Phil Galewitz, KFF Health News
Republicans insist that President Donald Trump’s cuts to Medicaid have been aimed toward lowering fraud and getting extra of its grownup beneficiaries into jobs. But the unwanted side effects could embody much less take care of sick children.
Some kids’s hospitals collectively stand to lose billions of {dollars} in income as soon as Trump’s wide-ranging tax and spending legislation, which Republicans known as the “One Big Beautiful Bill,” is totally enacted, in keeping with the Children’s Hospital Association. Kids account for practically half of enrollees in Medicaid, the state and federally financed well being program for low-income and disabled individuals, and its associated Children’s Health Insurance Program.
The legislation will lower federal Medicaid spending by about $900 billion over a decade.
The discount “cannot be achieved without directly affecting coverage and care for Arizona’s kids, especially the most vulnerable among them,” mentioned Robert Meyer, chief govt of Phoenix Children’s, a pediatric hospital system. About half of the system’s income comes from Medicaid.
Trump’s legislation locks into place a lot of his home agenda, together with an enormous growth of immigration enforcement and an extension of tax cuts that largely profit the wealthiest Americans. The cuts to Medicaid are anticipated to partially offset the price of the president’s priorities, which is able to add greater than $3 trillion to the nation’s deficit, in keeping with the Congressional Budget Office. About 7.5 million Americans will lose Medicaid protection by 2034 in consequence, the CBO estimates.
Throughout debates over the measure, Republicans insisted the Medicaid cuts would have an effect on solely nondisabled adults enrolled in this system who don’t work and immigrants residing within the U.S. with out authorized standing. “Our legislation preserves Medicaid, strengthens Medicaid for the people who actually need it and deserve it,” House Speaker Mike Johnson mentioned June 1 on NBC News’ “Meet the Press.” “And we’re going to get rid of the fraud, waste, and abuse.”
Meyer, although, warned that until some cuts are reversed, Phoenix Children’s would lose about $172 million a 12 months in funds that complement the well being system’s common Medicaid income, for treating low-income kids lined by this system. Medicaid sometimes pays decrease charges for care than business insurance coverage or Medicare, the federal program for individuals age 65 and older.
The supplemental funds, often known as state-directed funds, are financed largely by federal taxpayers by difficult tax preparations adopted by nearly all states. The funds have helped the Phoenix system open further pediatric clinics, enhance psychological well being staffing, and display kids for abuse and different trauma, Meyer mentioned.
A provision of Trump’s legislation would cap the quantity of directed funds states may make to any hospital, together with these for youngsters. But the cap, which doesn’t take impact till 2028, can be phased in over a decade — and hospitals are already lobbying to make sure that by no means occurs. Days after voting for Trump’s legislation, Sen. Josh Hawley (R-Mo.) introduced legislation that will get rid of provisions of the measure reducing Medicaid funds to hospitals.
If the legislation isn’t modified, at the least 29 states would want to scale back their funds, in keeping with an analysis by KFF, a well being data nonprofit that features KFF Health News.
The further Medicaid funds, on common, make up greater than a 3rd of kids’s hospitals’ complete Medicaid income and about 14% of their working income general, in keeping with the Children’s Hospital Association.
Richard Park, a director at Fitch Ratings, a credit standing company, mentioned the Medicaid funding cuts current a “long-term headwind” for youngsters’s hospitals. Hospital officers say that if the funds are lower and states don’t substitute the funding, they could possibly be compelled to chop workers and providers.
“Services the hospitals provide that require longer admissions or bring in less revenue are going to be in the crosshairs, for sure,” Park mentioned.
Children’s hospitals are particularly weak to modifications in Medicaid as a result of they rely on this system for about half their income — a a lot increased proportion than common acute-care hospitals do.
Most kids’s hospitals are in good monetary situation, nevertheless, as a result of they face little competitors — there are seldom a couple of or two in a metropolitan space — and powerful philanthropic assist. And the funding cuts gained’t have an effect on all of the nation’s roughly 200 kids’s hospitals.
In 2023, Phoenix Children’s had a $163 million surplus on practically $1.5 billion in income, in keeping with its 2023 IRS tax return.
Under the legislation, the additional funds within the District of Columbia and 40 states that expanded Medicaid underneath the Affordable Care Act could be capped at Medicare cost charges. The 10 states that didn’t develop would be capable to pay as much as 110% of Medicare charges.
The Biden administration had allowed states to pay as much as their common business insurance coverage charges. That’s usually about 2.5 instances the Medicare charge, in keeping with KFF.
Medicaid’s historically low charges to well being suppliers could make medical doctors, dentists, and different specialists reluctant to deal with sufferers in this system.
Brian Blase, president of the conservative Paragon Health Institute and a key architect of Medicaid modifications within the new legislation, mentioned reducing state-directed funds is justified as a result of states mustn’t pay hospitals extra to deal with Medicaid sufferers than they do for Medicare sufferers. Unlike common Medicaid funds for particular well being providers, hospitals will not be at all times held accountable for the way they spend the additional cash, he mentioned.
He mentioned state-directed funds to kids’s hospitals and different services quantity to “corporate welfare,” typically serving to financially sturdy establishments get richer.
Blase mentioned states have little incentive to pay hospitals much less as a result of the cash from state-directed funds comes largely from federal taxpayers.
In Norfolk, Virginia, Children’s Hospital of The King’s Daughters is dependent upon greater than $11 million yearly in state-directed funds to make up for what it says is a shortfall between Medicaid’s low reimbursement charges and the price of superior care.
The cuts to Medicaid in Trump’s legislation “will have serious and far-reaching consequences to our services, programs, and patients,” spokesperson Alice Warchol instructed KFF Health News. “Medicaid supplemental funding helps us pay for the highly specialized pediatric medical, surgical, and psychiatric physicians that are needed to care for every child who needs our services.”
In fiscal 2023, King’s Daughters had a $24 million surplus on $646 million in income, in keeping with its federal tax return.
King’s Daughters has used the additional Medicaid cash to develop remedy for abused and uncared for kids and psychological well being providers, Warchol mentioned.
How states account for the additional funds made to hospitals varies. For occasion, Utah Medicaid Director Jennifer Strohecker mentioned her state doesn’t observe how the cash will get spent.
Other states, akin to Texas, use the cash as an incentive for hospitals to enhance their efficiency in treating sufferers. They observe how properly the services do every year and publish the findings in public studies.
Matthew Cook, president and chief govt of the Children’s Hospital Association, mentioned that even with the additional funding, Medicaid doesn’t cowl the total price of remedy for its sufferers.
While some kids’s hospitals have sturdy stability sheets, boosted by philanthropy, that isn’t the case for all, Cook mentioned. And the Medicaid funding cuts come on high of reductions in different federal funds, together with for coaching medical doctors and analysis, he mentioned.
At Phoenix Children’s, Meyer mentioned, the lack of further funding would curtail expansions of care for youngsters and progress of the hospital’s workforce. The hospital hopes Congress delays or reverses the cuts — but it surely’s not relying on it, he mentioned.
“We see this grace period as a godsend to get ourselves ready to close the funding gap,” he mentioned.
