How Hospitals Can Navigate Potential Medicaid Cuts

Hospitals are the backbone of our nation's healthcare system, providing essential care to all, regardless of ability to pay. However, many face significant financial pressure, from rising operational costs to workforce shortages to increasing patient demand. With potential Medicaid cuts on the horizon, these challenges are set to escalate, putting patient care and community health at an even greater risk.

The budget resolution passed by House Republicans on February 25, 2025, directs the Energy and Commerce Committee to identify $880 billion in savings over the next decade. Although the resolution doesn't outline specific funding reductions, Medicare and Medicaid are the most extensive programs under the committee's oversight, leaving many to speculate Medicaid will take the most brutal hit.

According to a recent Congressional Budget Office report, the only way to reach the $880 billion savings goal is through Medicaid or CHIP cuts. Even if the Energy and Commerce Committee eliminated every other part of its budget, it would still need to reduce at least $600 billion from Medicaid to meet the savings goal, according to a New York Times analysis.

A Vital Lifeline for Millions

Established in 1965, Medicaid is a public health insurance program that covers approximately one in five people in the United States, including low-income adults, working families, children, seniors, and individuals with disabilities. Medicaid enrollment exceeded 72 million individuals nationwide as of October 2024.

While operating under broad federal guidelines, Medicaid is administered at the state level, with funding shared between states and the federal government through an uncapped federal matching program.

The program plays a vital role in our healthcare system, accounting for nearly 20% of all healthcare spending. For example, Medicaid funds are this country's largest payer of behavioral health services. It also covers the costs of two in five births and affords participants to receive essential patient care at all stages of life.

Medicaid accounted for about 19% of all spending on hospital care in 2023 and covered about one-fifth of hospital discharges that same year. Given an already strained healthcare workforce, changes in hospital finances could affect patient care and have broader economic implications.

Medicaid Cuts Could Cost Hospitals Billions

A recent analysis by the Urban Institute and Robert Wood Johnson Foundation suggests that reducing federal Medicaid funding to states that expanded Medicaid under the Affordable Care Act (ACA) could result in significant revenue losses for healthcare providers, particularly those serving rural and underserved communities, and lead to a surge in uncompensated care.

Currently, the federal government covers 90% of Medicaid costs for enrollees under the ACA’s Medicaid expansion in 41 states and D.C. According to the analysis, significant cuts to Medicaid could force some states to drop program expansion, potentially leaving an estimated 10.8 million more Americans uninsured. And in turn, hospitals that depend on Medicaid reimbursements to cover the cost of care for low-income populations would face severe financial repercussions.

And here's something to ponder: if all state participants were to eliminate their Medicaid expansion because of funding cuts, the United States would see an $80 billion decrease in healthcare spending in 2026. According to the analysis, hospitals would experience the most loss, with a $31.9 billion reduction in revenue and a $6.3 billion spike in uncompensated care costs.

Furthermore, a rise in uncompensated care costs could strain hospital budgets, limiting their ability to invest in new medical technologies, expand community outreach programs, or maintain adequate staffing.

If Medicaid cuts occur, researchers predict that these 10 states will face the most significant impact due to drastic reductions in hospital funding: Indiana, New Mexico, Oregon, North Dakota, New York, Arizona, Louisiana, Oklahoma, North Carolina, and Washington.

Medicaid Cuts Could Shift a $1.1 Trillion Burden to States

According to a new analysis by the Urban Institute and the Robert Wood Johnson Foundation, imminent federal Medicaid cuts could impose a significant financial burden on state governments, which may need to cover between $700 billion and $1.1 trillion in funding over the next decade.

The analysis suggests that per capita caps, limiting the federal government's contribution per Medicaid enrollee, are a likely strategy to achieve the projected $880 billion in savings. States with lower per capita income would be the most impacted, specifically Arkansas, Kentucky, Louisiana, Mississippi, New Mexico, and West Virginia.

The Domino Effect of Medicaid Reductions

Medicaid cuts of this scale would harm enrollees and strain state budgets, and they would also have wide-reaching consequences across our economy and healthcare delivery system. Hospitals may have to cut services, reduce staff, or close critical departments, resulting in overcrowded emergency rooms, longer wait times, and diminishing care quality.

Public Opinion on Medicaid Spending

As Congress debates potential Medicaid changes, the latest KFF Health Tracking Poll reveals that only 17% support cutting Medicaid funding. Instead, most Americans believe funding should increase (42%) or remain the same (40%). Support for increased Medicaid spending is highest among Democrats (64%), with nearly four in ten independents (39%) also in favor.

