Patients and medical centers are already feeling the pain as several provisions in the GOP’s deadly spending law take immediate effect, either as required or in practice.
Hospitals are closing or actively considering doing so, cutting programs, and laying off staff. Planned Parenthood is warning patients it can no longer accept Medicaid insurance and in one region says it can’t provide services to Medicaid recipients at all, even if the patient doesn’t use Medicaid to pay. And lawmakers in at least five states are planning special sessions to revamp their already-enacted budgets and determine how to handle the cuts, including what cuts they should enact and how to administer the new Medicaid work requirement.
The response puts the lie to an emerging narrative that Republicans cleverly delayed the worst effects of their spending law, and therefore would face no backlash until after the midterm elections.
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“There is a sense that the effective dates are pushed out quite a bit, but that’s actually not true. There are a variety of cuts that take effect immediately,” said Edwin Park, research professor at Georgetown University McCourt School of Public Policy.
Even if an effective date is months or years from now, Park added, states and providers would never “wait till the last minute to make cuts, they start making cuts now in anticipation of future revenue shortfalls, future increases of uncompensated care and lower payment rates.”
That would nullify the GOP boast that they designed their budget package to minimize near-term pain. “At a big-picture level, just because a particular cut that may affect a state or a provider doesn’t have an effective date until 2028, they may make cuts in advance,” Park said.
FIVE CONSEQUENTIAL PROVISIONS OF THE SPENDING BILL took immediate effect when President Trump signed the mega-bill into law July 4, four of which account for more than $340 billion in slashed funding over the next decade, according to the bipartisan Congressional Budget Office.
The legislation immediately forced most states to cap newly initiated state-directed payments (SDPs), which had been a way for states to raise the low rates of Medicaid closer to those of private insurance. Now, the 40 states that expanded their Medicaid programs under the Affordable Care Act and Washington, D.C., can only charge rates equal to Medicare, which is less generous than what insurance payers pay. Non-expansion states must cap the payments at 110 percent of Medicare rates. The CBO expects the change to eventually strip away almost $150 billion.
Existing state-directed payments don’t have to ratchet down to Medicare or near-Medicare levels until 2028. But SDPs have been a widely used source of federal funding for Medicaid in recent years. According to an issue brief last October from the Medicaid and CHIP Payment and Access Commission, the federal government approved 302 different SDPs from February 2023 to August 2024, about 60 percent of all SDPs in existence.
If the payments are now less generous, this key revenue source is no longer as useful. As a result, health programs will start dropping Medicaid, as UCare in Minnesota did temporarily to 88,000 patients in 11 counties last week.
Moratoria on rules that would have made it easier to qualify for and enroll in Medicaid, the Children’s Health Insurance Program (CHIP), the Basic Health Program, and the Medicare Savings Program (which helps low-income seniors who are “dual eligibles” in Medicare and Medicaid afford their medical needs) also went live immediately. Together, the CBO expects those to remove almost $167 billion from the health care system.
The immediate changes, and the threats of more to come, are enough for many medical providers to know now that they can’t survive.
Furthermore, the bill immediately nixed a Biden-era rule setting a minimum number of nurses in long-term care facilities, a workforce already stretched thin. Killing that rule will save more than $23 billion, the CBO says, but the quality of care will suffer. Staff will likely manage the work overload by drugging residents more often, warned a column in Morningstar last week based on recent research. University of Pennsylvania’s Wharton School of Business researchers found that nursing home residents are about 10 percent more likely to be “chemically restrained” than they would be if the staffing level rule was still in place.
The spending package also immediately barred Planned Parenthood from receiving any Medicaid funding, a change that the CBO expects won’t save anything but will actually end up costing taxpayers $52 million. Massachusetts U.S. District Judge Indira Talwani issued a temporary restraining order on July 7 to block the change and told the Health and Human Services Department it must “take all steps necessary to ensure that Medicaid funding continues to be disbursed in the customary manner and timeframes.” The order remains in effect for 14 days. Talwani will hear arguments on July 21.
