Health Issues

People in lower-income families with employer coverage spend a greater share of their income on health costs than those with higher incomes, and the cost of employer sponsored health insurance—including premiums, deductibles, and other out-of-pocket costs—has risen steadily over time. Low-income workers offered health insurance through their employer are typically not eligible for subsidies on the Affordable Care Act (ACA) Marketplaces, even if they would face lower costs to buy coverage and with reduced cost sharing.

This analysis uses information from the 2024 Annual Social and Economic Supplement (ASEC) to the Current Population Survey to look at the share of family income people with employer-based coverage pay toward their premiums and out-of-pocket payments for medical care. It considers non-elderly people living with one or more family members who are full-time workers and have employer-based coverage.

The analysis is available through the Peterson-Kaiser Health System Tracker, an online information hub dedicated to monitoring and assessing the performance of the U.S. health system.

Approximately 66 million people – about 20% of the U.S. population – live in rural areas, where Medicaid covers 1 in 4 adults (a higher share than in urban areas) and plays large part in financing health care services. In rural communities, Medicaid covers nearly half of all births and one fifth of inpatient discharges. The Congressional Budget Office (CBO) estimates that the Medicaid changes in the House-passed budget reconciliation bill—the One Big Beautiful Bill Act—will reduce federal Medicaid spending by $793 billion, decrease Medicaid enrollment by 10.3 million people, and increase the number of uninsured people by 7.8 million. Senators from both parties have raised concerns about potential impacts on rural hospitals and other providers, particularly given the ongoing trend of rural hospital closures.

To address those concerns, Senate Republicans have proposed adding a rural health fund to the reconciliation bill. Initial reports have pegged the size of the fund at $15 billion, though some Republican Senators have argued it should be bigger. The fund would provide $3 billion per year in fiscal years 2027 through 2031, with half distributed equally across all states and half to be distributed by the Centers for Medicare and Medicaid Services (CMS) based at least in part on states’ rural populations, percent of providers located in rural areas, and the situation of hospitals who serve low-income patients. It is unclear how the funds will be distributed across hospitals, other providers, and various state initiatives and whether the funds would be enough to offset any losses for providers under the bill.

This policy watch estimates how the House-passed reconciliation bill would affect federal Medicaid spending in rural areas and the number of rural Medicaid enrollees.

Building on KFF’s earlier estimates of state-by-state Medicaid cuts, this analysis estimates that Medicaid spending in rural areas could decrease by $119 billion over 10 years (Figure 1). The analysis allocates each state’s estimated spending reductions from the earlier analysis of the One Big Beautiful Bill Act to urban and rural areas using the percentage of Medicaid spending that paid for services used by rural enrollees within each state.

Overall, federal Medicaid spending in rural areas could decrease by 15% ($119 billion), which is far more than the $15 billion that has been suggested for the rural health fund. These estimates may underestimate the effects on rural areas because they do not account for the full change in total Medicaid spending, which would include the federal spending reductions and the associated reduction in state Medicaid spending stemming from lower enrollment. The estimates also do not account for the 8.2 million people who are expected to be uninsured because of changes in the Affordable Care Act. Those coverage losses stem from $268 billion in cuts to Affordable Care Act (ACA) Marketplace coverage from the reconciliation bill, the expiration of enhanced ACA subsidies that were enacted during the COVID-19 pandemic, and the impact of proposed Marketplace integrity rules. Federal spending cuts and coverage losses could have implications for rural hospitals and other providers, including increases in uncompensated care. While providers could potentially offset some of the cuts, financial pressure on hospitals and other providers could lead to layoffs of staff, more limited investments in quality improvements, fewer services, or additional rural hospital closures.

Over half of the spending reductions in rural areas are among 12 states that have large rural populations and have expanded Medicaid under the ACA, each of which could see rural federal Medicaid spending decline by $4 billion or more. Those states include Kentucky, North Carolina, Ohio, Illinois, Virginia, Michigan, New York, Washington, Pennsylvania, Oklahoma, Louisiana, and Arkansas. Kentucky would experience the largest rural Medicaid spending reduction, with an estimated drop of over $10 billion over 10 years. Larger effects in expansion states reflect the fact that expansion states would experience spending reductions under the House-passed reconciliation bill equal to 13% of their projected Medicaid spending, compared with only 6% in non-expansion states. Over half of the estimated federal spending cuts stem from provisions that only apply to states that have adopted the ACA expansions, including work requirements, more frequent eligibility determinations, and new cost sharing requirements. As a result, the effects of the reconciliation bill in rural areas will be larger for expansion than non-expansion states. The $119 billion decline in federal spending does not account for any changes in states’ Medicaid spending.

Building on KFF’s earlier estimates of state-by-state Medicaid enrollment declines, an estimated 1.5 million fewer people could be covered by Medicaid in rural areas under the reconciliation bill in 2034. The analysis allocates each state’s estimated enrollment loss from the earlier analysis of the One Big Beautiful Bill Act to urban and rural areas using the percentage of Medicaid enrollees in rural areas within each state. The same 12 states with the largest spending reductions account for over half of the estimated enrollment losses, each of which could experience enrollment declines of 50,000 or more rural enrollees in 2034. Currently, the uninsured rate is lower in expansion states than in non-expansion states, but it’s unclear whether that could change if the reconciliation bill passes. Research consistently links health coverage to improved health and to reduced mortality. The 1.5 million people who lose Medicaid in rural areas does not account for other increases in the uninsured rate stemming from reconciliation provisions affecting the number of people with coverage purchased through the ACA Marketplaces. It also does not account for the expiration of enhanced premiums tax credits, which were temporarily established during the COVID-19 pandemic, and the impact of proposed Marketplace integrity rules.

