Several provisions in the proposed reconciliation bill are designed to reduce Medicaid spending, and hospitals are likely to face significant revenue losses because of reductions in health insurance coverage.
Previous Urban estimates show that hospitals could lose $424 billion in total revenue between 2025 and 2034, losing $321 billion from the reconciliation bill and $103 billion from the expiration of enhanced premium tax credits (PTCs) in the health insurance Marketplaces. The Congressional Budget Office estimated that 11.8 million Americans will lose health insurance under the reconciliation bill, and 4.2 million will lose coverage from the expiration of the enhanced PTCs. Losses in health insurance coverage will lead to higher uncompensated care costs and lower reimbursement rates for providers because of limits on provider taxes and state-directed payments.
Our prior estimates project that increases in uncompensated care will reduce hospital revenue by $85 billion between 2025 and 2034, with $63 billion of that reduction attributable to the Medicaid changes in the reconciliation bill. These revenue projections likely represent lower-bound estimates because they only account for changes associated with the increase in the number of uninsured.
Rural areas are particularly at risk from losses of hospital revenues
Using national estimates on changes in provider revenue under the reconciliation bill, we find that rural areas would lose $87 billion in hospital revenue between 2025 and 2034, including $66 billion in lost revenue because of the reconciliation bill and $22 biliion in lost revenue because of expiriation of the enhanced PTCs (total does not equal sum of parts due to rounding).
Compared with urban and suburban hospitals, rural hospitals tend to serve higher-risk populations, receive a higher portion of their revenue from public programs like Medicaid, and face more financial challenges and a higher risk of closure (PDF), meaning reductions in revenue can lead to greater negative outcomes for rural hospitals. Given these concerns, Congress is considering setting up a relief fund for rural hospitals that would provide states with anywhere from $15 billion to $100 billion to defray the revenue losses from the reconciliation bill. The latest negotiations put the rural hospital relief fund at $25 billion over five years.
Increases in demand for uncompensated care by the uninsured would also have significant effects on rural areas. More than 25 percent of the projected increase in uncompensated care would occur in rural areas, amounting to an estimated $23 billion. This figure includes $17 billion in additional uncompensated care because of the reconciliation bill and $6 billion in additional uncompensated care because of the expiration of the enhanced PTCs.
Our estimates are similar to those published by other organizations. The National Rural Health Association has estimated that the reconciliation bill will reduce rural hospital revenues by $70 billion (PDF) over 10 years, not including losses from the expiration of enhanced PTCs. KFF found the reconciliation bill could reduce Medicaid spending in rural areas by $119 billion over 10 years, which includes spending on both rural hospitals and other providers.
The $25 Billion Rural Hospital Relief Fund will not fully offset losses
If the reconciliation bill passes as-is and enhanced PTCs are allowed to expire, rural hospitals will face $87 billion in revenue losses plus $23 billion in increased demand for uncompensated care. The current $25 billion, five-year rural hospital relief fund will not fully offset those losses. To fully cover the likely financial losses, a relief fund closer to $100 billion would be needed for rural hospitals.
Let’s build a future where everyone, everywhere has the opportunity and power to thrive
Urban is more determined than ever to partner with changemakers to unlock opportunities that give people across the country a fair shot at reaching their fullest potential. Invest in Urban to power this type of work.
