What if one day, the government delivered a brand new car to your driveway? Of course, you’d be pretty excited. The car looks really nice, and comes with some impressive features. But after you take it out for a few drives, you notice the temperature gauge slowly creeping higher and higher.
It turns out, the car has an irreparable coolant leak. Early on, the drip is manageable and you’re able to add new coolant as needed. But as you continue to drive the car, the coolant starts to drain faster and faster.
Eventually, the engine overheats to the point that it seizes up and breaks beyond repair. Leaving you stranded on the side of the road.
From our perspective, that’s what the One Big Beautiful Bill Act (OBBBA) has the potential to be. It offers shiny new benefits like permanent telehealth access, expanded HSA flexibility, and funding for rural hospital transformation. But underneath, it’s leaking through Medicaid cuts, Medicare spending caps, and millions of vulnerable people losing their health insurance. And if we ignore that leak, however slow it may be at first, the long-term damage could be devastating.
In this article we’ll discuss some of the major pros and cons of this bill, and what it means for healthcare leaders today. Our hope is that by better understanding what this bill contains, we as a healthcare industry will be able to prevent or diminish the potentially negative consequences.
Pros
1. Increased HSA Flexibility
One of the brighter spots in the OBBBA is the expanded flexibility it brings to Health Savings Accounts (HSAs). Patients with high‑deductible health plans can now use HSA funds for telehealth and direct primary care before reaching their deductible. That means routine checkups and wellness visits are accessible from day one, with no upfront costs to delay care.
For hospitals, this ushers in a host of benefits. One of which is that fewer patients arrive later and sicker, which helps alleviate the avoidable admissions for chronic or acute conditions. Another benefit is that patients who feel financially supported by their insurance are more likely to keep scheduled outpatient visits, which helps stabilize a hospitals operations and revenue.
While it’s true that this aspect of the bill won’t be very impactful for those without an HSA, it can help ease the strain on emergency departments and transition routine care away from acute settings, which will be beneficial for everyone who’s ever had to wait in a hospital waiting room.
2. Deductible-exempt Telehealth Coverage
Similar to the first point, another impactful feature of the OBBBA is how it will make telehealth services permanently deductible-exempt under high-deductible health plans. In plain terms, this means patients will be able to access virtual care without having to pay out of pocket before meeting their deductible, essentially removing any financial barriers patients might have to virtual visits.
Consequently, its expected that the number of missed appointments will decline, especially among patients who had a difficult time attending visits due to cost and transportation concerns. As a result, chronic care management becomes smoother, enabling better triage, earlier intervention, and fewer in-person encounters.
This can be particularly valuable in rural populations where transportation or distance is a hurdle.
3. $50 Billion Rural Hospital Transformation Program
Perhaps the widest-impact provision of the bill is the proposed $50 billion Rural Hospital Transformation Program, a five-year investment administered through CMS approved state plans. The potential use cases are compelling: expanding telehealth capacity, recruiting critical staff, launching care coordination tools, or investing in local health promotion efforts. At first glance, it’s a lifeline. But a closer look reveals serious limitations that demand a smart, strategic response.
If the $10 billion annual allocation is divided evenly across the approximately 1,800 rural hospitals in the U.S. (1), that amounts to about $5.5 million per facility per year. That can certainly be helpful, but in the face of large scale Medicaid cuts, rising labor costs, and aging infrastructure, that money can be absorbed as fast as it arrives. And by 2030, this funding will end. That gives hospitals a narrow five-year runway to not only address urgent needs with this additional funding, but also build more enduring, self-sustaining models of care delivery.
So the best move for rural hospitals is to start planning now. We recommend engaging early with your state’s CMS health plan to begin developing the goals for your hospital’s share of the funding. It would be helpful to position your proposals with that funding to address projects that don’t just fill immediate gaps, but create new revenue pathways or reduce future costs. That could mean launching remote patient monitoring services, building chronic care clinics, or aligning with managed care organizations to pilot value-based care initiatives.
