$200B in Uncompensated Care: CFO Outlook on the Reconciliation Bill

The bill could slash Medicaid funding and end enhanced premium subsidies, threatening over $1 trillion in provider revenue.

The House recently passed a massive reconciliation bill that, if enacted, could dramatically alter the landscape of health system financing.

The bill proposes big cuts to Medicaid funding and the expiration of enhanced premium tax credits, potentially leading to a loss of more than $1 trillion in provider revenue over the next decade. This move poses grave challenges for safety-net hospitals, which serve a high proportion of low-income and uninsured patients.

Provider Impact

According to an analysis by the Robert Wood Johnson Foundation, providers could face a cumulative revenue loss exceeding $1 trillion between 2025 and 2034.

Hospitals alone are projected to experience a $306 billion revenue decline. Additionally, uncompensated care costs could increase by $278 billion, with hospitals bearing the brunt of this burden.

Financial pressures are expected to intensify if the enhanced premium tax credits, which currently assist millions of individuals in affording health insurance, are allowed to expire at the end of 2025. This could play out to nearly 16 million people losing Medicaid coverage, raising the uninsured rate by more than 50% (it currently hovers around 7%) and further straining hospital finances.

April Audain, CFO of Denver Health, says the bill would produce more uninsured patients.

"Denver Health sees close to 125,000 Medicaid patients per year – nearly half of all patients across our health care system, and more than 10% of all Colorado Medicaid patients get their care at Denver Health," she said.

 "As a safety net, nearly two-thirds of our funding comes from the federal government, primarily through Medicaid funding," she added "Adding barriers to enrollment to Medicaid undoubtedly will result in more uninsured Coloradans. The net result will be delays in care for patients and additional financial burdens for safety-nets like Denver Health, who are disproportionately affected by reductions to Medicaid and increases in the uninsured."

The CFO To-Do List

CFOs, especially those in safety-net hospitals, should consider safeguarding their organizations and advocating against the funding cuts.

First, CFOs can develop detailed models to assess the impact the cuts would have on their health system. Taking this time to diversify revenue streams can also help prepare health systems for revenue losses. This may include expanding services, pursuing partnerships, or enhancing outpatient care offerings.

Cost efficiency initiatives are also attractive, especially when considering the uncertainty surrounding tariffs. Some CFOs are examining supply chain management, reducing administrative expenses, and leveraging technology to improve operational efficiency.

Lastly, CFOs should examine both their community partnerships and their advocacy efforts. CFOs should strengthen collaborations with community organizations to support patient populations affected by potential coverage losses. Community-based initiatives can also provide additional resources and support to vulnerable groups. They should also engage with policymakers to advocate for the continuation of Medicaid funding and enhanced tax credits. Active participation in policy discussions can help influence decisions that affect hospital revenue streams, and a CFO’s voice can hold a lot of power.

The bill is currently being debated in the Senate, where it will likely face changes, with the updated version then requiring another sign-off from the House.