Hospital Revenue Losses And Increased Uncompensated Care If Medicaid Funding Is Cut

The Issue

Under the Affordable Care Act, Congress covers 90% of costs for states that expanded Medicaid. Researchers examined the effect of eliminating this financial support, also known as the enhanced Federal Medical Assistance Percentage (FMAP). Previous research has shown nearly 11 million people who benefited from changes in eligibility criteria would lose coverage.

Key Findings

• If the enhanced FMAP is eliminated and states drop their Medicaid expansion, there would be an $80 billion decrease in spending on healthcare services in 2026.
• Similarly, costs of uncompensated care, which are services that hospitals must provide under law but are not reimbursed by an insurer, would increase by nearly $19 billion.
• Hospitals would experience the largest loss in revenue in 2026 ($31.9 billion), as well as the largest increase in uncompensated care ($6.3 billion).
• Reductions in healthcare spending would vary widely by state. Eight states (Ariz., Ind., N.M., N.Y., N.C., N.D., Okla., Ore.) would see cuts in spending for healthcare services of more than 6%.

Conclusion

Researchers say the effects of reducing federal Medicaid support provided to expansion states by eliminating the enhanced match would be widespread, threatening state economies, healthcare providers’ finances, and people’s access to care.

About the Author/Grantee

The nonprofit Urban Institute is dedicated to elevating the debate on social and economic policy. For nearly five decades, Urban scholars have conducted research and offered evidence-based solutions that improve lives and strengthen communities across a rapidly urbanizing world. Their objective research helps expand opportunities for all, reduce hardship among the most vulnerable, and strengthen the effectiveness of the public sector. Visit the Urban Institute’s Health Policy Center for more information specific to its staff and its recent research.