Is the Cost of Cutting Healthcare Just Too High?

Since the passage of H.R. 1 in July of 2025, healthcare organizations have been bracing for the effects of lower Medicaid revenues. The Congressional Budget Office (“CBO”) estimates that, over its 10-year lifespan, the bill will reduce federal Medicaid spending by about $911 billion and increase the number of uninsured people by about 10 million. Many struggling providers fear that the cuts will be too much to bear, forcing them to reduce services or, in some cases, shut their doors. While it was initially thought that the most vulnerable facilities might be small, rural hospitals, recent studies have suggested that urban, safety-net hospitals may be in even greater peril. These facilities often serve larger patient populations and rely more heavily on Medicaid revenues than their rural counterparts.

Not surprisingly, the H.R. 1 reductions pose more of a threat to facilities in Medicaid expansion states—such as Oregon, Washington, and Alaska—than in non-expansion states. The reason is that expansion states, which provide Medicaid coverage to adults with incomes up to 138% of the Federal Poverty Level (“FPL”), have relatively higher Medicaid budgets and percentages of Medicaid enrollees than non-expansion states. In other words, expansion states have more to lose. The Kaiser Family Foundation estimates that Oregon and Washington will see their federal Medicaid funding drop over the next decade by 19% and 18%, respectively, from their pre-H.R. 1 expected baseline levels. Alaska’s expected drop is 11%. These percentages translate to losses of $22 billion, $37 billion, and $2 billion.

Medicaid cuts are only part of the picture, though. H.R. 1 also eliminates subsidies that made it easier for many groups, including lawfully present immigrants, to obtain insurance through the healthcare marketplace. These measures are predicted to increase the number of uninsured by another 7 million Americans, bringing the legislation’s total toll to 17 million. Previous studies suggest that this loss of coverage will directly contribute to a higher national death rate.

Even those who are able to keep their insurance coverage are being adversely affected as healthcare providers are forced to shift more of their costs to insured populations. This rebalancing is resulting in unprecedented insurance premium increases. A recent study shows that 44% of large firms plan to pass along their higher insurance costs to their employees in the form of increased premiums. Employees can expect to pay an average of 9% more for health insurance in 2026 than they paid in 2025—and may find that they still receive less generous coverage in return.

When will the new cuts kick in?

Several groups are already starting to feel the pain of the H.R. 1 cuts. As noted above, employers and employees are grappling with higher-than-expected insurance premium spikes. Some non-citizens, such as refugees, asylum seekers, and other victims of humanitarian crises, are also scrambling. As of October 1, 2026, they are no longer eligible for federal funding for their full-scope coverage under Medicaid and the Children’s Health Insurance Program (“CHIP”). Some states, like Oregon, have taken steps to ensure that these populations remain covered despite the federal pullback. Other states have been unable to close the gap. Washington, for example, estimates that 11,000 non-citizens were recently removed from its Medicaid and CHIP rolls.

The most significant changes and cuts to the Medicaid program will go into effect on January 1, 2027. As of that date, adult Medicaid recipients will need to show that they are working, volunteering, caregiving, or receiving training or education for at least 80 hours per month in order to maintain their coverage. Failure to produce this evidence may result in these recipients losing coverage by as early as March 31, 2027. The work requirement provisions of H.R. 1 are expected to generate more Medicaid savings—approximately $326 billion over 10 years—than any other provisions of the bill. However, a CBO study has shown that work requirements might reduce Medicaid spending not so much because they convince recipients to start working, but because they create verification barriers that recipients find too confusing or too onerous to satisfy.

A shortening of Medicaid’s retroactive coverage period also becomes effective on January 1, 2027. Retroactive coverage helps pay for healthcare services received by individuals before they apply for Medicaid coverage. Since 1972, the retroactive coverage period has been 3 months. But H.R. 1 trims this period to 2 months for traditional Medicaid enrollees, including adults with disabilities and dependent children, and 1 month for Medicaid expansion enrollees. The CBO estimates that these reductions will save the Medicaid program $4 billion and increase the number of uninsured by 100,000 by 2034.

Other H.R. 1 changes that go into effect on January 1, 2027, include increasing the frequency of Medicaid eligibility checks from every 12 months to every 6 months, capping and prohibiting new Medicaid provider taxes, and imposing stricter requirements for verifying Medicaid enrollee addresses. These measures are expected to save the Medicaid program about $271 billion and increase the number of uninsured by about 1.8 million over the next decade. It is important to note that states are given some discretion as to when they implement the more-frequent eligibility checks. Washington and Alaska will move to 6-month verifications on January 1, 2027. Oregon will make the move on October 1, 2027.

What comes next?

The effects of H.R. 1 will be significant and broad. Government agencies, healthcare entities, employers, and individuals are already starting to feel the effects of Medicaid coverage retractions, reduced healthcare insurance subsidies, and increased Medicaid administration costs. Healthcare providers need to be actively planning for the worst, coming up with operational and investment strategies for remaining viable in a world where they will be asked to do more with less. Some of this work may include initiating frank conversations with their communities about the challenges that lie ahead and some of the service changes and other measures that might need to be carried out in order to survive those challenges.

The work may also include becoming more active on the political front. With an estimated 85–88% of total H.R. 1 spending cuts coming after Trump leaves office in January of 2029, there may be opportunities for Congress to reverse or blunt some reductions before they cause lasting damage. And while most experts agree that the likelihood of H.R. 1 being repealed is low, there is hope that changes in the makeup of the House and Senate as a result of the upcoming mid-term elections could open the door for some legislative relief. The healthcare industry has compelling arguments that it can bring to bear in support of this effort. Not only is the industry saving lives, it is also sustaining the economic viability of many communities it serves. In fact, about 75% of net job growth in the country can be attributed to the healthcare sector over the past year.

Simply put, America cannot afford to let its healthcare system shrivel up. Yes, the cost of keeping America healthy is high. But the cost of allowing it to become unhealthy would be devastating.

This article summarizes aspects of the law and does not constitute legal advice. For legal advice with regard to your situation, you should contact an attorney.