President Donald Trump signed the One Big Beautiful Bill Act into law on July 4, 2025. While the healthcare industry is no stranger to volatility, this legislation will usher in significant changes that will reshape the healthcare landscape over the next decade. Though the most dramatic impacts won’t be felt immediately, hospitals and health systems need to prepare for substantial shifts in coverage, reimbursement, and patient populations that will fundamentally alter how they operate and deliver care.
Financial Impact: A $3.4 Trillion Debt Increase
The Congressional Budget Office (CBO) projects significant financial impacts from the legislation:
- National debt increase: $3.4 trillion from 2025 to 2034
- Spending cuts: $1.1 trillion in direct spending reductions
- Revenue loss: $4.5 trillion in government revenue
- Uninsured population: 10 million additional Americans by 2034 (down from earlier projection of 11.8 million)
- Medicaid cuts: Nearly $1 trillion in reduced spending over the decade
According to a Becker’s Healthcare CEO Advisory Call from July 14, hospital leaders are already preparing for significant restructuring due to these sweeping Medicaid cuts. Many anticipate difficult decisions including service-line consolidations, workforce reductions, or complete withdrawal from certain markets as they struggle to balance fiscal sustainability with their commitment to caring for at-risk communities. Organizations with substantial Medicaid patient volumes or constrained cash positions face the greatest risk.
Immediate Coverage Challenges
ACA Marketplace Disruptions
The first major impact on coverage will likely involve Affordable Care Act (ACA) marketplace insurance. Unless Congress extends enhanced subsidies that help low-income enrollees pay their premiums, those subsidies will expire at the end of 2025. A projected 4.2 million more people would be uninsured in 2034 compared with a scenario where higher subsidies remain, with 2.2 million becoming uninsured in 2026 and 3.7 million in 2027.
The bill introduces several ACA premium tax credit restrictions:
- Immigration status: Prohibits access for people ineligible for Medicaid due to immigration status
- Special enrollment periods: Limits credits unless certain conditions are met
- Eligibility verification: Requires verification prior to issuing credits
- Reclamation caps: Removes current limits on government reclamation of excess advance payments (Becker’s Nine Things)
Medicaid Enrollment Erosion
The Centers for Medicare & Medicaid Services projects that approximately 725,000 to 1.8 million people will lose access to ACA coverage next year following newly implemented rules intended to strengthen enrollment controls and enhance program oversight. Furthermore, those registering for 2026 benefits through special enrollment windows will be denied subsidies unless their qualification stems from an approved life change, while certain previously covered immigrants, including refugees and asylum seekers, will be barred from subsidy assistance.
In Medicaid, immediate changes involve technical aspects of Biden administration regulations issued in 2024 to remove barriers to coverage. With parts of those rules withdrawn until at least 2034, states can implement more extensive renewal processes, such as requiring in-person interviews for enrollees whose Medicaid eligibility isn’t based on income.
Major Changes Coming in 2027-2028
Work Requirements and Eligibility Changes
Starting as early as January 2027, states must establish Medicaid work requirements with specific criteria:
- Work obligation: At least 80 hours per month of work, community service, work programs, or educational programs
- State flexibility: States set specific requirements for consecutive months and frequency of engagement checks
- Exemptions available: States can apply for exemptions through 2028 with good-faith compliance efforts
- Redetermination frequency: Medicaid expansion adults must have eligibility reviewed every six months instead of annually
- Retroactive coverage: Reduced from 90 days to one month for expansion enrollees and two months for traditional enrollees starting in 2027
Provider Tax and Reimbursement Restrictions
The legislation implements multiple restrictions on provider taxes and reimbursements:
- Federal oversight: Stricter criteria for states seeking uniform tax requirement waivers
- Enhanced FMAP phase-out: Federal Medical Assistance Percentage incentives connected to provider taxes will be eliminated
- Hospital tax reduction: 2.5-percentage-point reduction in allowable hospital tax rates for expansion states beginning in 2028
- New tax prohibition: Immediate ban on new and modified taxes for all states
- State-directed payment caps: Future arrangements capped at 100% of Medicare rate in expansion states and 110% in non-expansion states
- Existing payment reductions: 10% annual reductions beginning in 2028 until reaching new limits
Specific Hospital Impacts
Urban Safety-Net Hospitals Face Immediate Crisis
From a service-line perspective, areas serving high volumes of Medicaid beneficiaries will be most affected, including:
- Obstetrics and maternity care
- Behavioral health services
- Emergency departments
Leaders from urban safety-net hospitals, especially in states like Illinois and New York, described an immediate and dire impact during the CEO advisory call. Several hospitals are managing precariously thin cash flows and encountering obstacles in meeting staff compensation obligations. The erosion of state funding mechanisms like the Hospital Assessment Program is exacerbating financial strain, forcing hospitals to weigh painful service reductions.
