Children’s hospitals warn of care limits as Medicaid changes take hold

Editor's Note

Children’s hospitals are warning that newly enacted federal healthcare cuts will force them to scale back essential services and programs, jeopardizing care for the very populations Medicaid was designed to protect. The law, signed by former President Donald Trump and detailed in a July 9 article in Modern Healthcare, enacts approximately $1 trillion in healthcare reductions over the next decade, largely through cuts to federal Medicaid funding.

Though children enrolled in Medicaid weren’t directly targeted, hospital leaders describe in the article how new limits on supplemental payments and provider taxes will have far-reaching consequences. Under the new law, states can no longer implement new provider taxes, and existing ones will be gradually reduced to 3.5% of a provider’s net patient revenue. State-directed Medicaid payments are also capped at 100% of Medicare rates in expansion states and 110% in nonexpansion states.

For hospitals that rely on supplemental Medicaid reimbursement to offset shortfalls, the impact could be severe, Modern Healthcare reports. At Phoenix Children’s, where 65% of patients are Medicaid beneficiaries, Medicaid managed care payments cover only 72% of the cost of care. Supplemental payments bring that closer to 90%, President and CEO Bob Meyer told the outlet. He estimates the new law will reduce the hospital’s Medicaid reimbursement by $75 million annually. In response, the hospital plans to implement efficiency strategies, including the use of artificial intelligence to streamline administrative tasks.

Chicago-based Lurie Children’s Hospital, where nearly 60% of inpatients are on Medicaid and about a third of revenue comes from the program, is reviewing clinical services to determine whether some may need to be scaled back or eliminated. The article quotes President and CEO Dr. Tom Shanley, who says potential cuts to wraparound programs such as behavioral health, family support, and interpreter services—all under review—could affect all patients, regardless of insurance type.

Other sources cited in the article include representatives from Cincinnati Children’s Hospital, where concerns include specialty care, clinician staffing, and the number of care sites; and Children’s Hospital Los Angeles, which began preparing early for the cuts with hiring freeze, capital project delays, and bond issuance. As detailed in the full article, hospital executives also voiced concern over the downstream effects of Medicaid cuts on workforce training and long-term health outcomes, as well as shifting burdens to adult care providers over time.