Medicaid Changes Could Burden Hospitals and Strain Community Health Plans

Changes to Medicaid, such as the addition of work requirements and funding cuts, could significantly impact hospitals and community-based health plans, according to experts in the industry.

These changes could lead to a reduction in coverage, increased uncompensated care for hospitals and financial strain on insurers that primarily serve Medicaid enrollees.

Gabe Scott, a partner at K&L Gates Health Care Group, shared that work requirements have historically led to a decline in Medicaid enrollment.

When low-income adults lose coverage, they often delay or avoid seeking medical care.

“When low-income adults don’t have healthcare coverage, that often means they’re not seeking care,” Scott said.

This can result in more emergency room visits, which are costly and often go unreimbursed, shifting more financial responsibility onto hospitals.

Without access to preventive care, untreated conditions can escalate, leading to higher long-term healthcare costs.

Scott reflected on the thought that healthcare providers are expected to be paid for the services that they furnish. However, the federal government is orchestrating this sort of massive cut to one of the country's largest health insurance programs.

Beyond work requirements, Medicaid funding cuts could create additional challenges for health plans that serve vulnerable populations, according to Jennifer McGuigan Babcock, senior vice president for Medicaid policy at the Association for Community Affiliated Plans (ACAP).

Babcock shared that many of ACAP’s member organizations are nonprofit, community-based insurers that operate exclusively in Medicaid.

Because they typically serve a single state or region, they lack the flexibility of larger insurers to balance out financial losses by expanding into other markets.

Babcock warned that if Medicaid faces large-scale budget reductions, these community-based plans could struggle to stay financially stable.

“If cuts to Medicaid do equal hundreds of billions of dollars, I am very fearful that the community-based plans will be drastically harmed,” she said.

Although she hopes they will not be forced out of business, as they could potentially see reduced enrollment and funding shortfalls.

In addition, states may face difficulties in maintaining reimbursement rates for Medicaid services, she said.

The combined impact of work requirements and funding cuts could create a challenging environment for both healthcare providers and patients.