In an effort to reduce federal spending in the ACA Marketplaces, both the recent Centers for Medicare & Medicaid Services (CMS) rule and the House-passed version of the proposed One Big Beautiful Bill Act (OBBB) include provisions tightening eligibility rules and restricting access to federal subsidies. While the two sets of policies overlap significantly, only the CMS rule has been finalized so far. However, several provisions in the rule are designed to sunset after one year, potentially shifting how much the rule versus legislation may impact federal spending.

Key Provisions Included in Both the CMS Rule and the OBBB:

• Stricter Eligibility Verification: Requires more intensive verification of eligibility before individuals enroll in a health plan and receive federal subsidies. The Congressional Budget Office (CBO) estimates this could reduce the deficit by $37 billion through 2034.
• Special Enrollment Period Restrictions: Eliminates the income-based special enrollment period (SEP), which previously permitted individuals with incomes below 150% of the federal poverty level (FPL) to enroll in coverage outside of an open enrollment period, and requires additional eligibility verification for other, non-income based SEPs. The CBO estimates that ending premium tax credits paid to this SEP population will reduce the deficit by $40 billion through 2034.
• Other Cost-Saving Measures: Includes shortening the open enrollment period, revising methodology to calculate the premium adjustment percentage (the measure of year-over-year private insurance premium growth used to index out-of-pocket limits and gauge the affordability of employer coverage to determine subsidy eligibility), ending automatic reenrollment in certain cases, and excluding DACA recipients and other lawfully present immigrants from exchange subsidies. The CBO has estimated that enacting these provisions as described in the One Big Beautiful Bill will account for an additional $101 billion in projected deficit reduction through 2034.

Timing and Budgetary Impact:A CMS rule, once finalized, is generally intended to exist permanently or until it is repealed. However, this rule takes effect at the beginning of 2026 and many of its provisions, including those concerning SEP eligibility and income verification requirements, are temporary and designed to sunset at the end of the 2026 calendar year.

This temporary implementation may preserve the potential for the reconciliation bill to generate official savings through changes to ACA marketplaces in later years (2027–2034) if enacted. With parts of the rule expiring at the end of 2026, CBO may credit the legislation – assuming it codifies elements of the rule into federal law – with budgetary savings in future years.

Read the news release about these poll findings.

Key Takeaways

• The “One Big Beautiful Bill Act” that was passed by House Republicans and is currently being discussed by the U.S. Senate is viewed unfavorably by a majority of adults (64%), including large majorities of independents and Democrats. Six in ten Republicans have a favorable opinion of the bill, but this support is largely driven by supporters of the Make America Great Again (MAGA) movement, while two-thirds of non-MAGA Republicans view the bill unfavorably. Among both Republicans and MAGA supporters, support drops at least 20 percentage points, with less than half of each group viewing the law favorably after hearing it would increase the country’s uninsured rate and decrease funding for local hospitals.
• As the Republican-backed bill proposes sweeping cuts to Medicaid spending as well as changes to the Affordable Care Act (ACA), overall favorability of both programs reach all-time highs. Overall favorability of Medicaid, the health care program for low-income adults and children is now at 83%, including majorities of Democrats (93%), independents (83%), and Republicans (74%). This is an uptick in favorability from January 2025 of six percentage points overall and an 11-point increase among Republicans. In addition, two-thirds of the public now view the ACA favorably. KFF polling found a similar uptick in favorability of the ACA during the 2017 repeal efforts. In general, large majorities of the public, including most Democrats, independents, and Republicans, think it is the government’s responsibility to provide health insurance to people who cannot afford it.
• A majority of the public (68%), including nine in ten Republicans and MAGA supporters, as well as half of Democrats support Medicaid work requirements as described in the House bill. Yet, most people are not aware that the majority of Medicaid recipients are already working, and attitudes can change once people are provided with additional information. For example, support for Medicaid work requirements drops as low as 35% (a 33-point decrease in support) when proponents hear that most people on Medicaid are already working and that many would be at risk of losing coverage because of difficulty completing paperwork to prove their eligibility. On the other hand, support increases as high as 79% (an 11 point increase) if opponents hear the argument that imposing these requirements could save money and help fund Medicaid for the elderly, people with disabilities and low-income children, showing how persuasive an argument can be even if it is not factually true.
• Adults who currently are insured through Medicaid describe a variety of ways they would be affected if they lost Medicaid coverage. More than half say it would be “very difficult” to afford their prescription medications (68%), afford to see a health care provider (59%) or get and pay for another form of coverage insurance coverage (56%) if they lost Medicaid. In addition, most Medicaid enrollees say losing Medicaid coverage would have a “major impact” on their financial well-being (75%), overall quality of life (69%), their mental health (66%), and their physical health (60%).

The Tax and Budget Bill

Last month House Republicans passed a sweeping legislative package that combined tax cuts with other legislative priorities of President Trump. Known as the “One Big Beautiful Bill Act,” the tax and budget bill contains health care provisions which include significant changes to the Medicaid program and the Affordable Care Act (ACA). As the Senate takes up this legislation, the latest KFF Health Tracking Poll finds strong partisan views on key health care provisions in the proposed bill.