Multiple Planned Parenthood local websites have posted notices saying they still accept Medicaid, but some warn that they are barred from accepting payments. A message on the Planned Parenthood of the Rocky Mountains website cautions that the spending bill “blocks patients who are enrolled in Medicaid from receiving care at Planned Parenthood. This means if a patient is enrolled in Medicaid, they can no longer receive any services at our health centers, even if they do not want to use their Medicaid coverage. We are actively exploring every option to continue supporting the patients and communities who depend on us.”
Asked whether the organization had guidance for patients on Medicaid, a spokeswoman sent a statement from Danika Severino Wynn, vice president of care and access at Planned Parenthood Federation of America, saying the centers are “committed to doing everything they can to still see patients—and will continue to do so—while complying with all laws amid the chaos, cruelty, and confusion intentionally sown by the new law the Trump administration and its backers in Congress passed that seeks to shut down Planned Parenthood and ban abortion nationwide.”
OTHER CUTS TO MEDICAID, INCLUDING FROM added work requirements, new cost burdens on some beneficiaries, and rollbacks of provider taxes that states use to acquire federal funding for the program, come in later years.
But the immediate changes, and the threats of more to come, are enough for many medical providers to know now that they can’t survive. The cuts are already affecting hospitals’ ability to serve patients, said Beth Feldpush, senior vice president of advocacy and policy at America’s Essential Hospitals, and are projected to add $443.4 billion to hospitals’ uncompensated care costs between now and 2034.
“Hospitals will struggle to pay their staff, cut services, and even close, all due to this law,” she told the Prospect via email. “This is not sustainable.”
Curtis Medical Center in Nebraska was the first to announce its closure, and more are considering doing the same, such as the safety-net hospital Lady of the Angels in Bogalusa, Louisiana, which Sen. Ed Markey (D-MA) told Trump was at risk of closing along with 337 other rural hospitals.
Providers are cutting or planning to cut staff, and ending less-profitable services such as obstetrics, gynecology, pediatric care, and mental health, researchers said; they noted that local media and medical industry trade publications have chronicled hundreds of cuts caused by the loss of federal funding even before the spending bill became law.
Garnet Health in New York, for example, cited anticipated federal cuts as the reason it restructured last month, laying off 42 workers and cutting outpatient pulmonary rehabilitation from one location and outpatient diabetes services at two. Northern Light Health in Maine has advised of imminent workforce and services reductions. Indiana’s Columbus Regional Health did the same last month after it issued a WARN notice announcing the layoff of 50 workers. The system is closing its inpatient rehabilitation unit, outpatient orthopedics and sports medicine practice, and an athletic trainer program for Indiana University Columbus and two school districts.
“The simple friction of having to renew your health care or your SNAP status is enough that a lot of people will not get through that process.”
Health care goliath Providence, meanwhile, announced in June it is cutting 600 full-time positions across seven states because of multiple pressures, “including proposed federal cuts to Medicare and Medicaid.” UC San Diego Health cut roughly 1.5 percent of its staff, about 230 workers, because of “federal impacts to health care, regulatory uncertainty, and rising costs of providing care.” San Diego’s Sharp HealthCare announced that not only would it cut 315 workers, including senior executive leadership, but top brass would take a pay cut across the board, including President and CEO Chris Howard, who cut his compensation by 10 percent.
Workers at community health centers, not-for-profits providing care in underserved areas, can already anticipate that the loss of federal funding means hundreds of facilities will close down permanently, said Amy Simmons Farber, communications director at the National Association of Community Health Centers. She put the figure at 1,800 site closures, along with 34,000 job cuts.
These providers “are already struggling with razor-thin margins,” she told the Prospect via email, with average centers operating at margins below 2 percent.
“Nearly half of all CHCs are operating with cash on hand that will last 90 days or less,” she wrote. “Many are already making difficult decisions about cutting services, reducing essential staff, and closing sites.”
