According to the report, uncompensated care costs would likely be shouldered primarily by providers (over 50%), the federal government (30%), and state and local governments (19%). Providers could also be responsible for more uncompensated care if government funding is less than estimated. "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," said Katherine Hempstead, senior policy advisor at the Robert Wood Johnson Foundation. "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."

Commentary

According to Darbin Wofford, senior policy advisor at the think tank Third Way, safety net and rural hospitals that treat a disproportionate number of Medicaid patients will likely experience the most substantial effects of Medicaid cuts. Currently, hundreds of rural hospitals face the risk of closure.

"The healthcare providers that would suffer the most would be those in rural and low-income communities through increases in uncompensated care and possible declines in reimbursement," Wofford said.

Similarly, Hempstead said that rural states would be the most impacted since Medicaid funding is "critical to the health of financially fragile health systems."

Aside from the potential financial impacts, the report's authors said that hospital closures "could reduce access to and use of hospital services, increasing the mortality risk for heart attacks, unintentional injuries and time-sensitive conditions."

According to a separate KFF analysis, cuts to Medicaid could limit access to care, which could then lead to hospital closures and providers treating fewer Medicaid patients. Rolling back Medicaid expansion could also reduce Medicaid spending by $1.9 trillion over the next decade.

However, Joseph Antos, a senior fellow emeritus at the American Enterprise Institute, said that it is not guaranteed that all states will end their Medicaid expansion programs if the federal government cuts funding. "I don't think that is the way it would really work," he said.

Instead, Antos said that states are more likely to implement targeted strategies, such as cracking down on enrollees who may not be eligible for Medicaid, to compensate for funding cuts.

Republicans have said that any reductions in Medicaid spending will come from reining in fraud, waste, and abuse, leaving benefits intact for those who are eligible.

"I don't think you have to cut Medicaid," said House of Representatives member Eric Burlison (R-Mo.). "My definition of cutting does not include getting people who are fraudsters and getting people who are not supposed to be on the list as recipients."

4 ways leaders can prepare for cuts to Medicaid 

By  Natalie Trebes

As federal lawmakers consider potential funding cuts, billions of dollars in healthcare funds, particularly for Medicaid, are at risk. These potential cuts could have an outsized impact on various stakeholders throughout the healthcare industry, and leaders should take proactive action to ensure the sustainability of their organizations.

The potential impact of healthcare spending cuts

If federal funding for Medicaid is reduced, states will either have to make up the funding themselves or reduce their programs' reimbursements to providers and/or alter the scope of optional services and enrollment eligibility. Medicaid cuts will likely lead to reduced reimbursement for providers and plans, reduced volumes for providers, and reduced enrollment for plans.

Although less extensive than the proposed changes to Medicaid, lawmakers are also eyeing potential changes to Medicare, including reducing payment add-ons and adjusting provider payments. These potential changes to Medicare payments aim to stop market distortions, as well as any unintended consequences from previous financing mechanisms used to subsidize hospital operations, but they could lead to decreased revenue for Medicare providers, especially those that are in vulnerable financial positions.

Providers may have to further reduce their supply and labor costs, decrease patient care services, and put greater urgency in increasing their commercial payment rates — or potentially close their facilities all together.

How to prepare for these potential cuts

Although none of these healthcare spending cuts are guaranteed, the uncertainty contributes to broader environmental headwinds healthcare leaders are facing. To mitigate the potential impact of these cuts, leaders should:

1. Focus on boosting the resilience of your organization

Organizations should continue focusing on shifting their business models toward resilience. A shift away from inpatient care, an aging and increasingly sick population, a strained clinical workforce, expansion of pharmaceuticals, and financial pressure from government and employer purchasers are all currently challenging healthcare organizations. 

2. Coordinate your teams on messaging 

Ensure that your organization's finance, strategic planning, and government affairs teams are coordinating with each other to understand the potential impact of healthcare spending cuts on your organization. They should also consider potential impacts to partners and competitors and how their reactions will impact your organization.

By coordinating your teams, they can convey a specific story to policymakers about how these potential cuts will impact your organization.

3. Seek out other perspectives

It's important to understand different perspectives on the situation across the healthcare, business, and community organizations in your market, as well as across your subsector regionally and nationally.

Where possible and appropriate, you may want to align with others and develop joint advocacy efforts. Be aware that you may have a different perspective and be ready to clearly explain your most important and distinct positions.

4. Consider direct advocacy actions

Considering taking direct advocacy actions by coordinating with your government affairs team and any outside advocacy partners.

At this current stage, it's not clear what specific policy provisions will be included in the budget. Some actions you can take include initiating or strengthening any relationships with health-focused legislative staff in your relevant representative(s)' or senators' offices. You should convey what your organization accomplishes in your community, the current pressures you're facing, and what programs/factors impact your success and sustainability, rather than advocating for or against any specific policy provisions.