Cutting Medicaid would force even more hospitals to close

How much austerity can our hospitals take? It’s a frightening question — and Congress is threatening to find out the answer.

America’s health care infrastructure is shrinking. Since 2018, more than 100 hospitals have closed across the U.S. When hospitals close, doctor visits go down, death rates go up and job losses are severe.

Now, Republicans in Congress are threatening to slash the Medicaid budget, which would strip even more hospitals of desperately needed funding. If they are successful, this will be the third wave of financial pain to hit hospitals’ fragile budgets over the last five years.

The first wave came from COVID-19. The pandemic was disastrous for many of our nation’s health care facilities. Forced to provide expensive COVID care and postpone more remunerative procedures, most hospitals’ net patient revenues and operating margins declined significantly. This financial shock came at a time when many hospitals, especially in rural areas, were already operating on razor-thin margins.

The federal government’s provider relief fund, courtesy of the CARES Act, was able to tide hospitals over for a year or two. But for many hospitals, it wasn’t enough to stop the long-term erosion of financial sustainability that had started before the virus first visited our emergency rooms.

During this crisis, we conducted research to identify factors that put hospitals at greatest risk of financial collapse. We found that high levels of uninsurance, medical debt and COVID incidence in a hospital’s region were all important factors, but the failure of a hospital’s home state to join the Medicaid expansion under the Affordable Care Act stood out as particularly hazardous.

The evidence is clear: Medicaid was a crucial financial buffer for hospitals when they needed it most.

The second wave of closures came in 2023, when millions of Americans lost health insurance with the end of Medicaid’s guaranteed “continuous enrollment” under the Public Health Emergency. Medicaid rolls shrank significantly. Approximately 15 million enrollees lost coverage. According to one survey, half of those households became uninsured. As a result, thousands of hospitals lost reimbursement to cover the cost of treating millions of patients who otherwise had no means of payment.

That was a second devastating financial blow, and Congress is now poised to deal a third. The latest House budget resolution envisions upwards of $880 billion in spending cuts over the next decade, which would likely come from Medicaid. If these costs are pushed onto the states, which lack the funds to fill the gap, millions of Americans could lose their coverage.

But Medicaid isn’t only beneficial for the low-income Americans who rely on it. Research by us and others has shown that the Medicaid expansion has been a savior for many struggling hospitals, which would be forced to deliver far more uncompensated care to these low-income patients. Reversing that expansion now would rip away a valuable lifeline from these businesses and disrupt the proper functioning of this marketplace.

Health care is a business with a unique mandate: to serve a customer base in which many are unable to afford its services. Medicaid plays a vital role in sustaining these organizations and enabling them to provide lifesaving health care access to millions of Americans.

In this case, what’s good for low-income Americans is good for the stability of the health care business — and that’s good for all of us.

Robert I. Field is professor of law and professor of health management and policy at Drexel University and the author of “Mother of Invention: How the Government Created ‘Free-Market’ Health Care.” Anthony W. Orlando is associate professor of finance, real estate and law at California State Polytechnic University, Pomona. Arnold J. Rosoff is professor emeritus of legal studies and health care management at the Wharton School of the University of Pennsylvania.