2026 Outlook: The domino effect of Medicaid cuts and the hidden costs for healthcare
By Anastassia Gliadkovskaya / December 23, 2025
In July, the Trump administration passed the One Big Beautiful Bill Act, otherwise known as the budget reconciliation bill. The law, H.R. 1, has made waves for its historic nearly $1 trillion cut to federal Medicaid spending over 10 years. Healthcare stakeholders have been vocal opponents of the move.
H.R. 1 brings the first-ever national work requirements to the Medicaid program, which will kick in at the start of 2027. The number of uninsured Americans is expected to grow by 10 million in 2034 as a result, and another 4 million may become uninsured if the Affordable Care Act subsidies expire. To implement the requirements, state Medicaid agencies will need to make major changes to their eligibility and enrollment systems on a tight timeline. If a person is denied or disenrolled due to work requirements, they will need to file a new application to reapply, triggering a compliance check.
Healthcare leaders have been scrambling to reach out to patients who will be impacted, prepare for shrinking margins and mitigate coming gaps in care. Tech, stakeholders believe, can help. It’s not just the Medicaid players that will be affected. Other lines of business will feel it, too. The impact will trickle down even to the average American, experts caution.
“You either pay for them proactively, or you pay for them through hospitalizations and ER visits, so you’re going to end up paying for it either way as a taxpayer,” Karl Ulfers, co-founder and CEO of senior-focused care navigation company DUOS, said.
The Medicaid population is already extremely vulnerable. A recent study by the Yale School of Medicine found more than 40% of those at risk of losing Medicaid have at least three chronic conditions. It also found that most who don’t meet the work requirements are still working or looking for work.
“The system hasn’t been designed to address their healthcare needs,” Jason Robart, co-founder and managing partner at Seae Ventures, told Fierce Healthcare. “We know the needs of the population are not changing. If anything, they’re getting more acute.”
Research shows that good health is linked to work productivity. But having to report work hours can be difficult for people with multiple jobs, without internet or who don’t speak English. Many are likely to drop off of coverage not because they are ineligible, but because they can’t keep up with the reporting requirements or don’t know about them.
This trend bore out in Arkansas, which briefly had Medicaid work requirements in 2018 until they were paused by a court order. In three months, the state lost 17,000 Medicaid enrollees. The reporting itself was a major reason for the coverage loss, and those who lost coverage delayed care or skipped medications due to costs. There was no increase in employment.
Fierce Healthcare spoke to payers, providers and policy experts about their predictions for the fallout from Medicaid cuts in 2026.
Providers at risk
When the Trump administration implemented a federal funding freeze at the start of this year, community health centers struggled to access funding. The move was eventually overturned by the courts. Nonetheless, it “sent a shock wave” and left clinics “looking over their shoulder a lot more,” Jeff Brandes, president and CEO of Azara Healthcare, said. Azara is a population health company serving over half of the country’s federally qualified health centers (FQHCs).
The Michigan Primary Care Association estimates that clinics in the state will lose $94 million in reimbursement annually as a result of H.R. 1. “That’s a sizable operating hole,” Brandes said, especially considering community health centers operated on a -2% average margin in 2024. Many of the FQHCs Azara supports will be affected.
While EHR company PointClickCare will not be directly impacted by the Medicaid cuts, it works with hospitals and post-acute facilities that may be. Executive Vice President of Health System Solutions and Government Affairs William Charnetski is watching for downstream impacts on staffing and clinical investment. He is also concerned about regulatory fragmentation leading to variability. Decisions currently largely left to states, such as artificial intelligence oversight, leave the country with piecemeal regulations “without a unified framework,” Charnetski said. What if splintered Medicaid leads to more variability in clinical outcomes?
Urban safety-net hospitals will be hardest hit by the Medicaid cuts, in part because of significant reductions to disproportionate share hospital (DSH) payments. The extra revenue supports hospitals serving a higher portion of Medicaid and uninsured patients. As a company that helps hospitals reduce their readmission rates, Puzzle Healthcare is aware of the implications for the post-acute space—expected to drive healthcare volume growth in 2026.
“The funds that keep these safety-net hospitals afloat are the ones that get affected in cuts like this,” Ahzam Afzal, PharmD., co-founder and CEO of Puzzle, said. “They’re going to lose that cushion for that uncompensated care and some of the charity care they do.”
This could lead to shrinking workforces, longer inpatient stays and discharges of sicker patients. That, in turn, would make it more difficult to take care of patients in skilled nursing facilities and could lead to higher readmission rates. Afzal is particularly worried about rural hospitals, which already struggle to offer specialty care.
