Illustration: Allie Carl / Axios
Hospitals are steeling themselves for the effects of health cuts in the budget law and starting to plan which services they may need to roll back.
Why it matters: Hospitals raised alarms that largely went unheeded over the legislation's nearly $1 trillion in Medicaid cuts. Now they're likely to bear the brunt of the industry changes.
What they're saying: "We're going to see hospitals pull back on services, close clinics, and some will probably close outright," said Beth Feldpush, senior vice president of advocacy and policy at America's Essential Hospitals.
- "While the cuts don't take effect for several years, hospitals will need to start — and will start — that planning process now for how they navigate this," she added.
- The first things likely to go are construction or expansion projects, such as a clinic in an underserved neighborhood, she said. Those cutbacks are likely to start right away.
- Matthew Cook, CEO of the Children's Hospital Association, said hospitals are "scenario planning" and talking to states about whether they will be able to make up for any of the federal funding cuts.
- "If we have to cut services, which ones are we going to cut? That type of thing, and so it is very much a real exercise right now," he said, noting that outpatient clinics are likely the first item to be cut.
The big picture: The new law imposes work requirements in Medicaid starting Dec. 31, 2026, that are projected to lead to millions of people losing coverage, increasing uncompensated care for hospitals.
- Then, starting in 2028, the law phases down provider taxes that help states finance their share of program costs, and state-directed payments that hospitals say make up for low reimbursement rates in Medicaid.
- Republicans argue that those financing mechanisms are budgetary gimmicks that states and hospitals have used to game the system and shift more costs onto the federal government.
Between the lines: Cook said that even though the legislation is not explicitly aimed at children's health care, the effect of the provider tax and state-directed payment provisions will harm children's hospitals.
- "The language that was being used is 'We're trying to target able-bodied adults.' But the legislation, when it impacts the state-directed payments and the provider tax program, that impacts all hospitals," Cook said. "So they didn't exclude children's hospitals from those provisions."
- The law does include a $50 billion rural hospital fund aimed at mitigating impacts of the cuts, but Cook said that is not going to offer much help, especially for children's hospitals that are largely in urban areas.
What's next: Because the cuts don't take effect right away, hospitals and other groups have an opportunity to lobby to delay when the cuts are supposed to take effect.
- "We're absolutely going to be working to mitigate the impact, whether that's pushing the implementation dates out farther, changing the provisions," Feldpush said. "The cuts that are in the law are absolutely unsustainable."
