Assessing the impact of HR 1 on healthcare, one year later

A year ago, President Trump signed the sweeping tax and spending package known as HR 1, also known as the One Big Beautiful Bill Act.

While HR 1 was mostly touted for tax cuts, it ended up as an enormously significant piece of healthcare legislation. Hospitals and health systems are dealing with the ramifications of HR 1, including significant cuts in Medicaid unfolding in the coming years.

Analysts project that Medicaid spending will drop by nearly $1 trillion over the next decade,and millions of Americans are expected to lose coverage. Some industry observers warn that health systems will be cutting services and some may even be shutting down hospitals due to Medicaid cuts.

Hospitals and health systems are bracing for the prospect of caring for more patients with no ability to pay. And they’re expecting uninsured patients who no longer have access to primary care doctors will end up in emergency rooms to get care, adding more volume to ERs that are already packed. Hospitals also fear that those patients with be sicker and require longer hospital stays because they didn’t have access to doctors.

The biggest cuts won’t take effect for a few years, but some other changes are coming soon.

In 2027, Medicaid recipients are facing new requirements to work or be enrolled in educational programs.

Critics are raising alarms about the work requirements, including provisions that some fear could lead to patients with cancer being forced to continue working or risk losing coverage, NPR reports.

States are also facing new rules in financing their Medicaid programs. Mary Mayhew, president and CEO of the Florida Hospital Association, says she’s worried about Medicaid programs being damaged. She criticized policymakers who are equating provider taxes that fund Medicaid programs as “money laundering.”

“I'm frankly even more concerned about the continued narrative out of CMS against provider taxes and against supplemental payment programs,” Mayhew says. “I think that really threatens the future stability of state Medicaid programs.”

Some hospitals over the past several months have announced staff reductions, with some specifically citing the need to reduce expenses to deal with expected losses in Medicaid funding.

Kevin Holloran, senior director and leader of the nonprofit healthcare sector at Fitch Ratings, says hospitals and health systems have some time to deal with Medicaid changes. In an interview at the Healthcare Financial Management Association conference, Holloran says the more significant funding cuts aren’t slated to arrive until 2030.

“It gets tougher to be optimistic as you close in on that 2030 mark, absolutely,” Holloran says. “People are, rightly so, getting nervous about it.”

Some hospitals and health systems have been making plans to deal with the changes ahead.

Erik Wexler, president and CEO of the Providence health system, told Chief Healthcare Executive late last year that the health system is aiming to preserve all essential services. But he said the system will reduce some services, particularly in areas where other providers may be offering similar services.

“HR 1 is absolutely impacting our health system and all health systems across the country,” Wexler says.

Rick Pollack, the outgoing president and CEO of the American Hospital Association, says he expects to see some hospitals reducing services. But he also worries that some may end up shutting their doors.

In February, he told Chief Healthcare Executive, “There could very well be closures, and we're very concerned about that.”

Even as hospitals and health systems face more financial pressures, they are also dealing with more pressure about the rising cost of care for Americans.

Ann Jordan, president and CEO of the Healthcare Financial Management Association, spoke about the need to focus on affordability at the HFMA’s annual conference last month. She urged hospitals to keep prices for patients in mind, even in this challenging landscape.

“You cannot achieve provider sustainability by shifting costs to patients who cannot bear them,” Jordan said.

Undoubtedly, health systems and hospitals are dealing with a very different environment in light of the HR 1 tax package. The legislation will affect millions of Americans, whether or not they rely on Medicaid. If a hospital closes a labor and delivery unit, that affects everyone in that community. But healthcare leaders say there’s no denying that some of those who are most vulnerable may be at risk.

In one promising development, many of the healthcare leaders at the HFMA conference recognized the road ahead and said they are determined to deal with the problems ahead. Some expressed optimism, and most showed the willingness to find solutions, because they know there’s no other option.

This originally appeared in CHE 360, a free LinkedIn newsletter from Chief Healthcare Executive. Follow on LinkedIn and subscribe.