Nursing homes can try to get ahead of this by working with provider groups focused on preventive care and employing their own specialists “to give them more of a hospital-like environment,” Afzal said. They can also partner with companies like Puzzle that use remote patient monitoring to proactively manage patients. And hospitals should confirm coverage and manage eligibility checks as early as possible.
While historically, safety-net providers minimized their admin expenses in order to keep clinical services running in tough economic periods, they actually need to do the opposite now. Without taking care of the admin piece—work requirements, eligibility checks—there will be no reimbursement for the care they provide. And as safety nets, they legally must provide care, regardless of a patient’s ability to pay. Investing in this “will mean the difference between a paid clinical encounter and an unpaid clinical encounter,” Brandes said.
Tracking what patients are coming up for renewal and proactively reaching out to them will be key. “The bottom line is we’ve got to touch them in as many ways as we can to make sure that they get requalified in a timely manner,” Brandes said.
Boulder Care, a telehealth provider for substance use disorders, has a self-pay option and grant funding to avoid turning someone away if they lose their coverage, according to founder and CEO Stephanie Strong. It’s using tech to proactively identify those at risk of losing coverage. Since it engages with patients weekly, this helps the company stay proactive about coming changes. Its case managers help enroll people in benefits.
“It’s so important that we don’t rip the rug out from those people who are in really vulnerable moments,” Strong said.
A population already at-risk
The Medicaid cuts in H.R. 1 target Medicaid expansion, emphasized Jay Chaudhary, senior fellow for mental health and community wellness at the Sagamore Institute. People with substance use disorders are “overwhelmingly” on Medicaid expansion, Chaudhary said, which fueled the rapid growth of treatment in response to the opioid crisis and is associated with reduced overdose deaths.
“Addiction providers are going to face this existential threat,” Chaudhary, who is the former director of Indiana’s Division of Mental Health and Addiction, said.
This isn’t a small population or one that should be overlooked, Chaudhary noted. Leaning on his experience as a state health official, Chaudhary said employers across Indiana consistently cite addiction as one of their top concerns. For some, it poses a threat because they have to drug test their workers. Broadly, there are concerns about the impact on worker productivity, too. Addiction also has downstream impacts on child welfare. “I just don’t think it’s as niche as it seems,” Chaudhary said.
Chaudhary wouldn’t be surprised if states pull back costly behavioral health services, like residential substance use disorder treatment. Stakeholder advocacy will continue to be crucial as states determine their new budgets. “Groups and constituencies that can afford [advocacy], are well-organized and have strong advocates will suffer less,” Chaudhary said.
Seniors on Medicaid, of which there are over 7 million, are also particularly vulnerable. “We often don’t spend enough time talking about the older adults in our populations,” Ulfers of DUOS said. The recent study from Yale found 66% of older adults at risk of losing coverage have at least three chronic conditions and 62% take between one and four prescriptions. Most (86%) older Medicaid expansion beneficiaries report having a health condition that keeps them from working. Yet many older adults on Medicaid will be subject to the work requirements. About two-thirds of people who would lose Medicaid are predicted to be dual-eligibles.
Yet another issue: Government programs stack on top of each other. That’s assuming older adults even know about them: Nationally, only 30% to 49% of eligible older adults are enrolled in SNAP, SSI and Medicare Savings Programs. If someone loses Medicaid, they also lose access to Medicare Savings Programs that help pay for premiums or copays. Many states also bundle Medicaid coverage with SNAP, EBT and energy assistance. “If you start to lose that coverage, these other dominoes start to fall,” Ulfers noted.
For rare disease patients, noted Jennifer Noonan, M.S.N., R.N., VP of clinical strategy and patient engagement at Accessia Health, Medicaid is not optional or interchangeable. Accessia provides financial and navigation support to patients with rare conditions. These patients already struggle to navigate specialty care. Even brief disruptions to coverage and care could be “catastrophic,” Noonan stressed. In emergencies, hemophiliacs need immediate treatment to prevent bleeding out, for example. “All of those things are the costs that I think those that are cutting Medicaid are not thinking about,” Noonan said.
“When people are concerned about how am I going to pay for it, they’re waiting till things are more acute than they probably should,” Brandes of Azara said.
Though in 2024, only 5% of people that Accessia supported were on Medicaid, the organization expects that to grow as people lose access to insurance. Accessia is currently seeing an influx in patient assistance requests during open enrollment. Patients are confused and concerned about H.R. 1, Noonan said. “A lot of it is just helping them navigate the complexities of understanding what the impact will be to them,” Noonan said.
