Health systems say the budget reconciliation bill is bad news for patients and hospitals

Even before a Senate committee produced legislative text that would increase the Medicaid cuts in the budget reconciliation bill, hospitals were preparing to amplify their opposition to the bill.

The changes wrought by the Senate are likely to make the matter more urgent for hospitals that could be exposed to potentially significant revenue declines.

After the Congressional Budget Office (CBO) projected that more than 16 million people would become uninsured by 2034 via the bill approved by the House and the anticipated termination of Affordable Care Act insurance enhanced subsidies, the Senate proposed changes that would further reduce provider taxes, a key Medicaid funding mechanism for states. The upper chamber’s bill also would gradually reduce established state-directed payments (SDPs) rather than allowing them to be grandfathered at their current rates.

In addition, unlike the House, the Senate does not have a provision delaying the scheduled FY26 start of the three-year, $24 billion cut to Medicaid disproportionate share hospital payments

In a media briefing this week, leaders of health systems that are members of the Catholic Health Association (CHA) described the constraints their organizations will face if even the House version becomes law. Also, the American Hospital Association (AHA) hosted more than 250 hospital leaders in Washington, D.C., for an advocacy session about the bill.

Until the Senate votes on its bill, which could happen as soon as next week, hospital advocates hope they can persuade legislators to change course, especially because support for the bill is not universal among Republican senators.

“We hope that as senators review this new language, they listen to the experiences of our members who will be negatively impacted by these new proposals,” said Sister Mary Haddad, RSM, president and CEO of the CHA.

Assessing costly changes

The leaders who spoke during the CHA media briefing all oversee health systems that have a rural presence. Such facilities could face some of the highest risk if the reconciliation bill becomes law.

Recent research by the Cecil G. Sheps Center for Health Services Research, produced at the request of Senate Democrats, identified 338 rural hospitals that are in the top decile in Medicaid payer mix or already face financial duress as indicated by negative margins. The AHA conducted a separate study that found 1.8 million rural Medicaid beneficiaries would lose coverage by 2034, and rural hospitals would lose more than $50.4 billion in federal spending over that span.

Wright Lassiter III, CEO of CommonSpirit Health, said the proposals threaten to negate the financial strides that hospitals have made in recovering from the COVID-19 pandemic.

In Kentucky, where the 142-hospital system has seven hospitals, including four rural facilities, the organization projects an $85 million annual revenue reduction if Congress enacts the House bill. The impact could be more severe if the Senate bill passes in its current form.

“The use of the provider tax and state-directed payments has stabilized access and improved health outcomes in the communities that we serve in Kentucky,” Lassiter said. “That program has been directly responsible for significant improvements in the health of our patients,” as seen in metrics such as readmissions and sepsis rates.

At Texas-based CHRISTUS Health, an anticipated $4.3 billion revenue reduction from the changes to provider taxes and SDPs would endanger programs such as an initiative to send nurse practitioners into rural communities to help Medicaid beneficiaries avoid hospital readmissions, said Gabriela Saenz, senior vice president for corporate services.

“That [revenue] number is large, and the devastation will be just as large,” she said.

Wary of new mandates

While limits on taxes and SDPs would affect state budgets and hospital financing, the proposed work requirement is a key beneficiary-facing provision. The CBO projected the requirement as drafted in the House bill would cause 4.8 million people to lose Medicaid coverage over a decade, and the Senate bill would add parents of minors older than 14 to the requirement.

“The idea of work requirements and eligibility verification may sound reasonable in theory,” Laura Kaiser, president and CEO of SSM Health, said during the CHA call. “The reality is far more complex: Without job training, transportation [and] support services, work requirements and eligibility [verification] risk becoming barriers to care. They’re not bridges to independence.”

The Senate bill is more lenient in one aspect of the work requirement. While the House bill sets a start date of 2027, the Senate allows states to apply for a two-year delay if they demonstrate good-faith efforts at compliance.

“The reality is [that] to implement a work requirement program in roughly 18 months, which is what the House bill calls for, just is not even close to being realistic,” said Bradford Coffey, senior vice president with Maine-based Covenant Health and president of Covenant Health Foundation.

Health system leaders also expressed concern about a $35 copay that would be required of beneficiaries in the expansion population if their incomes are at or above 100% of federal poverty. Some healthcare services would be exempt, including primary care and behavioral health.

The copay “may seem small but can feel like obstacles for patients and low-income families who may depend on Medicaid for their insurance coverage,” Kaiser said.

No easy workarounds

If the Medicaid spending restrictions go through, hospital leaders will start a process of making tough choices.

Said Coffey, “We need to be asking ourselves, ‘What are we going to do?’ We will, over the course of the ensuing months, be looking at all of our services and asking ourselves, ‘What are those services that, if they were reduced, would have the least impact on the people we serve?’”

The cuts would be less about limiting a source of revenue than about negating a means to cover the total cost of care at many hospitals.

“What you’re hearing from all of us is that we’ve been pretty good at kind of sucking it up to date,” Kaiser said. “We can’t do it anymore. There are no additional hidden funds somewhere or monies that we’re all going to suddenly find. We are doing our best based on [our] mission and the dignity of each person that we serve, but it’s simply not an equation that works.”