As the new federal Medicaid work requirements take effect, the economic consequences will extend far beyond government budgets. Healthcare providers, especially hospitals and clinics serving low-income communities, stand to lose revenue and face greater uncompensated care burdens if patients become uninsured.
Note: This article is part of Infocap’s ongoing blog series exploring the new Medicaid eligibility and work requirements introduced under the One Big Beautiful Bill Act (H.R.1). Each post examines a different dimension of the law’s impact, from the economic impact, administrative challenges, and the effects of access to care.
Medicaid expansion over the past decade significantly reduced hospitals’ charity care costs; conversely, a rollback of coverage will increase those costs. Health policy researchers project significant financial hits to hospitals once work requirements are in force.
A Commonwealth Fund study projects that hospitals in Medicaid expansion states will see their annual operating margins drop by 12% to 14% by 2027 due to coverage losses from work requirements, a serious decline given that typical hospital margins average just 3.6%. That translates into roughly $11–12 billion in lost revenue nationwide in 2027 alone. Even after accounting for lower patient volume, hospitals would face a net shortfall of $5–6 billion annually, relative to current law.
According to DeBrunner & Associates, after accounting for people delaying care due to lack of insurance, hospitals would face a two-fold hit: $12.2–13.8 billion less in Medicaid revenue (an 8.7–9.9% decrease), coupled with $7–8 billion more in uncompensated care costs for treating the uninsured. This reflects patients losing Medicaid and still needing emergency or charity care that isn’t reimbursed.
These provider losses have broader community implications. Hospitals under pressure may respond by reducing services, laying off staff, or even closing facilities. Others might raise prices for privately insured patients to offset losses, contributing to higher premiums for employers and consumers.
As Commonwealth analysts note, the result could be “reduced access to healthcare for all people in the community, and higher costs for everyone.”
Healthcare systems are major employers and economic engines, particularly in rural and low-income regions. The withdrawal of billions in federal Medicaid funds has multiplier effects:
Communities with higher Medicaid enrollment, often already economically fragile, stand to lose the most.
While H.R.1’s work requirements aim to curb entitlement spending and reduce federal deficits, they may instead shift costs across the system rather than eliminate them. Uninsured residents often delay care until emergencies, driving up uncompensated costs for hospitals and public programs alike.
Evidence from Arkansas’s prior experience shows no meaningful increase in workforce participation, but a marked rise in uninsured rates and medical debt. In the long run, sicker workers, lower productivity, and higher emergency care spending can erode any short-term fiscal gains.
State Medicaid agencies and healthcare leaders face the challenge of mitigating these downstream effects through targeted communication, efficient eligibility systems, and close coordination between public and provider networks.
The success of the policy, therefore, depends not just on reducing costs, but on managing where those costs land at the state level, and ensuring that coverage losses do not destabilize the broader healthcare economy.
For state health systems, success under H.R.1 depends on maintaining continuity of care while implementing new compliance mandates.
Infocap partners with agencies and healthcare networks to design intelligent document and case management solutions that help ensure data accuracy, eligibility transparency, and faster coordination between Medicaid programs and providers.
By making every automated outcome observable, explainable, and accountable, Infocap helps organizations manage policy shifts with confidence, protecting both compliance and care access.
Discover how Infocap supports Medicaid modernization and what that means for your agency or organization. Let’s talk.