Federal funding uncertainty aggravates the situation further, she said. CHCs are on their sixth temporary funding extension in two years, and their federal funding expires in less than 90 days.
“This instability makes it nearly impossible to plan services, hire staff, or expand sites at a time when demand for affordable primary care is growing,” Farber said. “CHCs haven’t received New Access Point funding to build more sites since 2019, and there are 600 unfunded applications to start new centers.”
Half of the 32.5 million patients served by CHCs are on Medicaid. Farber said about 5,000 to 6,000 will die unnecessarily each year because of the impact on the centers.
A LESS-VISIBLE IMMEDIATE EFFECT OF THE BILL is playing out in state legislatures across the country, most of which have already enacted their budgets for fiscal year 2026, which runs from July to next June. At least five have already reportedly started planning special sessions to discuss Medicaid cuts: Colorado, Connecticut, New Mexico, New York, and Washington state. High on the agenda will be how to comply with the new Medicaid work requirement, which they must begin enforcing by January 1, 2027. Under that provision, Medicaid recipients “not medically certified as physically or mentally unfit for employment” aged 19 to 64 will be forced to volunteer or attend school for 80 hours each month, with some exceptions.
States are in charge of how they’ll administer the requirement, including what mechanism they’ll use, whether they’ll begin enforcement earlier, and if they’ll try to secure the permitted waiver allowing a delay until January 1, 2029. Researchers said it’s unlikely Trump officials will grant it to states whose lawmakers they dislike, such as California and New York.
The deadline for implementation is tight, so some states will use taxpayer money to hire consultants for the job, as Robert Gordon, former director of Michigan’s Department of Health and Human Services, told lawmakers last month. That will be a drain on state funding, he said, noting the price Equifax charges for its The Work Number, more than $20 per person per query.
“Twenty dollars may not sound like much, but with more than 18 million people subject to reporting as often as once a month, we are talking about a vast market opportunity. Georgia paid more than $60 million to Deloitte, the leading system integrator nationwide, for a glitchy system and an advertising campaign that netted fewer than 7,500 enrollees out of 240,000 people who might have qualified,” Gordon said. “That is a contractor payout from taxpayers of $8,000 per enrollee. No wonder my colleague Jennifer Pahlka calls work requirements ‘welfare for Deloitte.’”
Americans will over time feel the impact of the new requirements as an amount of paperwork so unwieldy that it is enough to prevent them from keeping up or even applying in the first place. Starting December 31, 2026, for example, the law requires states to redetermine Medicaid recipients’ eligibility every six months rather than annually, said Don Moynihan, University of Michigan Ford School’s J. Ira and Nicki Harris Family Professor of Public Policy.
That might sound manageable, he said, but such administrative burdens can be too difficult to overcome, especially for beneficiaries who are already struggling. A case in point is Georgia, the only state with a Medicaid work requirement. When the program started about two years ago, state officials said they’d enroll 25,000 people in the first year alone. But so far, they’ve only signed up 8,078. It’s not the work requirement that’s holding them back, Moynihan said, it’s the reporting requirement.
“The simple friction of having to renew your health care or your SNAP status is enough that a lot of people will not get through that process and so that to me is a consequential and pretty predictable outcome of the bill,” he said. “It’s an additional layer of complexity in paperwork in a sector which is already overwhelming for many Americans … [the] confusion, complexity, paperwork, is going to make what’s already an onerous system worse.”
Lawmakers will also decide in special sessions what cuts they themselves must impose given anticipated losses in federal revenue, said Park, the Georgetown researcher. Planned Medicaid expansions and annual increases, provider payment rates, and patient benefits such as personal care, dental, and vision for adults are all on the chopping block, he said.
“States will have less administrative resources than in the past, partially because the federal government is also increasing cost sharing on things like SNAP,” said Moynihan, referring to the Supplemental Nutrition Assistance Program. “So state budgets will be smaller than they were previously at the same time that they’re asked to take on these complicated tasks.”
This, too, will soon be felt by Americans.