As Chip Kahn, president and CEO of the Federation of American Hospitals, prepares to step down at the end of 2025 after 24 years in leadership, he is sounding the alarm on several complex but consequential policy shifts reshaping the healthcare landscape.
From looming Medicaid cuts and rising payer friction to deepening uncertainty around public health investments, Mr. Kahn sees today’s moment as one of the most difficult and “unprecedented” periods for hospitals in recent memory. He fears the country may be retreating from hard-won gains in access and coverage.
Coverage and access: Heading into a decline
Arguably, the most urgent warning stems from the One Big Beautiful Bill Act, which would cause hospital revenues to decrease by about $4.5 trillion and lead to $1.2 trillion in reduced spending, according to the Congressional Budget Office. Medicaid spending is set to decrease by nearly $1 trillion, with the number of uninsured individuals projected to grow by 19 million by 2034.
Uncertainty also looms around the ACA’s enhanced premium tax subsidies, which are set to expire at the end of the year. The knock-on effect for patients and providers would be substantial if subsidies lapse, particularly as ACA marketplace enrollment has more than doubled from 11.4 million in 2020 to 24.3 million in 2025, according to KFF.
“Expanding access to health coverage has been one of our biggest achievements, but with what just happened with the OBBBA and recent CMS policies, we’re moving in the opposite direction,” Mr. Kahn told Becker’s. “And it’s not just about Medicaid or the potential expiration of ACA tax credits; it’s also about changes to program integrity.”
Some reforms were warranted, but both CMS and the OBBBA may have gone too far, eliminating automatic renewals and shortening the enrollment window and making it harder for people to sign up, according to Mr. Kahn.
And that is before the issue of the ACA’s premium tax subsidies is taken into account, as lawmakers remain deadlocked amid the ongoing government shutdown.
“We’re going to see coverage declines, and that’s going to be tough — especially on hospitals that are committed to providing care, regardless of coverage,” Mr. Kahn said. “Some patients are going to face serious affordability issues, either due to lack of insurance or steep increases in what they’re expected to pay.”
That coverage decline is already pressuring hospital operations, and there is widespread concern around the looming cuts tied to the broader legislative package — set to take effect in late 2026 and early 2027.
Medicaid is different from Medicare because of its shared federal-state structure. While the federal government sets overarching rules, states ultimately implement the program. That means each state has its own timeline, political dynamics and fiscal approach, which will shape how they respond to upcoming changes.
“Oct. 1, 2027, isn’t a simple ‘flip the switch’ moment where everything changes at once. In reality, the process will already be in motion in some places before that date, and others may delay,” Mr. Kahn said. “State legislatures operate on different calendars, and governors will make decisions based on local priorities. There’s also significant variation across states in how they use provider taxes and state-directed payments, which will affect how they adapt to new federal requirements.”
For hospitals and health systems, this presents a significant operational challenge.
“Large enterprises can’t turn on a dime,” he said. “They need to begin preparing now, and understanding what their state may do, what proportion of their patients are covered by Medicaid, and how those changes could impact revenue. That, in turn, affects their ability to sustain services.”
One of the top priorities for hospital groups next year will be figuring out what, if anything, can be reversed or mitigated in terms of the OBBBA. That adds another layer of uncertainty for providers and patients alike.
The individual market, or the ACA, provides commercial health coverage within a broader regulatory system that acts as the main entry point for people seeking insurance. Mr. Kahn said this hybrid model is the most suitable for the U.S. and reflects how the nation is used to providing and managing healthcare coverage.
“But there are built-in tensions,” he said. “On one side, physicians and providers are mission driven, and their goal is to meet every need of every patient who walks through the hospital doors. On the other side, insurers operate with a fiduciary responsibility to minimize spending. That fundamental difference often leads to conflict.”
Medicare Advantage and the payer-provider arms race
That conflict has been amplified in the Medicare Advantage space in recent years. Since 2023, Becker’s has reported on a growing list of hospitals and health systems that have dropped some or all of their Medicare Advantage contracts due to challenges including excessive prior authorization denial rates and slow payments from insurers.