Nearly two-thirds of the public (64%) hold an unfavorable opinion of the tax and budget bill being discussed by Congress, while one-third (35%) hold a favorable view. And while there are strong partisan differences, there is a lack of support among Republican and Republican-leaning independents who do not align with President Trump’s Make America Great Again (MAGA) movement.

Generally, six in ten Republicans have a favorable opinion of the bill compared to large majorities of both independents (71%) and Democrats (85%) who have an unfavorable opinion. Support for the legislation rises as high as 72% among MAGA supporters, a key constituency of President Trump. Yet, among Republicans and Republican-leaning independents who are not MAGA supporters, two-thirds (66%) have an unfavorable view of the bill.

In addition, two groups that will be most directly impacted by the tax and budget bill – individuals with Medicaid coverage and people who buy their own insurance on the ACA Marketplaces – are largely negative towards the bill. At least six in ten people who purchase their own health coverage (64%) and Medicaid enrollees (61%) say they have an unfavorable view of the tax and budget bill being discussed by Congress. A recent KFF poll found that substantial shares of people who buy their own coverage and those with Medicaid coverage identify as Republican or Republican-leaning independents (45% and 27%, respectively).

Many are aware of how the bill impacts spending on federal health programs but some confusion remains about the implications for average Americans. More than half of the public correctly say that if the bill was signed into law, it would increase federal spending on border security (58%) and about half are aware it would add to the federal budget deficit (50%). About half are also aware the bill would decrease federal spending on food assistance for low-income Americans (53%), Medicaid (51%), and the ACA (48%).

While the CBO has estimated at least 10 million people would lose coverage under the bill, many Republicans disagree and say the savings will come from reducing fraud, waste, and abuse. Slightly less than half of the public say the bill would decrease the number of people in the U.S. with health insurance (45%) with about a quarter saying the bill would either make no change to the number of people with health insurance or would increase it. Another three in ten say they are unsure what the impact would be on the uninsured rate.

There is also some confusion on the impact of the bill on the amount most people would pay in taxes. The House version of the bill is expected to cut taxes for most Americans, but four in ten (38%) think it would increase taxes, 21% correctly say it would decrease taxes, and about four in ten saying the tax rate would either not be changed (15%) or they are not sure (25%).

Republicans Say Medicaid Savings Will Come From Cutting Fraud and Waste, Democrats Say It Will Come From Taking Health Coverage Away

Partisan views of the changes to Medicaid may be directly tied to where people think the savings would come from. The bill would reduce federal spending on Medicaid by nearly $800 billion and six in ten adults say the savings will come from taking health coverage away from people who need it while four in ten (39%) say the savings will come from reducing fraud and waste. The vast majority of Democrats (89%) and six in ten (63%) independents say the savings will come from taking health coverage away from people who need it. More than three-fourths of MAGA supporters also say the savings will come from reducing fraud and waste, while non-MAGA Republicans and Republican-leaning independents are more divided in their views of where the savings will come from.

Public Disapproval of Big Beautiful Bill Increases When Hearing it Increases Uninsured Rate and Decreases Funding for Local Hospitals

While the legislation continues to be debated as the debate moves from the House to the Senate, the Congressional Budget Office (CBO) released their report estimating the legislation would increase the number of adults without health insurance by more than 10 million and reduce federal spending on Medicaid by almost $800 billion. In addition, several Republican Senators have said they oppose the provision in the House-passed legislation that freezes states’ provider taxes at their current rate and prohibits states from establishing new provider taxes because of the negative impact it may have on rural hospitals.

Reflecting these ongoing discussions, public attitudes towards the legislation are dynamic and can shift after hearing some of these details. For example, public support for the legislation drops 14 percentage points to 21% after hearing that the legislation would decrease funding for local hospitals. In addition, three-fourths of the public (74%) have an unfavorable view of the legislation after hearing that the bill would increase the number of people without health insurance by about 10 million.

On the other hand, hearing that the bill would reduce federal spending on Medicaid by more than $700 billion seemingly has no impact on public opinion with two-thirds still holding unfavorable views of the bill after hearing this.

Reflecting the difficulty facing Republican lawmakers, a majority of Republicans and MAGA supporters view the law unfavorably after hearing that it would decrease funding for local hospitals (64% and 55%, respectively) or increase the number of people without health insurance by about 10 million (59% and 52%, respectively).

Across partisans, overall favorability drops once the public hears details about funding decreases and coverage losses. Republicans’ and MAGA supporters’ favorability of the legislation drops at least 20 percentage points with now less than half of each group saying they view the law favorably after hearing the bill would increase the uninsured rate in the country and that it would decrease funding for local hospitals.

Support for Key Health Care Provisions

The bill includes a provision that would penalize states that have used their own funds to expand coverage to immigrants, including some undocumented immigrants, by reducing the federal Medicaid match rates for their ACA Medicaid expansion group. Overall, a small majority of the public (54%) oppose this provision while 45% support it. There are stark partisan differences on this proposal as Republicans are more than twice as likely as Democrats to support reducing funding for states that use their own funds to provide Medicaid coverage to immigrants. Among MAGA supporters, three in four (76%) say they support this provision in the bill as do more than half of non-MAGA Republicans and Republican-leaning independents (55%).

