Commonwealth Fund: Hospitals to Lose Billions in Revenues from New Medicaid Work Requirements

Leaders at the Commonwealth Fund, a New York City-based policy research and analysis organization, are warning that the changes coming into being around Medicaid work requirements because of the tax and immigration bill passed in July that is referred to as the “One Big Beautiful Bill Act,” will have negative impacts on hospitals.

On Sep. 18, they published an “Issue Brief” report, entitled “The Impact of Proposed Federal Medicaid Work Requirements on Hospital Revenues and Margins.” In the introduction to the report, they note that “Congress recently passed unprecedented cuts to federal Medicaid spending that will not only impact beneficiaries but the entire safety-net system that serves a wide array of patients and families. To achieve a large portion of these cuts, lawmakers adopted mandatory federal work requirements for people who qualified for Medicaid through the Affordable Care Act’s (ACA) expansion of eligibility. Under this policy, enrollees ages 19 to 64 must engage in at least 80 hours per month of community engagement activities (such as work, volunteering, or enrollment in an educational program) and must verify these activities twice a year to retain coverage. The law exempts caregivers of dependent children under age 14, people with disabilities, people who are pregnant, and several other groups.”

What’s more, the Commonwealth Fund leaders note, “Forty states, along with the District of Columbia, have expanded Medicaid eligibility to nonelderly adults with incomes up to 138 percent of the federal poverty level (FPL) — more than 16 million people in 2024.2 In these states, Medicaid beneficiaries could lose health insurance if they cannot find work, are unable to document the required number of hours they work, or cannot document an exemption. While the vast majority of Medicaid beneficiaries subject to the requirements either work or qualify for an exemption, millions could lose coverage because of difficulties they experience in navigating complex work-reporting and verification systems or the work-requirement exemption process. Others who could lose their Medicaid are people who have been laid off or are temporarily unemployed.”

And here’s where the provider impact will be felt: “While the work requirement policy could generate federal and state savings by reducing the number of people that receive Medicaid insurance, it could leave many uninsured. This would lead to lower revenues and higher uncompensated care costs for hospitals. Alongside the potential loss of coverage for Medicaid beneficiaries is the work requirement policy’s impact on hospitals — a subject that has received less attention. Coverage losses will affect hospitals by reducing their revenue and increasing uncompensated care costs. These adverse outcomes will affect not only Medicaid patients but the broader community as well, since lower revenues and increased uncompensated care could force many hospitals to reduce staff and payroll or eliminate important clinical services used by all patients.”

Looking at the impact of the passage of work requirements legislation in two states, they report that, “Based on the impact that Arkansas and New Hampshire’s state work requirement programs had prior to their halt in 2019, the Urban Institute has estimated that about 5.5 million to 6.3 million people across all Medicaid expansion states would lose access to coverage if such a policy were fully implemented in 2026. Although the Urban Institute report did not attempt to estimate the number of people losing Medicaid coverage who would become uninsured, our estimates show that 5.1 million to 5.8 million people would become uninsured and that 400,000 to 500,000 individuals would either enroll in employer-sponsored health coverage or purchase nongroup health. In comparison, the Congressional Budget Office (CBO) estimated that 5.2 million people would lose Medicaid coverage and 4.8 million would become uninsured by 2034. The Urban Institute study assumed that Medicaid agencies would rely on existing state databases to automatically determine whether enrollees are meeting work requirements or are exempt from the policy, using data-matching processes similar to those that Arkansas and New Hampshire used previously. The study’s estimates also assumed that noncompliance rates for people not automatically exempted from the reporting requirement are consistent with the noncompliance rates observed in Arkansas (with a low-range estimate of 72 percent) and New Hampshire (with a high-range estimate of 82 percent).”

According to the figures included in the report, at the high end, hospitals nationwide could see a 9.9-percent decline in Medicaid revenues as a result of the policy changes in the act. And, they note, “We estimate that of those who lose Medicaid coverage, about 5.1 million to 5.8 million would become uninsured. With this change in coverage status, the HFSM [the Dobson/DaVanzo Hospital Finance Simulation Model] estimates that hospitals’ uncompensated care expenses would increase by $7.0 billion to $8.0 billion (29.5 percent to 33.6 percent), as former Medicaid beneficiaries lose their coverage and become uninsured.”

The full report can be accessed here.