“Over the past 15 to 20 years, we’ve seen a dramatic shift with the rise of Medicare Advantage. It’s changed the dynamic,” Mr. Kahn said. “In certain markets — take Southern Florida, for example — hospitals can have Medicare Advantage penetration rates as high as 70% to 80%, not just the national average of 54%. In those areas, it has essentially become the dominant way Medicare beneficiaries receive coverage.”
The share of eligible Medicare beneficiaries enrolled in Medicare Advantage plans climbed to 54% in 2025, according to a July 28 report from KFF. The plans hold strong front-end appeal for many enrollees, often offering coverage comparable to Medigap at little or no added cost — all bundled into a single plan. That simplicity and value continue to drive enrollment.
“But on the back end, from the standpoint of providers and many patients, these plans have introduced real barriers,” Mr. Kahn said. “The assumption seems to be that the more friction you introduce — whether through prior authorizations, delays or denials — the less care will ultimately be delivered, because patients, clinicians and hospitals will get worn down. They might give up on pursuing an additional test or simply absorb the cost of underpayment.”
The appeals process can be exhausting and often yields little progress, making it difficult for patients to challenge insurance decisions. Mr. Kahn has seen this dynamic from both sides of the healthcare system, having previously served as CEO of the Health Insurance Association of America.
“I believe there’s a real clash and that Medicare Advantage, in particular, needs more guardrails than it currently has,” he said. “When it comes to payments in MA, I won’t say it’s unregulated, but CMS has limited authority or willingness to apply pressure to the plans. Yet so much of care delivery ties back to payment — not just whether care is covered, but how that payment is assured and actually delivered to providers.”
He also highlights the ongoing debate over observation versus inpatient status, a prime example of how reimbursement classifications can significantly affect hospital margins.
“In fee-for-service Medicare, we have something called the two-midnight rule,” he said. “That means if a patient is in the hospital for at least two midnights — often after being admitted through the emergency room — Medicare will reimburse the stay as inpatient care. These patients are typically on the floor and receiving true inpatient-level services.”
The ongoing battle over whether a stay qualifies as observation or inpatient care is a major stress point. Payers in particular rarely see a service they do not try to classify as observation, according to Mr. Kahn. The reality is, on the floor, patients labeled as “observation” are often receiving the same services as those covered as inpatient by Medicare, but insurers reimburse differently, which ultimately affects the hospital and the patient.
“This not only impacts hospitals’ ability to deliver needed services, but also undermines the physician-patient relationship,” he said. “Insurers often interfere inappropriately in decisions that should be left to the clinician overseeing care — whether a patient should be considered inpatient or is left sitting in an emergency department bed under ‘observation’ status.”
Rural hospitals, budget extenders and national risk
While MA and Medicaid grab headlines, Mr. Kahn emphasizes rural hospitals face a different but equally urgent threat: funding cuts to Medicare low‑volume hospitals, Medicare‑dependent hospitals and disproportionate share hospital payments.
The rural transformation fund included in the OBBBA is set to begin next year and could have immediate effects.
“On the Hill, the idea was that this fund would offset some of the losses rural hospitals may face under these cuts, especially given their high dependence on Medicare and Medicaid,” Mr. Kahn said.
But CMS appears to have a different vision and aims to use that funding to support broader reforms in rural healthcare.
“There’s certainly a need for innovation, but we haven’t yet found a magic bullet. In some cases, it really comes down to simple dollars and cents,” he said. “If you want to keep OB-GYN services open at a rural hospital, you’re probably already losing money on it. And since so many births are covered by Medicaid, reimbursement levels are critical.”
There will be broader policy adjustments over time — October 2027 is not a sacred date — but there is also a real possibility that cuts could be deeper than projected.
“That’s what happened in 1997 when the hospital community faced similar pressures. The Congressional Budget Office projected one level of cuts, but the way the law was written caused actual reductions to be much steeper,” Mr. Kahn said. “We could be heading into a similar situation again if we’re not careful.”
