How Expiration of ACA Tax Credits Will Affect Healthcare Spending

If the Affordable Care Act’s (ACA) enhanced premium tax credits expire, hospitals, physicians, and other providers would face more than $32.1 billion in lost revenue and a $7.7 billion spike in uncompensated care in 2026.

The Issue

Enhanced premium tax credits were approved by Congress in 2021 and are set to expire at the end of 2025. If they are not renewed, approximately 7.3 million people will lose subsidized ACA health coverage, and 4.8 million people will become uninsured. Researchers examine how this change in insurance coverage will affect healthcare spending and demand for uncompensated care—services that healthcare providers must deliver but are not reimbursed by anyone.

Key Findings

• Hospitals, physicians, and other healthcare providers would face more than $32.1 billion in lost revenue in 2026, if the enhanced premium tax credits expire.
  • Approximately $14.2 billion less will be spent on services provided by hospitals, $5.1 billion less on services provided by office-based physicians, $5.8 billion less on prescription drugs, and $6.9 billion less on other healthcare services.
• Uncompensated care will increase by $7.7 billion, if the enhanced premium tax credits expire.
  • The burden of this increase in uncompensated care would fall on all provider types: about $2.2 billion on hospitals, $1.0 billion on physician offices, $1.5 billion on prescription drugs, and $3.1 billion on other services.
• Reductions in health spending and increases in the demand for uncompensated care will vary by state, with the effects being felt most acutely in states that have not expanded Medicaid.
  • Health spending for the nonelderly will drop by as much as 4.8% in Florida, Georgia, and Texas.
  • Demand for uncompensated care will grow by more than 27% in Mississippi, South Carolina, and Tennessee.

Conclusion

Researchers say the declines in healthcare spending, and subsequently provider revenues, will place financial strain on healthcare institutions and could hurt access to care for the communities they serve. 

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.