By Christy Santhosh and Kamal Choudhury
Nov 5 (Reuters) – US hospital operators are bracing for revenue pressure from more patients losing insurance coverage from the Affordable Care Act, a potential drop in government aid for treating Medicaid patients and deeper reimbursement cuts beginning in 2028.
Major hospital chains including HCA Healthcare, Tenet Healthcare and Universal Health Services are reporting steady patient admissions supported by aging baby boomers who require more medical care.
But rising numbers of uninsured patients are squeezing operating margins, the companies said on conference calls after reporting quarterly results. Emergency department care for people without health insurance often goes entirely unpaid, forcing providers to cover the costs.
“They don’t pay, so it’s essentially a write-off,” said Jefferies analyst Brian Tanquilut.
Some of the pressure on hospital operators comes as pandemic-era federal subsidies meant to lower the cost of health plans under the Affordable Care Act expired on Jan. 1, 2026.
That caused premiums to spike by two to three times for some enrollees, while others wrestled with double-digit increases in premiums. Ultimately, more than 3 million people have dropped their plans.
J.P. Morgan analysts estimated that declining enrollment in government-run ACA exchanges – where people who don’t get insurance through an employer can buy health plans – will create a low- to mid-single-digit percentage drag on 2027 profit growth for hospitals.
HCA estimates the loss of the federal subsidies could reduce its income by up to $1.2 billion in 2026. HCA, Tenet and Universal reported year-over-year drops of 17% to 19% in third-quarter ACA exchange volumes, as patients who lost coverage largely shifted to self-pay.
Adding to the pressure, Medicaid supplemental payments – or payments made by the government to help hospitals cover the cost of treating Medicaid patients – are set to fall sharply after boosting 2026 results.
HCA expects net supplemental benefits to decline by $550 million to $650 million in 2027, while UHS forecasts a $175 million to $200 million hit.
Tenet is relatively more insulated from these financial strains as its outpatient surgery-center unit, which accounted for about 40% of its third-quarter adjusted core earnings, is less exposed to exchange coverage losses and Medicaid reimbursement hits.
Some analysts said the healthcare cuts could be dialed back as Democrats have won majority of the House and the Senate in the midterm elections.
“We see the Democrats as most likely to focus on attempting to walk back changes to Medicaid and the ACA exchanges, but continue to see any meaningful traction as unlikely,” said J.P. Morgan analyst Lisa Gill.
MEDICAID WORK RULES AND 2028 CUTS
Starting in 2027, the Trump Administration’s One Big Beautiful Bill Act will require certain working-age Medicaid adults to meet work or community-service requirements to keep coverage, increasing the odds of uncompensated care.
Morningstar analyst Julie Utterback said Medicaid patients generate low profit margins, limiting the direct revenue impact of the work requirements for operators such as HCA, which has a larger footprint in states that have not expanded Medicaid eligibility to more low-income adults under the Affordable Care Act.
The work requirement changes generally only apply to people in these Medicaid expansion plans.
However, the larger risk for hospitals from the bill begins in 2028, when certain supplemental Medicaid payments from the government will be reduced by 10 percentage points annually. Health policy research firm KFF estimates the changes could put roughly $60 billion in current federal hospital funding at risk once fully phased in.
Tanquilut said the phased reduction in these supplemental payments would expose hospitals to four to five consecutive years of Medicaid pressure beginning in 2028.
“From a hospital profit perspective, I suspect the payment cuts will be a bigger headwind with a more lasting effect,” Utterback said.
(Reporting by Christy Santhosh and Kamal Choudhury in Bengaluru; editing by Caroline Humer and Devika Syamnath)
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