Healthcare’s Hideous Future: The One Big Beautiful Act’s Threat To The U.S. Healthcare System

Introduction

On July 4th, 2025, President Trump signed the One Big Beautiful Act (OBBA), now Public Law 119-21, into law, a major reconciliation package that restructures the federal budget and social services.  One of the Trump administration's major legislative priorities thus far has been to significantly reduce the amount of “wasteful government spending” and re-allocate spending to better suit Americans’ needs.  The OBBA serves as a legislative vehicle designed to fulfill the administration’s agenda, enforcing a series of changes to federal spending that justify steep tax cuts and reductions in social service funding.  The law enforces a $137 billion cut in federal healthcare spending for Medicaid and includes further provisions that restrict states’ ability to increase Medicaid funds.  These cuts to Medicaid were justified due to the increased budget deficit created by increased military spending and tax cuts for the wealthy. 

The financial stability of the U.S. healthcare system and the health of the patients who rely on it are at serious risk under the law's new passage.  Hospitals will be pushed to bankruptcy, then closure, due to the pernicious financial environment enshrouding U.S. healthcare centers.  This paper will argue that the OBBA will worsen the existing uninhabitable financial environment hospitals in the United States face, send U.S. hospitals to their demise, and leave patients without dire access to healthcare.  First, it will begin with a contextualization of the strenuous financial environment in which U.S. hospitals must operate.  Then it will present the exacerbating effects of the new law. Finally, it will issue a call for federal action to avoid a major wave of closures and potential strategies for intervention. 

Financial Distress In America’s Hospitals 

As of October 2025, 17 hospitals in the United States have declared bankruptcy and face imminent threats of closure, leaving entire communities without access to healthcare [1].  This statistic is a mere blip in the trend of hospital closures across the United States.  Between 2011 and 2019, there were more hospital closures than openings, which has been on a steady decline since 2010 [2].  One major driver of this trend is the ongoing financial distress hospitals face; financial distress meaning an institution's inability to meet its financial obligations [3].  An analysis of U.S. hospitals’ financial information revealed that one in four hospitals operates under financial distress [4].  The financial distress experienced by health centers can be explained partly by the rising costs of medical treatment.  In the United States, the biotechnology sector receives billions of dollars in private and federal funding for research and development each year.  As research funding increases, the final cost of treatment is experiencing a commensurate rise in pricing, placing quality care at exorbitant price tags.

Hospitals and centers like Federally Qualified Health Centers (FQHC) and other safety-net hospitals are at heightened risk in this financial environment.  These hospitals offer significant support to medically vulnerable populations, typically those who are uninsured, underinsured, or on Medicaid. The two major sources of revenue for these health centers are from medicaid reimbursement and federal grant mechanisms.  Although these centers are seeing increased rates of patient visitation and are currently the care provider for 32.4 million patients [5], these streams of revenue barely bring in enough to sustain and improve healthcare operations [6]. Changes in federal regulation and reimbursement have been known to dramatically shift these health centers from financially solvent to financially distressed [7]. From the initial signs of financial distress to closure, the capacity for health centers to provide care steadily decreases due to their inability to afford and deliver quality care. To address the mounting financial distress, health centers resort to efforts such as staffing reduction, elimination of services, and declined maintenance funding [8,9]. Centers are forced to administer cuts despite desperately needing to expand quality services to accommodate the health needs of the steadily growing U.S. population.  A doomed situation, unable to generate enough income, health centers face looming threats of closure. 

