Republicans are weighing new healthcare spending cuts as part of a broader effort to fund a budget package that could include up to $200 billion for the Iran war and immigration enforcement, according to a March 30 report from Axios.
The early stage discussions mark a potential revival of contentious healthcare policy changes with significant implications for coverage, costs and hospital finances.
Four things to know:
1. ACA subsidy changes are back on the table. One proposal would fund Affordable Care Act cost-sharing reductions, according to the report. The Congressional Budget Office projected that the policy would reduce gross benchmark premiums by 11% but increase the number of uninsured individuals by an average of 300,000 annually through 2035. The ACA-related proposal would cut subsidies for certain individuals, increasing premium costs while saving the federal government nearly $36 billion, according to the CBO.
The renewed discussion comes as CMS has already proposed significant cost-sharing changes for 2027 through its Feb. 9 notice of benefit and payment parameters. That rule would allow bronze plans to carry higher cost-sharing and update catastrophic plan cost-sharing requirements. It would also expand eligibility for catastrophic plans — which carry the highest out-of-pocket exposure — to individuals aged 30 and older who fall below 100% or above 250% of the federal poverty level and cannot access enhanced tax credits or cost-sharing reductions. CMS is also proposing to allow multi-year catastrophic plans with terms of up to 10 consecutive years.
The Federation of American Hospitals, in a March 13 comment letter, warned the proposed rule could reduce Marketplace enrollment by 1.2 million to 2 million people and increase premiums by 2% to 3%. FAH argued the changes could expose patients to “financially crippling cost-sharing burdens” and increase uncompensated care at hospitals.
2. Medicare, Medicaid policies in focus. Lawmakers are weighing potential Medicare changes — including site-neutral payment reforms and efforts to curb Medicare Advantage upcoding — while remaining cautious about revisiting major Medicaid cuts enacted in 2025, according to the report. However, some previously proposed policies, such as limiting coverage for undocumented immigrants, could resurface.
Site-neutral payments are already a live issue for hospital finances. CMS expanded site-neutral payment rates to drug administration services in excepted off-campus hospital outpatient departments in its 2026 outpatient rule, a move projected to reduce outpatient spending by $290 million. The AHA called the policy direction “exacerbating” for hospitals’ already strained finances.
A Kaufman Hall analysis warned that health systems with outpatient strategies built around campus-based hospital departments — or whose Medicare Advantage contracts are pegged directly to Medicare fee-for-service rates — face acute exposure as Congress considers expanding site-neutral policies further. In markets where MA penetration exceeds 70%, any CMS rate action could ripple rapidly through private payer contracts as well.
3. Prior legislation is already affecting providers. The One Big Beautiful Bill Act, signed into law last summer, is projected to reduce federal Medicaid spending by $911 billion over 10 years and lead to significant coverage losses, with hospitals facing up to $25 billion in annual revenue reductions, according to an analysis Kodiak Solutions published in November. The OBBBA’s Medicaid provisions — including work requirements, more frequent redeterminations and new limits on state-directed managed care payments — have drawn particular scrutiny from providers.
Fitch Ratings, in its December 2025 sector outlook, maintained a “neutral” view for nonprofit health systems but warned that OBBBA’s Medicaid cuts represent a significant drag on a margin recovery that is already uneven across the sector. Hospital leaders have expressed significant concern about the OBBBA’s nationwide Medicaid work requirement, taking effect in 2027, which will require adults ages 19 to 64 to work, attend school or volunteer at least 80 hours per month to maintain coverage.
A Kaufman Hall analysis published in October found safety-net hospitals could see operating margins shrink by nearly 30%, using Georgia’s 2023 Medicaid work requirement rollout as a cautionary benchmark: a GAO report found Georgia’s program led to coverage losses without increasing employment, and the state spent twice as much on administration as on enrollee care.
4. The timeline for action is aggressive. Lawmakers aim to pass legislation within 60 to 90 days, setting up a fast-moving policy debate with major implications for coverage, reimbursement and hospital finances, according to Axios.
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