Hospitals and physicians are staring down historic budget cuts to Medicaid, starting as early as January when states will lose extra federal money for expanding the government health program.

Further down the road, enrollees will face new burdens including work requirements, cost-sharing, and more frequent eligibility determinations. At the same time, millions of patients with Obamacare coverage will find their monthly premiums skyrocketing as pandemic-era tax credits expire.

For patients, this means losing access to care. But physicians are on the line, too, facing potential layoffs, lower earnings, and worse working conditions.

Because Medicaid pays for nearly 20 percent of US hospital care, healthcare systems have already begun cutting jobs, closing facilities and reducing services, all in anticipation of steep revenue declines. 

The retrenchment is taking place across the country, in rural and urban communities and at both academic medical centers and community hospitals. Among them:

• Augusta Medical Group closed three primary care clinics in Virginia as part of its response to Medicaid cuts.
• Funding uncertainty led to the closure of Curtis Medical Center in Curtis, Nebraska, with at least six other hospitals in the state facing severe financial risk.
• Mary’s Sacred Heart Hospital, Lavonia, Georgia, closed its maternity unit in October, citing impending budget cuts.
• Seattle Children’s Hospital, Children’s Hospital of Los Angeles, and CentraCare in Minnesota also have announced layoffs of some health workers. No physicians have lost their jobs so far, but the Seattle hospital won’t fill two open positions for physicians.

Data from the University of North Carolina at Chapel Hill projects that around 300 rural hospitals could close due to OBBBA’s Medicaid cuts. Where hospitals close, employees, including clinicians, lose jobs.

Layoffs and Uncompensated Care

“You’re going to have significant cuts to coverage, reduced Medicaid enrollment, more uninsured — that means more uncompensated care,” said Edwin Park, professor at the Georgetown University McCourt School of Public Policy in Washington, DC. Eventually, hospitals’ financial squeeze will trickle down and “have a devastating effect” on the physicians they employ, he said.

Job losses will be more significant where a larger portion of the population relies on Medicaid. The Fiscal Policy Institute, a labor-backed think tank, projects that nearly 78,000 healthcare jobs could be lost in New York state alone.

Hospitals will likely face the paradoxical situation where fewer patients seek routine care and more need emergency care they can’t pay for, said Leisa Maddoux, senior managing director at FTI Consulting.

Existing physician shortages mean the potential staffing cuts may not initially affect doctors, she said, but healthcare institutions may freeze new hiring, consolidate staff, or adopt more technological and AI assistance to support doctors’ growing workloads. 

Independent physicians who see larger volumes of Medicaid patients will face a choice between turning them away, or not getting paid. According to a preliminary estimate from the Urban Institute, a nonpartisan research organization, uncompensated care sought by uninsured patients would rise to $283 billion by 2034. 

To remain afloat, practices may need to expand their patient panels, adding to physicians’ workload, or abandon areas that are not sufficiently profitable.

“More and more practices will wind up refusing to see Medicaid or Medicare patients,” said Peter Angood, MD, FRCS(C), FACS, MCCM, FAAPL(Hon), the President and CEO of the American Association for Physician Leadership.

Pediatrics at Risk

Among the worst hit will be pediatric practices, since Medicaid pays for more than half of pediatric care, said Jesse Hackell, MD, the chair of the American Academy of Pediatrics Committee on Pediatric Workforce. 

“If children lose Medicaid coverage completely or if the payment levels are reduced, the pediatricians will simply see a drop in their revenue, but no commensurate drop in their costs,” he said. Many pediatric practices already struggle to stay in business because of the low rate of reimbursement from Medicaid and further reduction in the Medicaid budget would likely force more to close, he said.

Children’s hospitals would likely have to cut services, if not personnel, he said, resulting in fewer options available for all pediatric patients, including those who are privately insured. 

“Medicaid is really the backbone of the pediatric healthcare system,” said Aimee Ossman, vice president for policy at the Children’s Hospital Association. Medicaid pays for up to 70% of services in children’s hospitals and pediatrics.

Additional Challenges for Residents

Residents worry about how the funding cuts will affect their hospitals’ training programs, and the ability to hire them permanently after completing training. 

The cuts are going to affect “the ability of hospitals to stay afloat and continue to be institutions where they can adequately train physicians that are then going to be able to serve those communities in the long term,” said Rohan Pinto, internal medicine resident at Maimonides Medical Center in New York City and the New York Regional vice president for the Committee for Interns and Residents.

Deciding to become a physician, he said, can come at huge financial costs for those who need to take on loans.

The ‘Moral Injury’

Besides the financial losses, doctors will face a worsening of their work conditions, and additional challenges in conducting their work, starting with an increased workload.

For instance, physicians may need to certify patients who qualify for exceptions to new Medicaid work requirements, said Park. The additional administrative burden will take time away from clinical work.

“There's going to be a lot of pressure on physicians to be both overly strict because of the state telling them they have to be, and wanting to be helpful to their patients so that they can continue to get their Medicaid coverage — and the physician would continue to be reimbursed for those services,” said Park.

And there is the challenge of having to deal with more complicated conditions as patients aren’t able to access routine or preventative care, as well as the psychological toll of seeing patients unable to get care.

“I work in the South Bronx in a really underserved community. We have the worst outcomes of all of the counties in our entire state,” said Sarah Nosal, MD, family physician and the president of the American Academy of Family Physicians. There is a “moral injury happening to doctors [who are] watching the patients that they care for be marginalized and dehumanized,” she said.