Federal policy changes could strain hospital prices 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. This is according to a new report prepared by researchers at the Urban Institute, with support from the Robert Wood Johnson Foundation.

Urban Institute researchers analyze 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 Affordable Care Act (ACA) Marketplace policies, changes to immigration policy, and implementation of the Rural Health Transformation (RHT) Program.

Medicaid work requirements and more frequent eligibility redeterminations under OBBBA, coupled with the expiration of a key ACA Marketplace tax credit and other Marketplace regulations, are expected to result in millions of people losing health insurance coverage. Prior research suggests this will increase unpaid services as people without insurance skip preventative and office-based care and increasingly turn to hospitals for eventual treatment, which are required by law to treat emergency patients, regardless of their ability to pay. Many hospitals already experience low operating margins, according to prior estimates, and fiscal pressures created by policy changes are expected to compound them.

“Hospitals are facing a host of serious financial headwinds, which for some will have existential implications,” said Katherine Hempstead, senior policy adviser at the Robert Wood Johnson Foundation. “Loss of federal funding and growth in uncompensated care coupled with inflation and labor force problems will raise costs and reduce revenue, forcing some hospitals to close or reduce services. Smaller, rural, and safety net hospitals with tighter margins will be the most vulnerable to these massive pressures.”

Researchers say the full effect of policies on hospitals will vary based on location, how individual states implement policies, and hospitals’ current financial situations. Hospitals in rural areas and those serving a higher share of people enrolled in Medicaid are likely at greatest risk of service reductions or closures, contributing to health disparities and increasing barriers to care in rural and low-income communities.

Researchers also cite prior analyses suggesting that the RHT Program is likely insufficient to offset projected financial losses to rural hospitals, and limitations on how providers and facilities may use funds threaten rural providers’ financial viability.

Immigration policy changes may exacerbate existing persistent healthcare staffing challenges, researchers note, including worsening physician shortages and affecting healthcare employees nationwide.

“As these policies are phased in over time, there will be opportunities for policymakers and hospital leaders to prepare and adapt, but it also introduces uncertainty,” said Jennifer Haley, principal research associate at the Urban Institute.