Health system executives will be put to the test in 2026 as they anticipate — and respond to — the financial implications of the One Big Beautiful Bill Act (OBBBA).
The law’s most impactful healthcare provisions related to Medicaid coverage begin to take hold in the second half of the year. That’s when states start rolling out regulations around work requirements for beneficiaries and redeterminations. Other provisions, including new patient cost-sharing and reduced Medicaid payments, take effect in 2027 and 2028. Combined with the expiration of enhanced premium tax credits for Affordable Care Act (ACA) plans, it’s estimated that nearly 16 million people could lose health coverage over the next decade.
Last year, we created an easy-to-use calculator allowing users to enter their specific health system characteristics — state, payer mix, cost structure — and understand the income and margin implications the OBBBA could have on their financials. Results varied widely depending on the state in which a health system is located. To gain a better understanding of this dynamic, we modeled the impacts of same archetypal health system for all 50 states and the District of Columbia. We found vastly different bottom-line impacts: coverage loss, state-chosen cost sharing, and deep reimbursement cuts collide in different ways across the nation. The result? A new geography of national health system implications.
Three primary levers were identified to project the end state for a health system once the OBBBA takes full effect. Our model considers coverage loss due to Medicaid and ACA contraction, drops in utilization from Medicaid cost sharing, and Medicaid reimbursement cuts.
We made some general assumptions building out the calculations as well, including annual net patient service revenue of $1 billion, a payer mix that is 5% ACA and 15% Medicaid, 15% utilization decline due to cost sharing for Medicaid expansion adults, operating costs at 135% of Medicare, 50% of which is variable, and no change to 340B. Below are six key takeaways from our analysis.
Insight 1: Margin Pressure Looks Completely Different Depending on the State
Margin impacts swing widely, even for identical provider characteristics. State Medicaid policy, ACA Marketplace dependence, and financing structures like state-directed payments drive the difference. Local state nuances, already an important driver of health system performance, are now a core strategic variable, especially for multi-market systems balancing capital allocation, growth, and risk.
Insight 2: Medicaid and ACA Coverage Losses are the Largest Driver of Margin
Coverage loss drives about half of the total margin impact, as it affects both volume and revenue. When coverage drops, many patients do not stop seeking care; they simply lose the ability to pay for it. Preventative and elective care dwindles, but emergency care surges. The result is a shift of some paid encounters into uncompensated care while the cost to provide the care stays. Systems with large Medicaid and/or ACA populations will feel this most acutely, requiring early planning in emergency department capacity, financial counseling, and charity care resourcing.
INSIGHT 3: ACA Coverage Loss Impact on Margin Is Consistent; Medicaid Isn’t
Zooming in on coverage loss, declines in ACA coverage are relatively consistent across states. Medicaid losses, however, differ significantly based on state-specific eligibility rules, enrollment churn, and the size of the expansion population. The markets with the most Medicaid exposure will see the biggest swings in uncompensated care and revenue loss.
INSIGHT 4: States Can Influence Margin Impact Through Cost Sharing
Medicaid cost sharing is the smallest lever, but states have discretion on how to implement it. Higher cost-sharing increases the cost sensitivity of patients and will cause them to forgo care more often. In our analysis, the difference between low and high levels impacts margin up to 0.5% in some states. This is the only place in this modelling where state action directly changes the outcome. Provider advocacy may influence whether a state adopts, limits, or forgoes copays, directly sharing hospital financial exposure.
INSIGHT 5: Where In Effect, Medicaid Reimbursement Cuts Drives the Greatest Margin Reduction
The OBBBA caps reimbursement for Medicaid expansion states to 100% of Medicare and non-expansion states up to 110%. Systems in states with higher reimbursement levels will see the largest margin deterioration, as revenue falls without any change in underlying volume or cost of care.
INSIGHT 6: Accounting for Coverage Losses and Reimbursement Cuts, States Can be placed Into Four Impact Categories
The country splits into four archetypes, each cluster faces a different financial future under the bill:
- Coverage Crunch: Big coverage loss, modest reimbursement cuts.
These states face significant coverage losses due to broad Medicaid enrollment, and high ACA Marketplace participation. Their Medicaid reimbursement is lower, meaning the OBBBA’s reimbursement caps have a smaller effect. However, as the recent Medicaid redetermination experience has shown, providers can support eligible patients in securing coverage when facing heightened administrative burdens and friction.
- Double Trouble: High coverage loss + steep reimbursement cuts.
States in this grouping are at the intersection of large coverage losses and high dependence on supplemental Medicaid financing. They lose meaningful coverage as eligibility tightens and ACA subsidies roll back, while simultaneously seeing inpatient Medicaid rates pulled down by rates restrictions. For providers, these are the toughest states to operate under the OBBBA, where both volume economics and rate structures turn against them.
- Weathering Impact: Low on both; most stable.
This archetype faces smaller shocks because they have fewer Medicaid patients losing coverage and rely less on supplemental payments. Many already reimburse Medicaid at close to Medicare rates so reimbursement caps create a milder reset. But these states are not insulated: even modest coverage loss increases uncompensated ED care, and reduced flexibility in Medicaid financing can strain rural and safety-net providers. Hospitals here still need to prioritize coverage retention, track payer mix shifts, and prepare for long-term pressure on reimbursement.
- Reimbursement Risk: Steady coverage, big reimbursement cuts.
Reimbursement Risk states experience smaller coverage losses because fewer residents rely on Medicaid expansion or ACA subsidies, limiting exposure to eligibility and subsidy changes. But they are hit hard by reimbursement cuts. As the law caps these mechanisms, providers in this group face meaningful rate compression without corresponding cost relief.
Health systems must start adapting now
As our analysis shows, the OBBBA hits every state, but not equally. Coverage loss and reimbursement cuts reshaping hospital finances will create uneven pressure points. For health systems, the implications are clear:
1. Your financial outlook is now state-dependent, state engagement matters more than ever.
2. Coverage loss and reimbursement cuts will reshape payer mix and uncompensated care.
3. Systems must adapt forecasting, pricing, and cost structure planning to a post-H.R.1 landscape.
Understanding your exposure to each driver is now essential to navigating what comes next.