ACA tax credit expiration will cost health care sector $32B

New research shows that if Congress allows the Affordable Care Act’s enhanced premium tax credits to expire, hospitals, physicians and other providers will face more than $32 billion in lost revenue in 2026. Additionally, uncompensated care—services that healthcare providers must deliver but are not reimbursed by anyone—will spike by $7.7 billion. This is according to a new analysis prepared by researchers at the Urban Institute, with support from the Robert Wood Johnson Foundation.

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.

Urban Institute researchers find total spending on healthcare services will decrease by $32.1 billion in 2026, approximately 1.3% of total healthcare spending for the nonelderly in America. Around $14.2 billion less will be spent on services provided by hospitals (44% of the total decline in spending), $5.1 billion less on services provided by office-based physicians, $6.9 billion less on other healthcare services, and $5.8 billion less on prescription drugs.

“The negative effects of allowing these tax credits to expire couldn’t be more stark,” said Katherine Hempstead, senior policy adviser at the Robert Wood Johnson Foundation. “Millions of people will lose coverage, and providers will face the one-two punch of losing revenue and increasing uncompensated care. Healthcare institutions are often the economic engines of entire communities. If the credits expire, the ripple effects will be felt for years to come.”

Researchers say the burden of the projected $7.7 billion increase in uncompensated care will fall on all provider types: about $2.2 billion on hospitals, $1 billion on physician offices, $3.1 billion on other services, and $1.5 billion on prescription drugs.

Researchers also find reductions in health spending and an increase in the demand for uncompensated care will vary considerably by state. The effects will be felt most acutely in states that have not expanded Medicaid under the ACA. Health spending for the nonelderly will drop by as much as 4.8% in Florida, Georgia, and Texas. Similarly, demand for uncompensated care will grow by 27% or more in Mississippi, South Carolina, and Tennessee.

“If these subsidies expire, it will be important for federal, state, and local policymakers to consider the potential adverse effects on healthcare access and affordability, as well as revenue losses for providers of all types,” said Fred Blavin, principal research associate at the Urban Institute.

Read the full analysis, Changes in Health Care Spending and Uncompensated Care Under Enhanced Tax Credit Expiration for Marketplace Coverage: Updated 2026 State and National Estimates.