Understanding the Proposed Medicaid Cuts and the Impact these Changes will have on Value-Based Care
As of last week, the House has officially passed President Donald Trump’s proposed Medicaid cuts. But, as the bill has moved into the hands of the U.S. Senate, many senators are deeply divided on the proposed changes, with most believing they will extend negotiations into July 2025.
These changes could have major effects on marginalized groups in America, facilities, and providers nationwide. According to an article by Johns Hopkins Bloomberg School of Public Health, “As of November 2024, over 70 million Americans were enrolled in Medicaid, the government health insurance program that offers free or low-cost health care to adults and families with limited income, people with disabilities, pregnant people, and people in long-term care facilities.”
In this article, FRG will discuss the proposed bill and changes, what these Medicaid changes will affect, and how value-based care will be impacted by cuts to this federal and state program that provides health coverage for millions of Americans.
Medicaid Changes that are Under Consideration
The following changes to Medicaid are under consideration due to President Trump’s proposed “big, beautiful bill”:
- End the enhanced Federal Medical Assistance Percentage (FMAP) for the Medicaid Expansion population in states that newly expand Medicaid after January 1, 2026
- Reduce the Medicaid FMAP Floor
- Limit states’ access to financing tools like provider taxes and special payment arrangements to fund Medicaid
- Create per-capita caps for Medicaid and Medicaid Expansion enrollees
- Impose work reporting requirements for all Medicaid enrollees through non-disability pathways
- Require states to impose cost-sharing up to $35 per service on adults who qualify for Medicaid under the expansion program
- Impose work reporting requirements for Medicaid Expansion enrollees
- Require states to review eligibility for those covered under the Expansion program every six months
What’s at Stake
The healthcare industry will be significantly impacted by President Trump’s proposed changes, as they could have a substantial effect on revenue. According to Advisory Board, “…potential cuts to Medicaid could lead to an $80 billion decrease in healthcare revenue, including a $32 billion decline in hospital revenue in 2026.”
Individual states, patients, hospitals, healthcare providers, and local economies will all face the repercussions of decreasing revenue and increasing uncompensated care.
Negative Impacts on States
While it’s difficult to predict exactly how states will respond to reduced federal funding, we do know that all states will face major federal funding cuts if the proposed Medicaid changes are enacted.
In response to the potential changes, according to an article by The Commonwealth Fund, “…several states have already established statutory provisions. Nine states (Arkansas, Arizona, Illinois, Indiana, Montana, New Hampshire, North Carolina, Utah, and Virginia) have statutory triggers to discontinue the expansion when federal funding is reduced, and another three states (Iowa, Idaho, and New Mexico) that have statutes to mitigate the financial impacts when federal funding decreases and would likely end the expansion as a result.”
For a more detailed analysis of losses each state will endure under a federal work requirement, check out this fact sheet published by the Urban Institute.
Loss of Insurance Coverage Across the Country
With the proposed Medicaid cuts comes a loss of insurance coverage across the United States. According to the Congressional Budget Office’s preliminary estimate, the current bill will lead to over 10.3 million people losing Medicaid coverage by 2034. Within this group of people, there are millions of low-income enrollees, as well as the elderly, who are at risk of losing access to Medicaid under the proposed legislation.
Decline in Revenue for Hospitals and Healthcare Providers
Changes in Medicaid will not only affect enrollees but also create a decline in revenue for hospitals and healthcare providers. For hospitals located in Medicaid expansion states, the proposed cuts could lead to a 19% decline in operating margins. On the other hand, safety-net hospitals could also face repercussions because of their high share of Medicaid patients and see operating margins reduce by an average of 56%.
When it comes to healthcare providers, the proposed Medicaid cuts are projected to cause a decline in office-based physicians’ revenue by $6.4 billion, while other healthcare providers like home healthcare and dentists, could see an even larger decline in revenue of $21 billion.
Will Medicaid Cuts Impact Value-Based Care?
If the proposed Medicaid cuts are passed, shifting to value-based care will be the solution for providers who will face the hardships of these changes that are likely to shrink coverage and reduce funding without corresponding initiatives to address the ongoing needs of complex and vulnerable populations.
The healthcare landscape will change, but according to an article by Patient Safety & Quality Healthcare, utilizing a VBC payment model will continue to empower providers while treating Medicaid patients with a “whole person” approach.
Prioritize Value-Based Care in your Healthcare Facility with FRG!
Value-based healthcare is key to supporting Medicaid providers in addressing care gaps, ensuring people receive the care they need and deserve, and helping providers move away from the outdated fee-for-service model. For additional information about FRG’s services and our dedication to supporting value-based healthcare, email info@frgsystems.com or call 888-466-1025 today!