How Hospitals Can Mitigate the Impact of Medicaid Cuts

In light of potential Medicaid cuts, hospital executives face the challenge of maintaining high-quality care while controlling costs. ShiftMed offers a flexible, on-demand workforce solution that helps soften the blow by addressing key operational and financial concerns:

Cost-Effective Staffing Solutions

ShiftMed provides access to a robust, on-demand workforce of qualified nurses and allied health professionals, enabling hospitals to adjust staffing levels based on patient needs and budget constraints. By optimizing staffing and filling gaps with qualified clinicians via ShiftMed, hospitals can minimize the need for costly overtime or temporary agency nurses.

Operational Efficiency and Workforce Optimization

Hospitals can effectively manage their internal float pool with ShiftMed, ensuring that full-time staff and per diem nurses are utilized to their fullest potential before turning to additional labor. This minimizes unnecessary staffing expenses. The ShiftMed platform also provides predictive insights into staffing trends, helping leaders anticipate demand and adjust workforce levels proactively.

Enhancing Retention and Reducing Burnout

ShiftMed allows nurses and allied health professionals to select shifts that fit their schedules, improving job satisfaction and reducing burnout. By offering more flexibility, hospitals can retain their workforce, reducing turnover and the associated costs of recruitment and training. Furthermore, ShiftMed's W-2 workforce provides reliable, compliant clinical support to help ensure care continuity during financial or operational stress.

Ensuring Compliance and Reducing Risks

ShiftMed clinicians meet all necessary regulatory and certification requirements, reducing the risk of penalties and ensuring that care delivery remains compliant with Medicaid standards. Furthermore, ShiftMed helps hospitals maintain financial stability and operational continuity in a challenging healthcare landscape by reducing unnecessary labor costs and improving workforce efficiency.

Potential Medicaid Cuts Conclusion

The potential for Medicaid cuts poses a significant threat to the financial stability of hospitals, particularly those serving vulnerable populations. If Medicaid funding decreases, healthcare providers will face mounting pressures to balance the need for high-quality patient care with the financial realities of shrinking budgets.

In this challenging landscape, hospitals must explore innovative solutions to protect their operations and sustain their ability to care for patients.

ShiftMed offers hospitals a crucial lifeline, helping them navigate these uncertain times. Through cost-effective, on-demand staffing solutions, operational optimization, and workforce retention strategies, ShiftMed enables healthcare leaders to adjust to budget constraints without compromising care quality.

Schedule a free workforce consultation to learn more.

Sources:

Maia Anderson, "How Medicaid Cuts Could Affect Healthcare Workers," Healthcare Brew, March 5, 2025, https://www.healthcare-brew.com/stories/2025/03/05/medicaid-cuts-affect-healthcare-workers

Alan Condon, “10 Stated Where Hospitals Will Struggle Most if Medicaid is Cut,” Beckers Hospital Review, March 11, 2025, https://www.beckershospitalreview.com/finance/10-states-where-hospitals-will-struggle-most-if-medicaid-is-cut-report

Jakob Emerson, "Where Medicaid Cuts Would Hit Hardest Through 2035: A State by State Breakdown," February 27, 2025, https://www.beckershospitalreview.com/finance/where-medicaid-cuts-would-hit-hardest-through-2034-a-state-by-state-breakdown/

Alan Condon, "Medicaid Cuts Would Cost Hospitals Billions, Spike Uncompensated Care Costs," March 11, 2025, https://www.beckershospitalreview.com/finance/medicaid-cuts-would-cost-hospitals-80b-in-2026-spike-uncompensated-care-costs-report.html

Shannon Schumacher, Audrey Kearney, Marley Presiado, Julian Montalvo III, Lunna Lopes, Ashley Kirzinger, Liz Hamel, and MollyAnn Brodie, "KFF Health Tracking Poll February 2025: The Public's Views on Potential Changes to Medicaid," KFF Health, March 7, 2025, https://www.kff.org/medicaid/poll-finding/kff-health-tracking-poll-public-views-on-potential-changes-to-medicaid/

Allison Orris and Gideon Lukens, "Medicaid Threats in the Upcoming Congress," Center on Budget and Policy Priorities, December 13, 2024, https://www.cbpp.org/research/health/medicaid-threats-in-the-upcoming-congress#_edn4