Proposed Policy Changes Could Cause $1 Trillion Decrease in Provider Revenues

If enacted, provisions of the reconciliation bill currently under consideration in the Senate, combined with expiration of Affordable Care Act tax credits, could cause a staggering drop in health system revenues.

Providers could face a staggering $1.03 trillion decrease in revenues from 2025 to 2034 if policy changes currently under consideration go into effect, according to an Urban Institute report funded by the Robert Wood Johnson Foundation.

The estimate presumes that the reconciliation bill recently passed by the U.S. House of Representatives becomes law and that enhanced premium tax credits for Affordable Care Act (ACA) health plans expire at the end of 2025.

On top of the decrease in revenues, Urban Institute researchers valued the likely rise in demand for uncompensated care at $278 billion if the reconciliation bill is enacted and ACA tax credits expire.

For revenue cycle executives, these figures signal profound challenges ahead, potentially reversing insurance coverage gains achieved under the ACA and straining health system finances.

A Trillion-Dollar Hit to Provider Revenue

The projected $1.03 trillion decline in overall healthcare spending translates directly to lost revenues for providers.

• Hospitals would bear the largest share of lost revenues, with an estimated $408 billion reduction over the next decade;
• Physician services would see an estimated $118 billion decrease;
• Other healthcare services, such as dental care and home health, would see an estimated $272 billion decrease; and
• Prescription drugs would face reductions of $234 billion.

Provisions within the reconciliation bill would account for about 75% of the total decline, while the expiration of ACA tax credits would account for the rest.

Additionally, these potential policy challenges would likely cause a 15.9 million increase in the number of uninsured people, according to Congressional Budget Office projections.  The Urban Institute estimates that these newly uninsured would add $238 billion in uncompensated care costs over the 10-year time frame.

Local and state governments could deliver funding to account for revenue losses and increases in uncompensated care. Otherwise, providers are likely to absorb the costs.

Implications for Revenue Cycle Leaders

While healthcare leaders have consistently warned that cuts to Medicaid and changes to ACA tax credits would significantly disrupt health system revenue cycles, these projections put a price tag on the policy changes, painting a challenging picture for health system finances.

A significant increase in the uninsured population directly impacts payer mix, increases bad debt, and places pressure on revenue cycle operations to manage a higher volume of self-pay accounts and uncompensated care.

For provider organizations that are already financially vulnerable, such as rural hospitals and non-profits, the loss of revenues and increase in uncompensated care could be devastating, potentially leading to service reductions or closures.

Revenue cycle executives will need to closely monitor these legislative developments while preparing for various contingencies. Proactive planning could include:

• Reevaluating financial assistance programs and policies to accommodate larger uninsured and underinsured populations;
• Optimizing collection of patient payments as they become responsible for larger shares of healthcare costs;
• Engaging in advocacy efforts to inform lawmakers of the potential real-world consequences of proposed changes; and
• Identifying areas for improvement in operational efficiency, leveraging technology where possible.

The potential consequences of policy changes currently under consideration present a sobering outlook for healthcare providers. A $1 trillion decrease in revenues, combined with a significant surge in uncompensated care demand, would profoundly impact health system finances. For revenue cycle executives, these projections underscore the critical need to vigilantly monitor legislative developments and proactively develop contingency plans.