Everyone agrees that health care costs too much. The disagreements start when we have to decide who should receive less money. That’s a big reason why warnings about Medicaid “cuts” often receive so much attention. But the latest claims from Missouri hospitals about the One Big Beautiful Bill (OBBB) cuts hurting rural hospitals deserve a closer look.
At first glance, the concern seems straightforward. Since the government is the single largest purchaser of health care in the country, hospitals operating on thin margins could understandably struggle if they were paid less by Medicare or Medicaid. The first question, though, is what exactly is being cut.
The OBBB does not reduce the payment rates hospitals receive for treating Medicare patients or Medicaid patients who remain eligible. Instead, it implements community engagement requirements for some able-bodied Medicaid enrollees beginning next year, while changes to the provider tax financing system (explained more here) would not begin until 2028 at the earliest.
So, what are hospitals worried about? A recent KY3 report in Springfield provides some context. A spokesman for the Missouri Hospital Association explained that Medicare and Medicaid reimburse hospitals for only about 80 percent of the cost of providing care, describing the gap between costs and payments as “pretty enormous.” Mercy’s Sherry Clouse Day added that if someone loses Medicaid coverage under the new community engagement requirements, they may still seek care without insurance, leaving the hospital to absorb the cost.
That certainly could happen. But it assumes not only that a significant number of people will lose Medicaid coverage because of the new requirements, but also that many of them will become uninsured rather than finding work and obtaining employer-sponsored insurance or coverage through the Affordable Care Act marketplace.
That raises another question, though: If hospitals are already losing money treating Medicaid patients, why would treating fewer of them threaten their financial stability? Missouri hospitals already receive billions of taxpayer dollars every year through supplemental Medicaid payments and provider tax financing precisely because lawmakers recognize that Medicaid reimbursement often falls below the rates paid by commercial payers.
For those who have followed Missouri’s Medicaid debates for a while, this type of argument should sound familiar. Hospitals made similar claims during the campaign to expand Medicaid, arguing that adding more people to the program was necessary to protect rural hospitals. Today, even a policy change that doesn’t obviously reduce what hospitals are paid is being treated as a threat.
None of this is to say that lower Medicaid enrollment couldn’t result in less government money flowing to hospitals. But ultimately, hospitals are the only ones with a complete picture of how public dollars and other revenues from commercial payers affect their bottom line. After years of hospitals opposing efforts to bring greater transparency to their prices and financing, it’s fair to question yet another claim that a Medicaid policy change would threaten vulnerable hospitals. Before lawmakers accept those warnings, they should make sure there’s sufficient evidence to support the claim.
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