Top executives at the country’s largest for-profit health systems say they’re keeping the pressure on policymakers to preserve government health coverage in upcoming budget decisions but concede that some cost-cutting adjustments are likely and will require flexibility from providers.
In policy-heavy fireside chats held as part of this week’s Barclays Annual Global Healthcare Conference, the CEOs of HCA Healthcare and Tenet Healthcare acknowledged the broad uncertainty surrounding Medicare, Medicaid and the impending expiration of enhanced Affordable Care Act (ACA) tax credits.
Republicans, in Congress and the White House, campaigned on and have prioritized major cuts to federal budgets to offset the deficit and pay for tax cut extensions. Though the bulk of this effort has so far comprised workforce reductions and grant cancellations, a recent House budget framework calls for a 10-year, $880 billion reduction in spending under the Energy and Commerce Committee that a Congressional Budget Office analysis showed would likely require substantial adjustments to Medicaid.
Democrats have jumped on that budget framework as a sign that the majority party will be slashing coverage and allowing other healthcare funding to lapse. Republicans have pushed back, with congressional leadership pointing to extensions in this week’s continuing resolution and President Donald Trump repeatedly promising his administration “will not cut Social Security, Medicare or Medicaid benefits.”
Those assurances don’t appear to have entirely settled healthcare leaders’ nerves.
“We don't know what that means exactly,” HCA Healthcare CEO Sam Hazen said Tuesday at the conference. What “does that mean from a beneficiary standpoint? Does that mean from a provider standpoint? Does that mean from a Medicare Advantage payer standpoint? We don't really know what that means yet.”
A handful of approaches to adjust Medicaid are on the table, including work requirements, per capita caps and a reduction to the enhanced Federal Medical Assistance Percentage (which uses federal funds to cover 90% of enrollee cuts) for the ACA expansion population.
An analysis released Tuesday by the Urban Institute estimates that a Medicaid funding cut substantial enough to force states to drop their expansion would fuel an $80 billion hit to provider revenues in 2026, $31.9 billion of which would be among hospitals. That scenario would also bring an $18.9 billion jump in uncompensated care costs for all providers and a $6.3 billion increase for hospitals.
Hazen said he has been spending the week in Washington, D.C., “trying to gain a better perspective on what certain legislators are thinking around Medicaid, and maybe some pathways forward that would be appropriate for [reforming] Medicaid programs but protect the industry.”
Tenet Healthcare CEO Saum Sutaria, M.D., said during a Wednesday Barclays session that Washington’s discussions on Medicaid reform have “been wide ranging. Obviously, there are many perspectives out there about how much opportunity there may be in Medicaid, from an expense standpoint, to pay for … tax cuts.”
Echoing prior commentary, Sutaria pointed to the difficult uphill battle Republicans would face trimming the program. He said that roughly 10% to 15% of all voters are on Medicaid, with substantially more having either been on it in the past or know an immediate family member who relies on Medicaid.
“You very quickly reach 50% of the electorate, when you think about it from [that] standpoint, and our polling has shown that there is opposition to cutting Medicaid by almost a 2:1 margin among this group,” the CEO said. “What’s also interesting is that opposition is stronger among Trump voters than non-Trump voters in this past election.”
With that in mind, Sutaria predicted that the eventual reform “will be somewhere closer to work requirements and possibly looking to tighten up enrollment standards, or criteria verification,” which would satisfy Republicans’ broader messages of fraud but don’t take quite as large a bite out of the $880 million target.
The executives had a similar perspective in regard to enhanced ACA subsidies, which are slated to expire at the end of the year.
The more affordable coverage first passed in March 2021 has driven record enrollment through the ACA marketplace. Allowing the tax credits to lapse has been predicted to bring a $20.9 billion reduction in healthcare services spending in 2025 and $6.3 billion increase in uncompensated care burden, and for hospitals an $8.2 billion decrease and $1.7 billion increase, respectively.
Hazen said HCA believes “there’s good rationale for the government to want to continue those—refine them where they need to be refined, yes, but to continue them in a way that ensures coverage continues.” He added that the government has been receptive in discussions on the subject, which HCA plans to continue, and that “there’s still a lot of time between now and the end of the year.”
Sutaria characterized the ACA exchanges as a booster for small business growth, “an incredibly important priority politically,” and said more than half of the exchange growth Tenet has seen in the last few years came from five red states.
Tenet’s polling in those states, Sutaria continued, has found that the average consumer and Republican voter is aware they are benefiting from their exchange plan and that the benefit exceeds what they would receive through a continuation of the tax cuts Republicans are seeking to extend.
“Roughly $1,350 a month versus $1,000 a year,” Sutaria said contrasting the insurance cost increases against the tax cut for a middle-income family. “Again, politically, this is a very difficult thing to deal with.”
Sutaria said Tenet is sharing its polling data with Congress, from which the health system has received “tremendous interest” in reviewing the voter insights.
He acknowledged that failure to extend the credits would hit Tenet’s hospital business due to the exchange population’s greater utilization of the ER but downplayed the impact of higher premium caps or other potential adjustments to the credits by pointing to other opportunities for consumers to find coverage.
Not to be lost in the conversation are site-neutral payment policies which, if enacted by Congress, would amend Medicare to pay the same rate for a service regardless of whether it was delivered in a hospital or other outpatient site.
Both executives outlined three potential scenarios of varying impact that have so far been floated in regard to the policy.
Sutaria said his company hasn’t and won’t quantify the impact “until there’s some clarity on where this may go,” but repeated commentary given during the company’s most recent earnings call that its heavy presence in the ambulatory surgical center space insulates the business from such policy changes.
The “light” version of site neutrality could have a broader impact on academic medical centers, Hazen said, whereas a “medium” or “heavier” approach would have a greater impact on HCA.
“But that requires significant change in philosophy within the Medicare program, and we don’t see a high likelihood of that,” Hazen said. “So we think we’re somewhere in the light, medium kind of implications with site neutral as a possible item for Medicare reform. But again, it’s really early. I don’t even think Dr. Oz has been … approved yet as the administrator [of the Centers for Medicare and Medicaid Services], so there’s not really been a lot of effort at this particular juncture.”
Broadly speaking, the executives acknowledged that these potential changes and other Trump policies including tariffs underscore a need for flexibility and resiliency. Hazen said that responses to recent curveballs like the COVID-19 pandemic or debilitating hurricanes have given HCA “a quiet confidence” when it comes to navigating uncertainty.
“Our balance sheet is in the best position it’s been in a long time, and so that provides a platform,” he said. “But in addition to that, we’re looking at cost initiatives that we can execute that will give us a response, if you will, to coverage dislocation or to reimbursement changes and so forth.”
Should the reforms or cuts materialize, Tenet would likely look toward expense management, adjusting capacity in markets with a heavy Medicaid presence and limiting investment or fully curtailing some of its programs that serve the Medicaid population, Sutaria said.
“We have to adjust the business no differently than we adjusted the business when there was significant compression of demand during COVID—and you know, we’ve demonstrated a lot of flexibility in the business doing that,” he said. “At the same time, ultimately any cuts that are made here, or any people that are made uninsured—it’s not good for healthcare.”