From Policy to Practice: A Guide for Essential Hospitals Navigating the Compounding Effects of H.R. 1 and CMS Rulemaking

Essential hospitals serve an overwhelming share of Medicaid and uninsured patients and are projected to be disproportionately affected by the 2025 reconciliation law, H.R. 1, which will reduce federal Medicaid spending by an estimated $1 trillion over 10 years. The Centers for Medicare & Medicaid Services' rapid and complex implementation of the statute further complicates essential hospitals' efforts to understand how compounding changes to coverage, payments, and financing will affect access to essential care in their communities.  

To help essential hospital leaders better navigate the road ahead, this joint brief from America's Essential Hospitals and Sellers Dorsey review the key policy changes that will have a cumulative impact on essential hospitals, including:  

1. Coverage losses from more frequent eligibility redeterminations and new community engagement requirements.  
2. Reduced payments for Medicaid benefits through state directed payments, which help offset low payment rates in managed care and advance state quality and access goals. 
3. New constraints on states' ability to finance Medicaid payments with provider taxes, a permissible funding source on which hospitals have historically relied. 
4. Changing budget neutrality rules under Section 1115 waivers, a long-standing tool states have used to advance innovative proposals to target funding. 
5. New federal reporting and modeling requirements that will make it more burdensome for states and essential hospitals to demonstrate compliance with federal rules.

America's Essential Hospitals' public analyses of the effects of H.R. 1 are available at ProtectMedicaid.org, and comment letters are also available on the association's website. Members of America's Essential Hospitals can access additional analyses of H.R. 1 through its members-only resource center and the Medicaid Financing interest group.