Medicaid Work Requirements

Incorporating work-requirements for people on Medicaid is a core aspect of the House-passed legislation. While most analyses have shown that most working-age adults on Medicaid are already working or have a disability or caregiving duties, the public is largely unaware of this fact. A majority of the public (56%) think most adults with Medicaid coverage are unemployed, while about four in ten (43%) are aware most adults who have Medicaid coverage are working.

A slight majority of Democrats (57%) and about half of independents (48%) are aware that most working-age adults on Medicaid are already working. However, more than three in four Republicans and majorities of both MAGA and non-MAGA Republicans and Republican-leaning independents are unaware that most working-age adults on Medicaid are working.

The latest KFF Health Tracking Poll finds majorities of the public, including nine in ten Republicans (88%) and MAGA supporters (93%), as well as half of Democrats (51%), support requiring nearly all adults with Medicaid coverage prove they are working, looking for work, in school, or doing community service, with exceptions for caregivers and people with disabilities.

Yet attitudes towards this provision can change once people are provided with additional information and arguments. For example, when those who support Medicaid work requirements hear that most people on Medicaid are already working and many would be at risk of losing coverage because of difficulty of completing the paperwork to prove their eligibility, about half of supporters change their view, resulting in two-thirds (64%) now opposing Medicaid work requirements and one third (35%) supporting it (a 33 percentage point decrease in support).

Similarly, after supporters hear that work requirements would not have a significant impact on employment but would increase state administrative costs, support drops to 40% (a 28 point decrease).

On the other hand, when those who initially oppose work requirements hear the argument that imposing these requirements could save money and help fund Medicaid for the elderly, people with disabilities and low-income children, overall support increases from 68% to 79% (an 11 point increase). While this argument is persuasive, it is not factually accurate.

The arguments for and against work requirements work similarly across partisans, with overall support for Medicaid work requirements dropping significantly once initial supporters of the provision hear that imposing such a requirement would put many people at risk of losing coverage due to the difficulty proving eligibility through required paperwork, or that that imposing such a requirement would have no significant impact on employment but would increase state administrative costs.

On the other hand, support for Medicaid work requirements increases among Democrats and independents after those who initially opposed the proposal hear that imposing such a requirement could save money, helping fund Medicaid for groups like the elderly, people with disabilities, and low-income children.

Planned Parenthood Medicaid Funding

The House bill also includes a provision that would stop all federal health care payments to Planned Parenthood and other clinics for services like birth control and health screenings provided to people on Medicaid, if the clinics also offer abortion services. Overall, about two-thirds of the public (67%) oppose stopping these health care payments to Planned Parenthood and similar clinics, while about one-third (32%) support this provision.

About nine in ten Democrats (89%) and seven in ten independents oppose this provision, while Republicans are more divided with 54% supporting and 46% opposed. The provision to stop payments for health care services to any clinic that offers abortion services is popular among MAGA supporters, with more than six in ten of those who identify as MAGA supporters saying they support stopping payments to Planned Parenthood and similar clinics. Notably, a majority of non-MAGA Republicans and Republican-leaning independents are opposed to stopping payments and Republican women are divided in their views.

Attitudes towards federal Medicaid payments to Planned Parenthood are also somewhat malleable. For example, after those who initially support stopping payments hear that even though no federal payment to Planned Parenthood goes directly to abortion services, cutting off all Medicaid payments to Planned Parenthood and other clinics would make it difficult for many lower-income women to access health services, such as treatment for STDs, cancer screenings, and birth control, overall support for stopping payments drops from 32% to 19%.

Conversely, when those initially opposed to stopping payments to Planned Parenthood hear that even though no federal payment to Planned Parenthood goes directly to abortion services, the organization does provide and refer women for abortions, support for stopping payments increases from 32% to 41%.

Overall support for stopping Medicaid payments to Planned Parenthood decreases by 18 percentage points among Republicans and by 13 points among independents after those who initially support stopping payments hear that cutting off these payments would make it difficult for many lower-income women to access non-abortion health services.

When those who initially oppose stopping all payments to Planned Parenthood hear that that even though no federal payment goes directly to abortion services, the organization does provide and refer women for abortions, overall support for stopping the payments increases by 11 percentage points among Republicans and by 8 points among Democrats and independents.

Public Attitudes towards Medicaid

In 2010, the Affordable Care Act significantly expanded the country’s Medicaid program, which provides health and long-term care coverage to 83 million low-income children and adults in the U.S, and helped millions afford private health insurance through the exchanges. Eight in ten adults (79%) think it is the government’s responsibility to provide health insurance to people who cannot afford it, including nearly all Democrats (93%), more than eight in ten independents (84%), and about six in ten Republicans (62%).

In addition, more than eight in ten adults now view the Medicaid program favorably. This includes large majorities of Democrats (92%), independents (83%), and Republicans (74%) who hold favorable views of Medicaid. Since January 2025, the share across partisans who view Medicaid favorably has increased including an eleven-percentage point increase among Republicans.

Overall views of the ACA are now two to one in favor of the law with two-thirds of the public viewing the ACA favorably while one-third hold unfavorable views of the law. This continues a long-term trend upwards in ACA favorability as the 2010 health care legislation has garnered majority approval since the latest GOP effort to repeal and replace the legislation during the first Trump administration. Notably, a majority of Republicans (63%) still hold unfavorable views of the law.