For further information on the details of how these transformation funds can impact rural hospitals, we encourage you to read this article (2) from the Kaiser Family Foundation.
Cons
1. Medicaid Cuts
An alarming side effect of the bill is the large-scale Medicaid cuts, with nearly $900 billion slashed over the next 10 years. Its estimated that 7.8 million Americans are projected to lose Medicaid coverage as a result of these reforms. (3) The reforms include tighter eligibility rules, new work requirements, and fewer federal dollars flowing to states.
This loss of coverage obviously doesn’t mean that patients will stop getting sick. Those individuals will still show up in emergency rooms, labor and delivery units, and pediatric clinics. For example, 41% of births in the U.S. in 2023 were funded by Medicaid, and it was 47% of all births in rural communities. (4) But now, without Medicaid covering less of those births, hospitals will be performing that life-giving care without being reimbursed for it.
The financial domino effect from that fallout will be real: if a facility is already operating on razor-thin margins, absorbing millions in unpaid services isn’t sustainable. This often leads to having to make impossible choices, like cutting back on community health programs, shutting down specialty units like maternity or mental health, freezing new hires, or delaying critical facility upgrades.
For rural hospitals, which typically have about 20% of their discharges covered by Medicaid (5), this could accelerate the already troubling trend of closures. And children’s hospitals, which serve large populations of lower-income families, could see entire patient populations lose access overnight. The previously mentioned provision to give more funding to rural hospitals is meant to help address this shortage, but will it be enough? And what will happen in 2030 when that funding runs out?
2. Medicare Spending Caps
Another concerning aspect of the bill is the introduction of Medicare spending caps. These caps essentially limit how much Medicare payments to hospitals can increase over time, regardless of real-world pressures like inflation, rising wages, or staffing shortages.
On paper, it’s framed as a way to control federal spending, but in practice, it shifts the financial burden onto hospitals already operating under tight margins. If reimbursement rates don’t keep pace with the actual cost of care, hospitals will be forced to make difficult financial decisions that may lead to diminished clinical outcomes.
And as labor costs continue to rise, the inability to match those increases with stable Medicare revenue may trigger staff reductions or increase reliance on contract labor, each of which undermines care continuity and staff morale. For rural and safety-net hospitals that depend heavily on Medicare reimbursements, these caps could mean reducing entire service lines like obstetrics, behavioral health, or outpatient rehab to keep the doors open.
The ripple effects won’t merely be financial; they’ll be felt in less patient access, clinical outcomes, and an erosion of community trust. At a time when hospitals are being asked to do more with less, Medicare spending caps lock them into a funding model that’s divorced from operational realities. It’s budgeting by algorithm, not by need, and patients ultimately pay the price. We know that money from the government to fund Medicare isn’t infinite, but with the Medicare population increasing steadily by the day, this is a leak that will need to be addressed.
3. Health Insurance Loss for Millions
The Kaiser Family Foundation wrote that: “The Congressional Budget Office (CBO) estimates that, taken together, these changes will result in 16 million more uninsured people in the year 2034 than would otherwise be the case, including:
- 7.8 million more uninsured resulting from Medicaid changes in the One Big Beautiful Bill Act (OBBBA)
- 3.1 million more uninsured from OBBBA provisions affecting the ACA Marketplaces
- 900 thousand more uninsured from codifying the recent Trump Administration proposed rule on the ACA Marketplaces. This accounts for only half the effect of the proposed rule; the remaining 900 thousand people becoming uninsured are included in the effects of ACA provisions in the reconciliation package.
- 4.2 million more uninsured with the expiration of the enhanced premium tax credits, relative to an estimate of a permanent extension of those credits” (6)
These numbers tell a story, but they don’t tell much of it. Truthfully, millions of people losing their insurance is a crisis waiting to unfold. Uninsured patients are more likely to delay care, skip medications, and ultimately show up in emergency rooms when conditions have worsened and treatment is more expensive. This creates a double burden: ERs become overwhelmed with avoidable cases, and hospitals are forced to provide care without reimbursement.
