Guide: Reduce the Impact of Medicaid Cuts on Hospitals

Understanding the Financial Risks of Medicaid Cuts

What is the impact of Medicaid cuts on hospitals?
Medicaid cuts reduce provider revenue, increase uncompensated care, and place rural and safety-net hospitals at higher risk of closure. When patients lose Medicaid coverage, they often become uninsured, leaving hospitals to absorb more bad debt and charity care while struggling to maintain financial stability.

That’s the reality many leaders are bracing for today. Congress has passed the One Big Beautiful Bill Act, which includes reductions of up to $793 billion in Medicaid spending over the next decade. Analysts warn this could leave up to 7.8 million people without coverage by 2034, with total uninsured rates climbing by 16 million once other changes to marketplace subsidies are factored in.

For hospitals and health systems, these cuts translate directly into:

• Reduced Medicaid reimbursements for covered patients
• Higher volumes of self-pay patients with limited ability to pay
• Increased financial pressure on organizations already dealing with thin operating margins

Looking at the numbers, it’s clear that the impact of Medicaid cuts on hospitals and the communities they serve is a looming, measurable risk that demands proactive strategies.

How Medicaid Cuts Increase Uncompensated Care

Uncompensated care is one of the clearest and most immediate consequences of Medicaid cuts. When patients lose coverage, they still seek care, but providers often do not get paid.

• The American Hospital Association estimates enacted cuts could increase uncompensated care costs by $42.4 billion by 2034.
• Hospitals would also face $21.7 billion in shortfalls (the gap between Medicaid reimbursement and actual costs of care).

Hospitals have seen this dynamic before. After the Affordable Care Act expanded Medicaid, uncompensated care fell by nearly 25% in expansion states. In Louisiana, expansion reduced uncompensated care as a share of hospital operating expenses by one-third. Rolling back coverage would reverse those gains and do so quickly.

The financial risk here is twofold: not only will hospitals see more uninsured patients, but the costs associated with treating them will also balloon. Uncompensated care erodes margins, forces hospitals to reallocate funds away from service lines, and undermines investments in staff, facilities, and innovation.

The Ripple Effect on Rural and Safety-Net Hospitals 

Not all providers face the same degree of risk. Rural and safety-net hospitals will be disproportionately impacted by Medicaid cuts.

• Medicaid covers more than half of children and nursing home residents in some states, making it a lifeline for community health.
• Data from the University of North Carolina shows 338 rural hospitals are already financially vulnerable and could be pushed to closure as the cuts go into effect.
• Safety-net leaders have warned that even modest reductions have a “significant adverse impact” on financial viability.

For rural providers, any decline in Medicaid revenue may be the tipping point. Many of these hospitals already operate with negative margins year over year. Without sufficient coverage, they may be forced to close altogether, leaving communities without access to local care.

The ripple effect goes beyond balance sheets. Hospital closures disrupt local economies, limit access to critical services, and create long-term health disparities in already underserved regions.

Solutions to Reduce the Impact of Medicaid Cuts

Hospitals can’t prevent federal policy changes. But they can take proactive steps to reduce their risk and stabilize their revenue in anticipation of Medicaid cuts. Patient financing solutions are one of the most effective strategies available.

1. Bridge the Coverage Gap for Patients

As patients lose Medicaid coverage, many face higher out-of-pocket costs. Without affordable payment options, they delay treatment or default on bills. CarePayment’s interest-free financing empowers patients to pay balances over time without punitive interest or credit harm. This makes care accessible while reducing the likelihood of defaults.

2. Convert Uncompensated Care into Revenue

Every patient who enrolls in a CarePayment plan represents one less uncompensated case. Instead of writing off bad debt or increasing charity care, hospitals can recapture revenue by giving patients a feasible path to repayment.

3. Strengthen Cash Flow During Uncertainty

Unlike traditional financing, CarePayment provides hospitals with upfront funding for receivables. Providers don’t have to wait months or years to collect from patients. They receive immediate cash flow that helps keep operations stable when budgets are under pressure.

4. Align with Mission and Community Needs

Importantly, solutions like CarePayment do more than balance the books. They allow hospitals to uphold their mission to care for all patients, even as Medicaid support falters. By offering compassionate, interest-free payment plans, providers demonstrate a commitment to community health and equity while protecting financial sustainability.

Why Hospitals Should Act Now

The impact of Medicaid cuts on hospitals will not unfold gradually. With the One Big Beautiful Bill Act now signed into law, billions in hospital revenue are set to disappear as coverage reductions phase in. Hospitals that prepare now by strengthening revenue cycle strategies and implementing patient-friendly financing will be better positioned to absorb the shock.

CarePayment has been helping hospitals navigate patient affordability challenges for nearly two decades. Our proven model has enabled systems to:

• Increase self-pay collections while reducing administrative burden
• Improve patient satisfaction by offering flexible repayment options
• Stabilize cash flow through upfront receivable funding

For example, see how a $1.7B health system improved collections and patient experience with CarePayment. Read the Case Study »

Request a demo today to learn how CarePayment can help your hospital reduce the impact of Medicaid cuts or explore our Comprehensive Provider Solutions.