As details come into focus of the federal work requirements that will be imposed on state Medicaid programs next year, health systems are preparing for how the cuts will undermine their bottom line.
The new rules, released earlier this month, detail a much stricter work requirement program than initially predicted, and many recipients with cancer or other debilitating conditions will be required to prove that they are too ill to work. Colorado Medicaid director Adela Flores-Brennan told NPR’s Here and Now that the state is already struggling to integrate the new regulations into its eligibility infrastructure, but did not anticipate that a diagnosis would not be enough to demonstrate medical frailty.
On another front, Children’s Hospital Association President Dr. Paul Haut told Modern Healthcare that pediatric hospitals are at higher risk, as nearly half of the country’s children are enrolled in Medicaid or the Children’s Health Insurance Program (CHIP). Parents will inevitably have a difficult time meeting the increased paperwork requirements for eligibility while maintaining a course of treatment for their sick child. But children’s hospitals also rely on state-directed payments, which will be undermined by another rule to place controls on what Trump administration officials are calling “legal money laundering.”
The uninsurance rate for children is already on the rise, according to the Georgetown University Center for Children and Families. State-by-state analysis of Medicaid and CHIP enrollment demonstrates that 2 million fewer children are enrolled than when Trump took office. The administration has not commented on the phenomenon, a 4% decline in childhood enrollment should trigger some kind of federal response.
Health and Human Services Chief Economist and Chief Regulatory Officer Casey Mulligan attended the Healthcare Financial Management Association conference in Michigan this month, and took the opportunity to praise Medicaid cuts to the very providers who are anticipating income shocks as a result of federal funding cuts. STAT reports Mulligan boasted states would no longer be able to pay providers without relying on their general funds. Arizona’s provider tax is currently 5.99% of a hospital’s patient revenue, which is collected by the state and used to boost federal matching funds.
Under the One Big Beautiful Bill Act, signed by President Trump on July 4, 2025, the new threshold is 6% of net patient revenues but only in Medicaid expansion states. The threshold drops to 5.5% in fiscal year 2028 (which starts on October 1, 2027), 5% in 2029, 4.5% in 2030, 4% in 2031 and then to 3.5% in fiscal year 2032 and thereafter. The lower thresholds would apply to existing taxes and assessments on all provider types.
The Georgetown report confirmed that some of the existing taxes on hospitals that will no longer be allowed under this section were used to specifically finance the Medicaid expansion, such as in Arizona. These expansion states will therefore be at risk of being unable to continue to finance the Medicaid expansion moving forward., the authors concluded.
All states but Alaska use provider taxes to help finance the state share of Medicaid spending. Because OBBA sharply limits states’ ability to generate Medicaid revenue through provider taxes, the Congressional Budget Office projects the change will reduce federal Medicaid spending by $226 billion over 10 years.
With significant cuts to Medicaid and alterations to the Medicare program underway, House Speaker Mike Johnson indicated that the next object of Republican spending cuts would likely be Social Security. Newsweek explains that Johnson was referring to the national debt on a podcast when he listed Social Security as a program that would require alteration.
We have a plan to do that next year, and it’s critical, because we’re at $40 trillion plus in debt. At some point you get into a hole so deep you can’t climb out of it, so desperate times call for desperate measures.
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