With a government shutdown underway and the year quickly drawing to a close, Congress is running out of time to protect critical healthcare funding. Hospitals and health systems are already under strain from rising costs for drugs and equipment, workforce shortages, and continued delays and denials from many corporate insurers. Now, federal funding decisions threaten to deepen the crisis with consequences that will fall most heavily on patients and underserved communities.
Medicaid Under Threat: State-Level Hospital Fallout
The One Big Beautiful Bill Act (OBBBA) further compounds hospital financial pressures. While framed as a tax cut package, it slashes nearly $1 trillion from federal health funding over ten years, the largest reduction in history. For hospitals, Medicaid cuts will mean less reimbursement for essential services, wider budget gaps, and further threats of closure.
- In Florida, Medicaid funding could drop by up to 20%, threatening service lines that depend on federal support like NICUs, delivery rooms, psychiatric units, and rural hospitals. Eight rural hospitals in Florida have already closed in the past two decades, and more closures would further expand care deserts.
- In Georgia, some rural hospitals have announced they will end scale back services, such as maternity and newborn care, due in part to Medicaid reductions under OBBBA – before the full effects of the law even take hold.
- In North Carolina, recent cuts to Medicaid provider payments driven by a $319 million shortfall have already strained the state’s more than three million Medicaid enrollees. The 3-10% reductions risk driving providers away from Medicaid participation, narrowing access for children, seniors, and people with disabilities.
An additional $8 billion in Medicaid Disproportionate Share Hospital (DSH) cuts took effect on October 1, placing safety-net providers at risk. These funds are crucial to hospitals that treat a high volume of low-income patients. Without them, many hospitals could be forced to scale back services or close.
Medicaid reductions do not just reduce coverage– they destabilize the financial foundation of hospitals and health systems across the nation, impacting all patients in the process.
Medicare Advantage Pressures
Hospitals also face growing tensions from Medicare Advantage (MA) plans, which now cover more than half of U.S. seniors. While enrollment has expanded, so have provider frustrations with:
- Excessive prior authorization hurdles
- Delayed or denied reimbursements
- Rising administrative burdens
From 2022 to 2023, claim denials in MA jumped nearly 56%. Hospital leaders warn that administrative costs are “skyrocketing,” straining staff and diverting resources away from direct patient care. For patients, this means fewer providers and longer wait times. For hospitals, it means less capacity and resources to maintain services and expand access.
A Critical Moment for Hospitals
Together, these threats paint a troubling picture: coverage losses from massive Medicaid cuts under OBBBA, escalating MA burdens, and looming Enhanced Premium Tax Credit (EPTC) expirations all converging on hospitals and health systems. Without timely action from Congress, hospitals may be forced to cut services, reduce staff, or close entirely, leaving patients and communities without access to critical care.
These are not just budget choices. These decisions will determine whether hospitals can continue to provide 24/7 access to high-quality care, the backbone of America’s healthcare system. The stakes for patients, providers, and entire communities could not be higher.