How Will the Changing Federal Policy Landscape Affect Hospitals?

Federal policy changes could strain hospital finances and patient care.

Hospitals and health systems may soon struggle to provide adequate patient care, as recent federal policy changes are expected to increase the number of people without health insurance, raise uncompensated care costs, limit state payment and financing options, and intensify healthcare workforce shortages.

The Issue

Urban Institute researchers explore available data and information on five major policy developments that will substantially affect hospitals and health systems in the years to come: new Medicaid eligibility and enrollment rules in the One Big Beautiful Bill Act (OBBBA), revised rules for state Medicaid payment and financing, alterations to the Affordable Care Act (ACA) Marketplace policies, changes to immigration policy, and implementation of the Rural Health Transformation (RHT) Program.

Key Findings

• Medicaid work requirements and more frequent eligibility redeterminations under OBBBA, coupled with the expiration of a key ACA Marketplace tax credit, are expected to result in millions of people losing health insurance coverage and raise hospitals’ uncompensated care costs.
• Immigration policy changes may exacerbate existing persistent healthcare staffing challenges, including worsening physician shortages and affecting healthcare employees nationwide.
• Hospitals in rural communities and those that serve a high share of patients covered by Medicaid face the greatest financial risk.
  • While the new $50 billion Rural Health Transformation Program represents a substantial federal investment, researchers find it is unlikely to fully offset projected financial losses facing rural hospitals from Medicaid-related funding reductions.

Conclusion

Researchers say the impacts will unfold gradually over the next several years, offering hospitals and state policymakers time to adapt, plan, and deploy strategies to minimize strain on hospitals and preserve patients’ access to care. However, significant uncertainty remains that could impede these efforts.

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, Income, and Benefits Policy Division for more information specific to its staff and its recent research.