Provisions in the tax and budget bill passed by the House would reduce ACA enrollment by shortening enrollment windows and increasing required eligibility paperwork for adults who purchase their own health insurance through the ACA marketplaces.

About a third of the public (34%) support this provision, while two-thirds (65%) are opposed. Most Democrats (79%) and independents (68%) are opposed to this provision of the bill, as are half of Republicans (47%). Among supporters of the MAGA movement, more than half (55%) support shortening enrollment windows and increasing eligibility paperwork for those who purchase their own health insurance through the ACA marketplaces.

Public Concerned How the One Big Beautiful Bill Will Impact Families

In addition to gauging overall favorability of the tax and budget bill and its various health care provisions, the latest KFF Health Tracking Poll also asked the public how they expected themselves and others to be impacted by the legislation.

Public Believes Republican Tax and Budget Bill Will Hurt Them and Their Families

Nearly half of the public (44%) think the tax and budget bill will hurt them and their own family, and majorities say the bill will generally hurt undocumented immigrants (71%), people who receive SNAP benefits (60%), middle-class families (50%), people with Medicaid coverage (56%), and immigrants who are in the U.S. legally (52%). A majority of the public also say the bill will hurt people with lower incomes. On the other hand, half (51%) think the bill will help wealthy people. Despite the fact that the bill makes major changes to the ACA marketplaces for people who buy their own insurance, 47% of the public think the bill won’t make much difference for people who buy their own health insurance.

Republicans are much more likely to say they and their family will be helped by the tax and budget bill being discussed by Congress than independents or Democrats, as well as to say the other groups asked about will largely not be impacted. Yet just 32% of Republicans think the bill will help them or their family members. Democrats consistently think all of the groups asked about will be hurt by the GOP tax bill, except for wealthy Americans. Seven in ten Democrats say wealthy people will be helped by the bill as do six in ten independents. At least three-fourths of Democrats say people with lower incomes, immigrants in the country legally, undocumented immigrants, people with Medicaid, and people who get SNAP benefits will be hurt by the bill.

The Public, Especially Those Who Rely on Programs, Worry About Funding Cuts

Seven in ten adults are concerned that more adults and children will have trouble affording food because of changes to the food stamp program in the tax and budget bill. This includes about nine in ten Democrats and three-fourths of independents, and nearly half of Republicans (47%). Among the 42% of adults who are connected to the SNAP program either through themselves or a family member, more than three-fourths (77%) say they are concerned that families will have trouble affording food as a result of the tax and budget bill.

Large majorities of Democrats and independents are also concerned that more adults and children will become uninsured because of changes to Medicaid and the ACA in the tax and budget bill, as are nearly half of Republicans. Among the 44% of adults who have a current personal or family connection to the Medicaid program, nearly eight in ten say they are concerned about the number of people becoming uninsured as a result of the tax and budget bill.

People With Medicaid Are Worried About Impacts of Losing Coverage

Currently more than 40 million adults receive coverage through the country’s Medicaid program and some of them could lose coverage under the tax and budget bill. Among adults 18-64 with Medicaid coverage, more than half say that if they lost Medicaid, it would be “very difficult” to afford their prescription medications (68%), afford to see a health care provider (59%) or get and pay for another form of coverage insurance coverage (56%).

In addition, most Medicaid enrollees say that losing Medicaid coverage would have a “major impact” on their financial well-being (75%), overall quality of life (69%), their mental health (66%), and their physical health (60%). Four in ten say it would have a “major impact” on their ability to work.

President Trump has vowed to impose tariffs on a wide variety of goods from multiple countries. While consumers may expect the price of some imported goods to go up, what may be surprising is that these tariffs are already driving health insurance premiums up.

That is because some health insurance companies expect tariffs to drive up their own costs for prescription drugs that are imported into the United States. Retail prescription drugs represent about 12% of all private health insurance spending.

Health insurance companies must submit their proposed premium changes for the coming year to state regulators in the spring and summer. Several individual insurance market carriers are raising 2026 premiums by more than they otherwise would, due to the expectation that tariffs will drive up their prescription drug costs, which may or may not come to pass.  

“To account for uncertainty regarding tariffs and/or the onshoring of manufacturing and their impact on total medical costs, most notably on pharmaceuticals, a total price impact of 2.20% is built into the initially submitted rate filing.”–UnitedHealthcare of Oregon (OR)

Optimum Choice of Maryland, Independent Health Benefits Corporation of New York, and UnitedHealthcare of New York are also raising premiums by 2.4%, 2.9%, and 3.6% more than they otherwise would because of tariffs’ impact on pharmaceuticals, respectively.

Not every insurer is explicitly mentioning tariffs or necessarily including an upward effect on their 2026 premiums. The extent to which tariffs increase the cost of healthcare and insurance premiums more broadly than these examples remains to be seen, but just the expectation of higher prescription prices is already causing premiums for some carriers to go up by more than they would otherwise.

