https://www.axios.com/2025/10/02/government-shutdown-hospital-funding-medicaid?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axiosvitals&stream=top

Hospitals in rural and underserved areas could lose out on billions of dollars in federal funding if the government shutdown drags on.

Why it matters: 

Many hospitals already run on tight margins and are bracing for fallout from Medicaid cuts and other changes in the One Big Beautiful Bill Act.

The big picture: 

The immediate concern is health policies that expired when government funding lapsed at midnight Tuesday. Health providers and their lobbyists expect Congress will make providers whole in an eventual funding deal and reimburse claims made during the shutdown.

• But that’s not a given. And uncertainty about how long the shutdown will go on is leaving some of the most financially vulnerable hospitals in limbo.
• “There’s just that underlying fear of, oh my gosh, what if they can’t come together on any agreement to open the government again, and we all get looped into it,” said Kelly Lavin Delmore, health policy adviser and chair of government relations at Hooper Lundy Bookman.

State of play: 

Safety-net hospitals face an $8 billion cut to Medicaid add-on payments in the absence of a government funding package.

• The cuts to so-called disproportionate share hospital payments originate from the Affordable Care Act.
• Congress has postponed the pay reductions more than a dozen times, but the most recent delay expired on Tuesday and Congress hasn’t signaled if or when it will step in.

The add-on payments are made quarterly, so hospitals may not feel immediate effects, even if Congress doesn’t further delay the cuts, according to the American Hospital Association. But state Medicaid agencies could let the cuts take place if they think lawmakers’ standoff will continue indeterminately, per AHA.

• The uncertainty “really impacts that predictability and reliability as it relates to funding,” said Leonard Marquez, senior director of government relations and legislative advocacy at the Association of American Medical Colleges.
• If the cuts do take effect, it would significantly hamper hospitals’ ability to care for their communities, Beth Feldpush, senior vice president of advocacy and policy at America’s Essential Hospitals, told Axios in a statement.

Additionally, two long-running programs that give pay bumps to rural hospitals expired on Wednesday.

• One program adjusts Medicare payment upward for rural hospitals that discharge relatively few patients.
• The other gives increased reimbursement rates to rural hospitals that have at least 60% of patients on Medicare.
• They were designed to keep care available in communities that might otherwise not be able to support a hospital.
• Both programs have expired in the past, only to be brought back to life with claims paid retroactively.

Zoom out: 

Hospital industry groups have also been urging Congress to extend enhanced Affordable Care Act tax credits, which have become a flashpoint in the shutdown fight. Democrat lawmakers have so far refused to pass GOP-led funding proposals that don’t include a full extension of the subsidies.

What they’re saying: 

AHA is urging Congress to find a bipartisan solution and reopen the government, a spokesperson told Axios.

• “Patient care doesn’t go away with the loss of coverage and the loss of funding,” said Lisa Smith, vice president of advocacy and public policy for the Catholic Health Association.
• “I just don’t know how long that’s going to be sustainable for our facilities that are really already operating on the margins.”