When funding for mental health services for adults and children in community settings is reduced, more people will utilize emergency rooms and hospitals for care that doesn’t need to be acute care, creating additional strain on already overburdened emergency departments and driving up costs for everyone, said Nate Mussell, vice president of public policy with Fairview Health Services in a U.S. News & World Report webinar.
Rural Hospital Challenges
The bill does incorporate $50 billion across five years for the Rural Health Transformation initiative, designed to bolster rural medical facilities. CMS will oversee these resources, distributing $10 billion each year from fiscal 2026 through 2030.
However, rural hospitals face particular challenges. Independent rural hospitals report that they were already operating at a loss due to workforce shortages and infrastructure challenges, according to the hospital CEO advisory call. The latest Medicaid-related funding turbulence adds to an accumulating pattern of economic blows, with rural leaders warning that closures would shatter their communities, where hospitals typically remain the exclusive healthcare destination and most significant employer.
If a rural hospital serves a high volume of mothers and babies on Medicaid and has to pull back on some services, it impacts everyone who relies on those services in that community, said Mussell.
State-by-State Variations
The impact will vary significantly across states based on their current Medicaid structure:
- High-impact states: Federal Medicaid spending cuts expected to exceed 13% in roughly 35 states
- Lower-impact states: Decline under 10% primarily in states that haven’t expanded Medicaid under the ACA
- State response challenges: Limited ability to move budget money around to compensate for shortfalls
- Rural state vulnerabilities: Smaller budgets make it harder to find alternative funding when provider reimbursement rates decrease (HFMA)
Executives in states that declined Medicaid expansion said in the advisory call they expect a more gradual initial effect given their smaller Medicaid populations and different state financing mechanisms. Nonetheless, administrators recognize this protective cushion could prove short-lived, as upcoming budget choices and extended consequences stay unpredictable. Numerous leaders are utilizing state organizations to monitor policy changes and inform key constituents.
Strategic Response and Implementation Challenges
Timing Creates Strategic Uncertainty
Since many of the most impactful changes from the bill will phase in over three years, some leaders in the advisory call said they are holding off on drastic operational changes. They are carefully monitoring state government and Medicaid plan reactions before making moves, while others are developing contingency plans privately but hesitant to announce potential changes too early to employees or communities.
Broader Healthcare System Impact
A central thread running through the executive discussions on the advisory call was the mutual apprehension that healthcare availability will diminish for every patient demographic—extending beyond Medicaid recipients alone—as hospitals eliminate programs to remain financially viable. Administrators emphasized that this consequence requires more transparent dialogue with legislators and communities. Contracted emergency services, wellness initiatives, and clinic operations will generate extensive repercussions throughout the broader healthcare landscape.
The Strategic Road Ahead
Some healthcare executives voiced hope that the 2026 midterm contests will produce a political restructuring and potentially overturn or soften the budget’s most severe elements, while others stayed doubtful, observing that even a change in legislative leadership wouldn’t ensure policy reversals given presidential veto authority and established fiscal objectives.
Hospitals must prepare for a healthcare environment that will look dramatically different in the coming years, with reduced coverage, tighter reimbursement, and increased demand for uncompensated care. The compounding effects of these changes will require strategic planning and operational adjustments to ensure continued viability in serving their communities.
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