The House-passed reconciliation bill includes only a few provisions that directly affect Medicare spending. It includes no provisions related to Medicare Advantage, the private plan alternative to traditional Medicare, even though analysis by the Medicare Payment Advisory Commission (MedPAC) estimates payments to Medicare Advantage plans are $84 billion (or 20%) more than spending for similar beneficiaries in traditional Medicare. In contrast, the bill instead focuses on major changes to Medicaid and the Affordable Care Act (ACA), which would reduce federal spending by over $1 trillion and increase the number of uninsured people by an estimated 10.9 million. (When combined with the effects of allowing the ACA’s enhanced premium tax credits to expire, CBO estimates 16 million more people will be uninsured in 2034.) Despite some reports last week that Senate Republicans were considering including changes to how the federal government adjusts payments to Medicare Advantage plans based on the health status of their enrollees, those now appear unlikely to be included in the Senate version.

The Medicare Advantage quality bonus program, established by the Affordable Care Act, increases Medicare payments to Medicare Advantage plans based on a five-star rating system. Plans may, but are not required to, use the additional payments to cover the cost of supplemental benefits, including reduced cost sharing, extra benefits not covered by traditional Medicare (e.g., vision, hearing and dental), and lowering Part B and/or Part D premiums. The star ratings are intended to help consumers make informed decisions when choosing among Medicare Advantage plans and the bonus payments are intended to encourage plans to compete based on quality. However, MedPAC and others have observed that the star ratings incorporate too many measures, do not adequately account for social risk factors, and may not be a useful indicator of quality because star ratings are reported at the contract rather than the plan level. Medicare Advantage contracts typically include multiple plans, which may have different benefits, costs, networks, service areas, and enroll different populations (i.e., plans that are open for general enrollment and special needs plans that limit enrollment to dual-eligible individuals).

Critiques of the quality bonus program have led to calls to replace, reform or end the program. In 2018, the Congressional Budget Office estimated that eliminating the quality bonus program would lower federal spending by almost $100 billion over ten years. Given the sharp increase in both actual and projected Medicare Advantage enrollment since CBO’s analysis, the savings from eliminating bonuses could be substantially higher. For example, 33 million people were enrolled in Medicare Advantage in 2024, which was 5 million more than CBO projected at the time of the analysis, and CBO’s most recent projections for future Medicare Advantage enrollment are nearly 30% higher than previously projected. The degree to which changes to the quality bonus program would impact plan quality or the availability of supplemental benefits would depend on the specifics of any proposal and how insurers modified plan offerings in response. Though the proposal that had reportedly been under consideration by the Senate, the No UPCODE Act, does not directly address the quality bonus program, to the extent the changes in the legislation results in lower risk scores of Medicare Advantage enrollees, spending under the quality bonus program would also be lower.

This analysis examines trends in bonus payments to Medicare Advantage plans, enrollment in plans in bonus status (plans that qualify for a benchmark increase based on their quality star rating), and how these measures vary across plan types using publicly available information on Medicare Advantage enrollment, payment rates, and quality ratings.

Key Takeaways:

• Federal spending on Medicare Advantage bonus payments will total at least $12.7 billion in 2025, similar to spending in 2023, and more than four times higher than in 2015. Since 2015, Medicare has spent at least $87 billion on quality bonus program payments.
• Most Medicare Advantage enrollees (75%) are in plans that are receiving bonus payments in 2025. Since 2019, at least 7 in 10 Medicare Advantage enrollees have been in a plan receiving a bonus payment.
• The average bonus payment per enrollee is highest for employer- and union-sponsored Medicare Advantage plans ($438) and lowest for special needs plans ($332), raising questions about the implications of the quality bonus program for high-need beneficiaries.

Medicare Advantage plans will receive at least $12.7 billion in bonus payments in 2025.

Estimated bonus payments to Medicare Advantage plans will total at least $12.7 billion in 2025, similar to 2023. Bonus payment spending had decreased slightly in 2024 following a decline in star ratings after the expiration of COVID-19 pandemic-era policies. Those policies prevented individual measures that go into calculating the star ratings from declining between 2021 and 2022 and temporarily increased star ratings for certain plans. Bonus payments have increased sharply since the program started, more than quadrupling from $3.0 billion in 2015 to $12.7 billion in 2025 (Figure 1). The total spending on the quality bonus program is less than 2.5% of the projected payments to Medicare Advantage plans in 2025 ($540 billion).

Medicare spending on bonus payments has grown faster than enrollment in Medicare Advantage, which has doubled since 2015. This spending comes at a time when the Medicare program is facing growing fiscal pressures. Medicare Advantage benchmarks (and corresponding spending) have grown faster than traditional Medicare spending in part because of the increase in bonus payments.

These estimates are a lower bound because bonus payments are risk adjusted, which is likely to increase bonus payments. The estimates also do not include additional spending that results if plans increase their bids when their benchmark is higher because of being in bonus status. For example, a plan might increase its bid to increase payments to providers, add more expensive providers to its network, or retain a larger amount as profit, provided they meet medical loss ratio requirements.

The distribution of bonus spending across plan types is similar to the distribution of enrollment in 2025, though employer plans comprise a slightly larger share of bonus spending than enrollment. Individual plans account for 61% ($7.8 billion) of bonus spending and 62% of enrollment, employer plans account for 20% ($2.5 billion) of bonus spending and 17% of enrollment, and special needs plans account for 19% ($2.4 billion) of bonus spending and 21% of enrollment in 2025 (Appendix Table 1).

Most Medicare Advantage enrollees (75%) are in plans that receive bonus payments.

