Reconciliation bill would cut $800B in health care spending, spike uncompensated care

The budget reconciliation bill passed by the House of Representatives would reduce health care spending in the United States by $797 billion over the next decade, with more than one-third (36%) of the cuts occurring in California, Florida, Texas and New York, a new analysis shows. Drops in medical spending would run more than $20 billion in nine additional states (Arizona, Georgia, Illinois, Indiana, North Carolina, Ohio, Oregon, Pennsylvania, and Washington).

Prepared by the Urban Institute with support from the Robert Wood Johnson Foundation, the analysis finds that hospitals would face an overall cut of $321 billion in spending from reconciliation, while physicians would face an $81 billion cut. Spending on prescription drugs would decline by $191 billion from 2025 to 2034.

At the same time, the analysis shows U.S. hospitals would face a $63 billion increase in uncompensated care over the next decade—services sought by the uninsured that hospitals and other providers are required to deliver but are not reimbursed.

Some experts say costs of uncompensated care are ultimately passed on to insured patients through higher healthcare prices.

“The Medicaid cuts Congress is considering would be the largest funding reduction in the program’s history, and it is hard to overstate just how devastating the impacts would be,” said Katherine Hempstead, senior policy adviser at the Robert Wood Johnson Foundation. “Such drastic changes to Medicaid financing would have ripple effects that go well beyond people covered by the program, further squeezing hospitals, limiting access to care for entire communities, and destabilizing state and local economies.”

“As Congress considers significant cuts to the Medicaid program and ACA Marketplaces, this analysis can help state and local policymakers and stakeholders consider the potential adverse effects on healthcare coverage, access, and affordability, and the financial vulnerability of certain providers in their state,” said Fredric Blavin, senior fellow at the Urban Institute.

Decline in health care spending  due to reconciliation bill, 2025-2034 (billions of dollars):

Source: (1) Congressional Budget Office projections for the overall increase in the number of uninsured and (2) Urban Institute Health Insurance Policy Simulation Model for the state-level distribution of uninsurance changes and per newly uninsured spending estimates.

Notes: *Indicates nonexpansion state. Researchers treat Wisconsin as an expansion state because the state provides minimum essential coverage through an 1115 demonstration and would be subject to key provisions of the reconciliation bill.

Increase in uncompensated care sought by the uninsured due to reconciliation bill, 2025-2034 (billions of dollars):

Source: (1) Congressional Budget Office projections for the overall increase in the number of uninsured and (2) Urban Institute Health Insurance Policy Simulation Model for the state-level distribution of uninsurance changes and per newly uninsured spending estimates.

Notes: *Indicates nonexpansion state. Researchers treat Wisconsin as an expansion state because the state provides minimum essential coverage through an 1115 demonstration and would be subject to key provisions of the reconciliation bill.

Read the full analysis “State-Level Estimates of Health Care Spending and Uncompensated Care Changes under the Reconciliation Bill and Expiration of Enhanced Subsidies.”