in 41 states that expanded Medicaid eligibility would face significant financial losses if federal funding for Medicaid expansion programs is cut. 

– The potential drop in federal support could lead to nearly 11 million people losing health insurance coverage, triggering an $80B reduction in revenue for healthcare providers by 2026.

The Role of Medicaid Expansion

Under the Affordable Care Act, the federal government covers 90% of the costs of Medicaid expansion. This expansion primarily benefits working individuals with modest incomes who lack access to affordable employer-sponsored insurance.

Massive Revenue Losses and Increased Uncompensated Care

If all states were to drop Medicaid expansion in response to federal funding cuts, the healthcare sector would experience a dramatic shift. The analysis projects:

• $80 billion reduction in healthcare provider revenue in 2026.
• $19 billion increase in uncompensated care costs, which are services hospitals must provide without reimbursement.

Hospitals Face Significant Financial Strain

Hospitals would bear the brunt of these losses, with projected:

• $31.9 billion revenue loss in 2026.
• $6.3 billion increase in uncompensated care costs.

Additionally, the analysis forecasts reductions in spending across other healthcare sectors:

• $20.9 billion less spent on prescription drugs.
• $20.7 billion less spent on other healthcare services like dental and home healthcare.
• $6.4 billion less spent on services from office-based physicians.

State-Level Impacts Vary Widely

The impact of these cuts would vary significantly across states. Eight states (Arizona, Indiana, New Mexico, New York, North Carolina, North Dakota, Oklahoma, and Oregon) are projected to experience cuts in healthcare spending exceeding 6%, which could have devastating consequences for some hospitals.