In 2025, nearly 26 million people, or 75% of Medicare Advantage enrollees, are in plans that are receiving bonuses. That compares to just under 9 million people (55%) in 2015 (Figure 2). The share of enrollees in plans that receive bonus payments in 2025 is slightly higher than the previous year (72%).

Average annual bonus payments are highest for enrollees in employer- and union-sponsored plans.

In 2025, Medicare Advantage plans receive an average annual bonus of $372 per enrollee, more than double the $184 average bonus per enrollee in 2015 (Appendix Table 2). Average bonuses in group employer- and union-sponsored plans have consistently been higher than for other plans. The average bonus per enrollee in a group employer- or union-sponsored Medicare Advantage plan is $438 in 2025, compared to $368 for individual plans and $332 for special needs plans (SNPs) (Figure 3).

Bonuses are higher per enrollee in employer plans because these plans have higher average star ratings, resulting in a larger share of enrollees receiving coverage from plans that qualify for bonuses. Across the entire period of 2015 to 2025, the share of all enrollees in employer- or union-sponsored plans that received a bonus never went below 80%. In contrast, at least 80% of enrollees in individual and special needs plans were in a plan that received a bonus in only one year – 2023 (Figure 4).

Relatively low bonus payments for special needs plans, raises questions about the implications for higher need beneficiaries, including people who are dually eligible for Medicare and Medicaid.

On May 22, 2025, the U.S. House of Representatives passed a budget reconciliation bill—called the One Big Beautiful Bill Act (OBBBA)—that includes significant reductions in federal Medicaid spending to help offset the cost of tax cuts, along with changes to the Affordable Care Act (ACA), immigration reforms and  other provisions. Together, the combination of policies that increase the number of uninsured, policies that limit the ability of states to raise revenues to increase provider payments, and other changes are expected to have financial consequences for hospitals, affecting some hospitals more (or less) than others. Financial pressure on hospitals could affect patient care to the extent that hospitals respond by cutting certain expenses—such as by offering fewer services, laying off staff, or investing less in quality improvements—or close altogether, especially in rural areas. This is in addition to the direct impact of losing coverage on individuals, who would be less likely to obtain needed care as a result.

According to the Congressional Budget Office (CBO), the bill is projected to cut federal Medicaid spending by $793 billion and reduce spending related to the ACA Marketplaces by $268 billion over a decade, totaling $1.04 trillion in cuts after accounting for the indirect effects on federal revenues. CBO projects that the number of uninsured Americans would increase by 10.9 million as a result of the OBBBA—7.8 million due to changes to Medicaid and 3.1 million due to changes to the ACA exchanges—and by 16.0 million when combined with the expected expiration of the ACA enhanced premium tax credits and the implementation of proposed rules for the ACA exchanges. The substantial increase in uninsured Americans would likely lead to more uncompensated care, putting an additional strain on hospital finances. The bill would also restrict states’ future ability to raise the state share of Medicaid revenues through provider taxes, which often support higher payments for hospitals, and would limit the ability of states to create new state directed payments to increase payments to hospitals. The impact of the OBBBA on hospital finances would vary across hospitals. For example, it is likely that the OBBBA would have a disproportionate impact on hospitals caring for a relatively large number of Medicaid patients and other patients with low incomes.

Because the OBBBA is projected to increase the deficit, CBO projects it would trigger about $500 billion in mandatory reductions in Medicare spending between 2026 and 2034, including a 4% reduction in payments to hospitals, unless Congress takes action to circumvent them (which Congress has historically done).

This issue brief discusses the potential implications of the OBBBA for hospitals and explains how some hospitals (such as rural hospitals as well as urban hospitals that serve a large share of Medicaid patients) may be less well positioned than others (such as hospitals that serve a large share of commercial patients) to absorb revenue losses given their current financial status. Analyses of hospital operating margins are based primarily on RAND Hospital Data and reflect 2023 numbers.

About 4 in 10 hospitals had negative operating margins, and 12% had margins below -10%, but 24% had margins at or above 10%, suggesting some will have greater capacity than others to absorb any losses

About four in ten (39%) hospitals had negative operating margins in 2023 (Figure 1). Operating margins are a measure of financial standing that indicate the extent to which hospitals profit or lose money on patient care and other operating activities. Hospitals with negative operating margins could have a particularly hard time absorbing any losses resulting from the reconciliation bill. This could especially be the case for the more than one in ten (12%) hospitals with operating margins below -10%.

However, the remaining three fifths (61%) of hospitals had positive margins, though some of these hospitals had relatively modest margins (e.g., 22% had positive margins of less than 5%).  Roughly a quarter of all hospitals (24%) had relatively high margins of at least 10%. These hospitals may be most likely to withstand major spending reductions in the OBBBA.

Rural hospitals were more likely to have negative margins than urban hospitals

A larger share of rural versus urban hospitals had negative margins (44% versus 35%) (Figure 2). The share with negative margins was especially high among hospitals in the most remote rural areas (49%), defined here as rural areas not adjacent to a metropolitan area.

Rural hospitals have a unique set of financial challenges and could have an especially hard time adjusting to any losses resulting from the OBBBA. For example, rural hospitals tend to be smaller facilities with lower volume. Operating at a smaller scale can lead to a higher cost of providing care on average—e.g., to the extent that the fixed costs of operating a hospital, such as maintaining a minimum number of staff, are spread across fewer patients—and may limit the ability of rural hospitals to offer specialized services.