Rare disease patients struggle with cognitive load. “Having to prove someone’s inability to work, I'm afraid, is going to double up on the amount of work that’s already layered on them. It’s a lot of friction to figure out what paperwork needs to be done, where and by whom,” Noonan noted.
“Any confusion about coverage or eligibility is an opportunity for people to slip through the cracks,” Strong said.
Effects on many payers
Payers are reviewing existing contracts, cutting internal teams, limiting who they work with and freezing new contracting in 2026. Large payers are also going to centralize their resources at their national corporate offices. So hears Peter Morrison, SVP of strategy and growth at Pair Team, a case management company for Medicaid beneficiaries.
“You gain efficiencies by bringing things to national, you gain quality control in some regards, you can do things at scale more effectively,” Morrison said. It also intentionally slows vendor approvals and contracting. A payer’s regional team may not be as happy about that, as they will have less decision-making power while facing pushback from state partners.
Pair Team already checks patients eligibility for government programs and appointment scheduling. It plans to expand its existing care navigation solution to housing coordination and Medicaid enrollment support in the near future. “Healthy people, particularly in the Medicaid population, are rising risk,” Morrison said. “If we don’t support them earlier … they’re going to get sicker and end up in the ED and then be high utilizers.”
As a nonprofit plan that serves Los Angeles County’s most vulnerable residents, L.A. Care Health Plan is “here for the long haul,” Martha Santana-Chin, the plan’s CEO, told Fierce Healthcare. “We are not a plan that is going to exit the market when the going gets tough.”
Earlier this year, L.A. Care ramped up patient education, making sure mailing addresses were kept up to date and notifying them of the coming changes. “Anything that we can do to educate people as things evolve to keep people covered will be critically important,” Santana-Chin said.
At this time, L.A. Care wants to strengthen primary care, encourage adoption of telehealth, innovate with AI and help providers implement team-based care to alleviate emergency departments. The plan is considering leveraging philanthropic funding to accomplish some of this. It’s also looking into wraparound services for high utilizers.
“There will be significant revenue cuts to our providers,” Santana-Chin said. “In order for us to stabilize the delivery system, we’ve got to take action now to help them get ahead of that.”
“That squeeze starts to be felt directly in the employer space,” Virgil Bretz, co-founder and CEO of MacroHealth, a marketplace for payers, said. Providers might raise their prices to offset reductions in the public sector. They might cut services, or merge with surviving providers, which can also drive up prices. Payers, too, may decrease reimbursement or raise premiums for other lines of business. “It’s got to come from somewhere, so the pressure will be up to make up the reduction in public spending,” Bretz said.
L.A. Care will continue its ongoing Elevating the Safety Net initiative, a $255 million effort to subsidize and relocate physicians recruited into the safety net in the state, and is in early talks with community-based organizations to connect patients to job opportunities.
Partnerships, open communication and a joint advocacy strategy are all top of mind for Santana-Chin going into 2026. The plan will need to contain its admin costs while facing losses in its enrollment. To do so, L.A. Care is looking to optimize its use of tech and streamline interoperability with provider partners.
“If clinics close, if providers shut their doors, if service lines get shut down, if there are layoffs, if uncompensated care increases, all of those things have a ripple effect to everybody else that we serve,” Santana-Chin said.
“Everyone benefits when we invest in the health of all Americans,” Strong of Boulder Care said.
Investing in people’s health upstream, by addressing social drivers of health, has a high payoff. But the cuts to Medicaid will have the opposite effect. “People don’t fully understand, or they’ve chosen to not fully understand, how that’s really going to impact these populations,” Ulfers of DUOS said.
MacroHealth is focused on examining the variation in value of providers in transparent pricing data. The Centers for Medicare & Medicaid Services offers outcome and payment measures data, while private companies like the Healthcare Bluebook or Motive Medical Intelligence can also offer valuable insights.
Some plans are already designed to encourage members to go to lower-cost providers or better-quality providers, which could be a valuable approach in the future. “If we tend to choose the providers that have the best value, then hopefully that will make healthcare more affordable,” Bretz said.
The private sector’s role
Over the years with Medicaid expansion and the changing composition of beneficiaries, it has become easier for companies to innovate for the space, per Robart, and develop a long-term relationship with members. Many of Seae Ventures’ portfolio companies work with Medicaid today.
“We think that the need and the value that companies can develop or deliver for underserved and vulnerable populations … is still there, and frankly will grow over time,” Robart said.
