CMS Proposals Threaten Hospital Stability and Patient Care Amid Medicaid Cuts

Congress cut federal Medicaid spending by nearly a trillion dollars last summer with H.R. 1-the One Big Beautiful Bill Act. Now, the Centers for Medicare & Medicaid Services (CMS) must implement this law without causing further harm to hospitals and their patients. However, recent CMS proposals seem to be pushing the boundaries set by Congress, potentially leading to a race to the bottom in healthcare quality.

The Kaiser Family Foundation (KFF), using Congressional Budget Office (CBO) estimates, projects that H.R. 1 will cut Medicaid spending by $911 billion over 10 years. This legislation is expected to increase the number of uninsured individuals by 10 million by 2034, with 7.5 million of those due to changes in Medicaid alone. These cuts are already law, and their impact on both patients and hospitals will be profound.

Since April, CMS has issued four major proposed rules affecting inpatient hospitals, outpatient care, physician services, and Medicaid payments. While some provisions simply implement what Congress enacted, others represent additional policy choices that could further burden hospitals.

The Fiscal Year 2027 Inpatient Rule: A Mixed Bag

The fiscal year 2027 inpatient rule proposes a 2.4% increase in base payment rates, projecting an overall net increase of $1.4 billion. However, this boost is offset by a significant reduction in Medicare disproportionate-share and uncompensated-care payments, which are crucial for hospitals serving low-income patients. CMS estimates that these payments will decrease by $564 million, even as the uninsured rate climbs from 8.7% to 9.1%.

While the rule projects an overall increase in funding, it masks the real challenges faced by hospitals caring for a growing number of uninsured patients. These facilities may see their financial stability erode, potentially leading to reduced services and longer wait times for those who need care the most.

The Calendar Year 2027 Outpatient Rule: More Strain on Hospitals

The calendar year 2027 outpatient rule further complicates the situation. CMS proposes changes that will affect how hospitals are reimbursed for outpatient services, including adjustments to the 340B drug pricing program and site-neutral payments. These changes could reduce revenue for hospitals, especially those in rural areas where patients have limited access to alternative care providers.

The 340B program is designed to help safety-net hospitals stretch scarce federal resources as far as possible by providing discounted drugs. However, CMS's proposed adjustments to this program could limit the savings available to these hospitals, making it even harder for them to provide essential services to their communities.

The Human Cost

The cumulative effect of these policies could be devastating. Hospitals already operating on thin margins may struggle to maintain staffing levels and update equipment. Patients, particularly those in low-income and rural areas, could face longer wait times, reduced service availability, and higher out-of-pocket costs.

The CMS proposals go beyond simply implementing the cuts mandated by H.R. 1; they add layers of additional financial strain that could push hospitals to their breaking point. This is not just a fiscal issue but a matter of public health. As hospitals struggle, the quality of care for millions of Americans will be at risk.

It is crucial for CMS to reconsider these proposals and focus on policies that support hospital stability and patient care. The agency must prioritize ethical practice and ensure that its actions do no harm to the very people it serves.