The ability to absorb any losses resulting from the reconciliation bill would likely vary across rural hospitals, as is true of hospitals overall. More than four in ten (44%) rural hospitals had negative margins, and about one in seven (15%) had margins of less than -10%. Negative margins were more common among rural hospitals in states that had not expanded Medicaid (especially those in the most rural areas) and among sole community, Medicare-dependent, and low-volume hospitals, among other differences. A major provision in the reconciliation bill – a work and reporting requirement in Medicaid – would only apply to the Medicaid expansion. However, other provisions, such as cutbacks on the ACA Marketplaces, would likely disproportionately affect states that have not expanded Medicaid.

At the same time, more than half (56%) of all rural hospitals had positive margins. Nearly a quarter (23%) of rural hospitals had relatively modest margins (less than 5%) while about one fifth (19%) had margins of at least 10%. Positive margins were more common among rural hospitals with more beds, with higher occupancy, that were affiliated with a health system, and that were not government-owned.

Hospitals that serve a large share of Medicaid patients in urban and rural areas were more likely than others to have negative margins, and they could be disproportionately affected by the House-passed bill

Hospitals where Medicaid covered a high share of stays—a group that could also have an especially hard time absorbing any losses resulting from the OBBBA—were more likely than others to have negative margins. For example, 45% of hospitals with high shares of Medicaid patients had negative margins versus 35% among hospitals with low shares. The share with negative margins was relatively high among hospitals with high Medicaid shares in both urban and rural areas (44% and 48%, respectively). Relatedly, operating margins were lower than average among hospitals with high Medicaid shares (e.g., they were 2.3% among hospitals with high shares versus 7.0% among those with low shares).

Hospitals caring for a disproportionate share of Medicaid patients and other patients with low incomes have unique financial challenges. For example, Medicaid and other public payers tend to reimburse at lower rates than private insurance, and it may be more expensive to treat patients with low incomes in ways that are not captured in reimbursement rates.

Further, it is likely that hospitals caring for a relatively large share of Medicaid patients and other patients with low incomes would take the biggest hit under the OBBBA, since the bill achieves much of its savings through Medicaid cuts along with changes to the ACA exchanges that would increase the number of uninsured individuals.

Hospitals with for-profit ownership, high commercial shares, and high commercial-to-Medicare price ratios were more likely to have positive margins than other hospitals, among other differences

While about six tenths (61%) of hospitals had negative operating margins, the share was higher among for-profit hospitals (71%), hospitals where commercial payers cover a relatively large share of stays (73%), hospitals with high commercial-to-Medicare price ratios (75%), hospitals that were part of a broader health system (66%), and hospitals with high market shares (73%) (Figure 4). These hospitals may have an easier time than others in absorbing any losses related to the OBBBA.

In most states (29), at least four in ten hospitals had negative margins in 2023

The share of hospitals with negative margins varied across states, but in more than half of all states (29 states), at least four in ten hospitals had negative margins (Figure 5). At least half of hospitals had negative margins in 14 states. This includes a mixture of red states (such as Kansas and Oklahoma) and blue states (such as Massachusetts and New York). At least 60% of hospitals had negative margins in four states: Kansas, Mississippi, Vermont, and Washington.

Differences in hospital finances across states may be attributable to variations in demographics, hospital ownership and type, commercial reimbursement rates, and state and local health and tax policy. For instance, the share of hospitals in the red may have been relatively low in Texas in part because the state has a relatively large number of for-profit hospitals (which are less likely to have negative margins) among other factors. The relatively low share of hospitals with negative margins in Florida may be at least partly due to relatively high commercial prices as a percent of Medicare rates.

Some states with a relatively large share of hospitals with negative margins may be disproportionately affected by the OBBBA and other policy changes. For instance, three fifths (60%) of hospitals in Mississippi had negative margins. If the OBBBA were enacted, the ACA enhanced tax credits expired, and the proposed rules for the ACA Marketplaces were implemented, then the share of people who are uninsured is expected to increase, putting a particular strain on hospitals in states that experience large increases in the number of uninsured.  The uninsured rate in Mississippi would increase by 6 percentage points—one of the highest increases in the country—based on KFF estimates. As another example, in Washington, where more than three fifths (63%) of hospitals had negative margins, the reduction in federal Medicaid as a share of baseline spending resulting from the OBBBA would be the largest of all states (17% over ten years) according to KFF estimates.

The bill could trigger about $500 billion in mandatory Medicare cuts, including cuts in payments to hospitals and other providers, unless Congress intervenes

Because the bill is expected to increase the federal deficit, CBO projects it would trigger about $500 billion in mandatory cuts to Medicare spending between 2026 and 2034—including a 4% cut in payments to hospitals and other providers—unless Congress intervened. The automatic reductions in Medicare payments to hospitals and other health care providers and plans, known as “sequestration,” would be required under the Statutory Pay-As-You-Go (PAYGO) Act. If these cuts did go into effect, they would come at a time when the Medicare Payment Advisory Commission has recommended that Congress increase Medicare payment rates in 2026 relative to current law and could raise concerns about the adequacy of Medicare reimbursement. Historically, Congress has voted to waive automatic Medicare payment reductions due to sequestration under statutory PAYGO rules.