Medicaid cuts would cost hospitals billions, spike uncompensated care costs: Report
By Alan Condon / March 11, 2025
Hospitals and health systems could face severe financial consequences if Congress moves forward with proposed Medicaid funding cuts, with new research projecting an $80 billion revenue loss for providers in 2026 and a sharp rise in uncompensated care costs.
This month, the Senate is expected to vote on a budget resolution passed by House Republicans on Feb. 25. The legislation directs the Energy and Commerce Committee, which oversees Medicare and Medicaid, to identify $880 billion in savings over the next 10 years.
The resolution does not specify how the committee must achieve these savings, but Medicare and Medicaid account for the largest share of its oversight. The Congressional Budget Office has said that reaching the $880 billion healthcare savings target over the next decade would likely require significant cuts to Medicaid or the Children's Health Insurance Program.
A March 11 report from the Urban Institute and the Robert Wood Johnson Foundation analyzed the impact of potential federal funding reductions for Medicaid expansion programs. The findings suggest that if all 41 states that expanded Medicaid eligibility over the past decade were to drop the program in response to federal cuts, nearly 11 million people would lose coverage, leading to widespread financial strain on healthcare providers.
The analysis projects hospitals would bear the brunt of revenue cuts, facing a $31.9 billion decline in 2026 alone. At the same time, the cost of uncompensated care would rise by $6.3 billion. The study also forecasts:
$20.9 billion less spent on prescription drugs
$20.7 billion less on other healthcare services, including dental care, home healthcare and services from non-hospital providers
$6.4 billion less on office-based physician services
The financial hit would not be evenly distributed, with some states — Arizona, Indiana, New Mexico, New York, North Carolina, North Dakota, Oklahoma and Oregon — facing healthcare spending cuts exceeding 6%. Researchers warn such reductions could be particularly devastating for rural hospitals, where Medicaid expansion has played a critical role in maintaining financial viability.
Medicaid expansion, introduced under the ACA, covers millions of working Americans who earn modest incomes but do not receive employer-sponsored insurance. The federal government currently funds 90% of the costs for states that opt into the expansion. If funding is cut, states may be forced to reconsider their participation, which could have far-reaching consequences beyond coverage loss, according to the report.
"As Republicans in Congress consider significant cuts to the Medicaid program, it is important that federal, state, and local policymakers and stakeholders consider potential adverse effects on healthcare coverage, access and affordability, and health providers," Fredric Blavin, senior fellow at the Urban Institute, said in a news release.
Beyond the direct impact on hospitals and patients, the study underscores potential ripple effects across local economies. Katherine Hempstead, senior policy adviser at the Robert Wood Johnson Foundation, noted that hospitals are often the largest employers in their communities.
"A funding reduction of this magnitude would not only cause a massive coverage loss but would also be financially devastating for hospitals and other healthcare providers," Hempstead said. "Hospitals are major employers and are often the economic bedrock of their communities. These cuts would have major ripple effects on local economies, especially in rural areas."