As we mentioned previously, these kinds of cuts lead to a surge in uncompensated care that further strains already tight budgets. For many safety-net and rural hospitals that rely heavily on Medicaid and ACA-subsidized patients to stay solvent, this could mean cutting service lines, laying off staff, or even shutting down entirely. Maternity wards, mental health services, and chronic care clinics often disappear first, leaving the most vulnerable with nowhere to turn.
It also jeopardizes federal and state goals around population health, prevention, and chronic care management. Simply put, stripping insurance from vulnerable populations doesn’t just harm patients; it destabilizes entire care ecosystems. As administrators, this calls for advocacy, innovation, and preparing for a future where the safety net may be weaker than ever. The OBBBA may deliver cost savings, but it risks transferring those costs, both fiscal and human, directly onto the shoulders of hospitals and their patients. Hospital leaders should brace for that impact and begin planning for it now.
Summary Table
| Pros | Cons | |
|---|---|---|
| Expanded HSA use | Lower-cost access to preventive and telehealth care | Only helps those with HSAs |
| Telehealth coverage | Boosts access to care for rural and mobility-limited patients | |
| $50B rural fund | Provides some financial relief to rural hospitals | Expires in 2030 |
| Medicaid cuts | Reduces federal spending | Harms coverage and care access, with thousands of projected deaths |
| Medicare spending caps | May help control healthcare expenditures and encourage efficiency across the system | Could force hospitals to delay needed upgrades, reduce service lines, or downsize staff |
| Coverage losses | Millions will lose their health insurance, negatively impacting the most vulnerable patients |
How to Navigate the Road Ahead
Going back to our car analogy, the OBBBA looks like an upgraded vehicle with new features like expanded telehealth access and greater HSA flexibility. It even offers rural hospitals a hopeful injection of funding, like a fresh set of tires for a long drive ahead. But under the hood, there’s that hidden coolant leak of Medicaid cuts, Medicare spending caps, and widespread coverage losses. At first, everything may seem to run fine, until the engine overheats, seizes up, and breaks due to the loss of coolant.
For healthcare organizations and policymakers, this means the benefits must be weighed against the hidden risks. Yes, telehealth is here to stay, and HSAs are more useful, and rural hospitals will get more funding. But that won’t matter if millions lose their insurance and hospitals collapse under the weight of all the additional uncompensated care.
Consequently, states will need to implement the rural transformation funds quickly, wisely, and equitably. Hospitals will need contingency plans for lost Medicaid and Medicare revenue, and patients with chronic conditions will require stronger outreach, navigation, and support to keep them from falling through the cracks.
A quote from Hubert H. Humphrey (a former Vice President of the U.S.) is inscribed in the entrance of the Health and Human Services Administration headquarters in Washington, D.C. It says,
“The moral test of government is how that government treats those who are in the dawn of life, the children; those who are in the twilight of life, the elderly; and those who are in the shadows of life, the sick, the needy and the handicapped.” (7)
No matter where we stand in this field of healthcare, that quote is a reminder to all of us about where the priorities must be in our work.
In the end, the OBBBA may look like progress on the surface, but if we ignore the leak beneath, the engine of healthcare in our country will overheat, and the very people it aims to help will be the ones left stranded on the roadside when it breaks.
Sources:
- https://www.aha.org/statistics/fast-facts-us-hospitals
- https://www.kff.org/medicaid/issue-brief/a-closer-look-at-the-50-billion-rural-health-fund-in-the-new-reconciliation-law/
- https://thefulcrum.us/governance-legislation/big-beautiful-bill-health-insurance
- https://www.kff.org/medicaid/issue-brief/5-key-facts-about-medicaid-and-pregnancy/
- https://www.kff.org/health-costs/issue-brief/10-things-to-know-about-rural-hospitals/
- https://www.kff.org/policy-watch/how-will-the-2025-budget-reconciliation-affect-the-aca-medicaid-and-the-uninsured-rate/
- https://hign.org/news/hign-news/moral-test



