Medicaid changes to reduce payments for hospital services in at least 37 states, including Ohio

New research shows that at least 37 states, including Ohio, are facing billions in reduced federal payments for hospital services because of the Trump/Republican Medicaid funding changes.

The limits imposed as part of the 2025 federal congressional budget reconciliation bill, championed by President Donald Trump as the One Big Beautiful Bill Act, may mean billions less in federal funding and state-directed payments, which could include devastating effects, especially to rural and financially struggling hospitals.

The healthcare research group KFF released a new analysis estimating $60 billion in current federal spending for hospitals could be reduced when new limits from the reconciliation bill take full effect.

That number is a moving goalpost, as the changes aren’t all being implemented at the same time.

“It does not represent the amount by which federal payments would be reduced in any given year, since these limits will be phased in over time starting in January 2028, and will fully take effect at different times in different states,” KFF wrote in the analysis.

The group also estimated an overall federal Medicaid spending reduction of $911 billion based on the terms of the One Big Beautiful Bill Act.

The reduction in state-directed payments to hospitals will have varying impacts from state to state, and even from hospital to hospital, based on how much the states are spending for their individual Medicaid programs.

Hospitals operating on relatively high margins could see the changes land more softly on their bottom line.

“On the other hand, hospitals with relatively low operating margins (like rural hospitals and those serving relatively large shares of Medicaid patients) may adapt in ways that affect Medicaid enrollees’ access to care, such as by cutting service lines or closing,” KFF researchers stated.

Ohio’s Medicaid program serves more than a quarter of the state’s population, accounting for nearly 3 million residents, and is the second most common form of health insurance in the state, according to the Health Policy Institute of Ohio.

The institute noted the Medicaid budget in the state exceeded $43 billion in fiscal year 2025, with the federal government paying 68.5% of the total costs.

With the budget reconciliation bill restricting the ability for states to raise revenue through methods like provider taxes, along with placing caps on the amount states can reimburse providers through those state-directed payments, Ohio will have to account for the funding gap.

As part of the changes from the budget bill, Ohio has to change or eliminate a health insuring corporation franchise fee by July 1, 2027.

The fee is calculated using state Medicaid member counts, and is a provider tax overseen by the Ohio Department of Medicaid.

The health policy institute’s research showed the change or elimination of the fee could result in annual losses to state revenue of $640 million starting in 2028, along with $1.5 billion in lost federal matching dollars.

“States may pursue reducing Medicaid expenditures, however, doing so is likely to have negative health and economic consequences for Ohioans,” the institute said in a March analysis of the reconciliation bill’s changes to Medicaid.

The analysis also said Medicaid enrollees could see a loss of optional covered services, such as dental coverage, as a result of the changes, and Ohioans may have to pay more for things like prescription drugs.

Originally, the total funding losses to the state’s Medicaid program were estimated at $33 billion over the next decade.