Tech companies are increasingly looking to jump into the Medicaid space, seizing on opportunities like the Rural Health Transformation Program. Tech that supports cost-savings has “notable potential for impact,” EY recently noted in its 2026 healthcare outlook. One care navigation company historically working with payers, Reema Health, recently told Fierce Healthcare it is now seeing interest from providers in its solution. Reema is in talks with an East Coast health system that serves uninsured patients already but is bracing to provide more charity care because of the Medicaid cuts.
Robart predicts that there will be more demand for companies to take into account sites of service, engagement rates and holistic care to tailor their solutions. One thing is for sure: Despite the cuts, founders are not yet shying away from startups. “I don’t think it has dampened interest at this point amongst entrepreneurs looking to solve these problems,” Robart said, noting Seae Ventures is looking at a rich pipeline of companies.
When making Medicaid plays, vendors will need to focus on demonstrating strong outcomes and ROI upfront when courting partners. “The pressure’s on companies to be able to demonstrate better health outcomes and reduced costs right away,” Robart said. The far-off promise of savings five years down the line “is not an attractive proposition right now.”
That goes for all kinds of buyers—especially states, which plan spending for one or two fiscal years ahead. “The problem is saving $100 million in 10 years if you spend $10 million now is harder if you just don’t have the $10 million to spend now,” Chaudhary, the Sagamore Institute senior fellow, said.
“We’re not strangers to tumultuous changes in Medicaid,” Strong noted. Most Boulder patients are on Medicaid. “For many years, we’ve had to adapt strategies to keep people covered and in care.”
Boulder has worked for years to build trust by proving its value proposition to its partners, Strong said, citing value-based care as key to the strategy. With Medicaid plans, pay-for-performance contracting based on HEDIS measures helps make the ROI measurable, per Strong. It is harder to do quality measurement in states that haven’t expanded Medicaid, she added.
Pair Team, the company providing case management for Medicaid beneficiaries, similarly believes in putting money where your mouth is. The care navigation company puts up to 100% of its fees at-risk. “It’s either we’re delivering, or it’s no skin off your back. That’s the easiest way to do it. That is supported by strong outcomes,” Morrison said.
While sources interviewed by Fierce Healthcare agreed value-based care is a powerful enabler, they acknowledged it’s not feasible for everyone. “In the long run, that is a very valuable model,” Robart acknowledged. “For earlier-stage companies, that becomes tougher. They need the revenue to run their operations and fuel their growth.”
The potential for AI
Given the attention AI is getting in healthcare—its adoption is more than double the blended rate rate across the rest of the U.S. economy—it is unsurprisingly seen as an opportunity to help meet the Medicaid moment. Automating revenue cycle management, analyzing Big Data to drive earlier health interventions and personalizing benefits are just a few of the use cases leaders are considering.
“People who are well-versed in AI will replace people who are not,” Charnetski of PointClickCare said. “Companies who have AI-enabled tech solutions will be better off than those who do not.”
“AI is coming like a freight train in Medicaid, I don’t think there's any doubt about that,” Robert Andrews, CEO of the Health Transformation Alliance, agreed. Cutting costs is the top priority for strapped hospitals, he explained. AI can help streamline tasks for clinicians and other staff, like triage and prior authorizations. “Part of me is deeply worried about this: that poorer people are going to get worse care,” Andrews added. Proper regulation will be crucial to prevent a negative impact on disparities.
Going into 2026, venture fund Rock Health is interested in companies that support enrollment, navigation or safety net capacity and “that preserve relationships while improving throughput,” CEO Katie Drasser told Fierce Healthcare in an email. “As an example, our investment arm Rock Health Capital recently invested in Pear Suite, a care management platform for community health workers,” Drasser wrote.
The firm is also looking at solutions offering integrated healthcare or social services, using the new rural health fund or having a pay-for-performance model. Drasser recommended companies focus on community health workers and what she called “Medicaid-aware ops” that preserve care continuity and stabilize provider finances.
She stressed the importance of strengthening data-sharing between Medicaid agencies, managed care orgs and community-based orgs to identify care gaps earlier and coordinate interventions. Investors should look for stratified equity outcomes, value-based contracts and co-design opportunities in startups. Advocates, meanwhile, should urge policymakers to simplify redeterminations and fund bridge support.
“Our researchers expect capital will continue shifting toward fast-payback admin and RCM plays,” Drasser wrote. “Admin and AI tools can blunt the impact and extend reach, but they must be built with human-in-the-loop guardrails and equity metrics or risk amplifying disparities.”