Exacerbation by The OBBA 

Despite the volatile state of the healthcare system's financial situation, the OBBA reconciliation package was signed into law.  The law limits federal spending through imposing efforts like a moratorium on provider taxes and stricter enrollment criteria, which is estimated to increase the uninsured population by 10 million in 2034 [10].  These provisions prevent states from adjusting provider tax rates to justify increased Medicaid funding, effectively restricting enrollment and states' ability to expand coverage.  The expiration of enhanced premium tax credits will also push many who gained coverage in Medicaid expansion out of eligibility.  After Medicaid expansion enrollment in the ACA marketplace skyrocketed from 11.9 million to 24.3 million, 113% of the original population [11].  The population of expansion enrollees surged in states like Louisiana at 42%, Virginia at 37%, and Kentucky at 35% [12].  Such states with high populations of expansion enrollment seem to bear a majority of the damage from the cuts, with over 50% of federal spending cuts being borne by twelve states [13]. When looking at enrollment demographics, data reports that Black and Hispanic populations are overrepresented in the medicaid enrollment pool in comparison to census data [14]. Hispanic and Black populations have historically been exposed to disproportionate levels of medical racisms, malpractice, and misconduct.  States like Louisiana and North Carolina face a combined 17 billion dollars loss in funding, representing a disproportionate share of federal cuts.  Louisiana’s medicaid enrollee population make-up is 45% Black people, and North Carolina’s is 30.8% [15], demonstrating that the burden of the reduced funding falls disproportionately on Black communities.  Looking across gender, four in ten self-identifying women of reproductive age and six in ten self-identifying women of between 50-64 years old are covered under expansion [16].  These groups rely on Medicaid for maternal and preventive care, making them particularly vulnerable to coverage losses.  Those suffering from chronic physical and behavioral illness have also found access to care through expansion enrollment, the former representing 33% of enrollees and the latter 25% [17].  Medicaid expansion has thus played a critical role in expanding care for medically vulnerable populations; however, the new provisions in the OBBA will put health access out of reach.

The provisions in the OBBA will exacerbate systematic health inequalities and widen disparities in healthcare access.  With Medicaid expansion enrollment being a bipartisan phenomenon, being adopted by over 40 states and equal proportions of both parties, the effects of the cuts will ripple nationwide.  Specifically, the consequences will be especially severe in communities that are already medically underserved.  Communities in rural and urban areas alike will face significant consequences of this federal action.  Lawmakers did give attention to the implications the passage would have on rural communities, so in an effort to offset a portion of the impact, the Rural Health Transformation Program was included in the new law.  The program would create a $50 Billion, $10 Billion each fiscal year, health fund to support rural health care centers survival [18].  However, the gesture of good faith falls short when stacked against the $87 Billion difference in funding reductions [19].  As of March 2025, over 700 rural hospitals are at risk of closing due to financial problems; over 300 of these hospitals are categorized as immediate risk, with closure being imminent [20]. The funds generated through the program will not be enough to flip the fortunes of nearly half of America’s rural healthcare centers.

Although the OBBA attempts to mitigate harm through rural health provisions, the approach to further cuts in the rural health area is shortsighted, and literature suggests that the focus may be misplaced.  Studies predict urban communities treated by Urban Safety-Net Hospitals, which treat the highest percentage of our nation's uninsured and medicaid populations, will feel the most significant impact [21]. First, these hospitals are at a heightened risk of financial distress and closure due to the high share of revenue from Medicaid patients [22].  Second, with 80% of the U.S. population residing in urban areas, the closure of urban hospitals would leave millions of Americans without health care access [23]. Lastly, the reduction in Medicaid reimbursements and rise in uncompensated care will cut revenues, sending more urban hospitals, where Medicaid patients represent 24% of patient revenues, into financial distress [24].  The hit to Urban Safety-Net revenue streams and the growing urban populations forecast serious signs of financial distress in the centers in the near future.  Looking more locally, New York, home to the largest urban population in the United States, faces significant threats to its health centers. Reports state that 70 of New York's 156 hospitals are at threat of closure following OBBA’s passage into law [25].  Reports also state that 93 hospitals in NY operate under profit margins smaller than 10% of their overall Medicaid revenue [26].  Meaning, once cuts are enacted, 93 hospitals will find themselves now in the red or pushed further into existing financial distress.  This foreshadows that a majority of NY hospitals will have to reduce or alter care delivery to keep the hospital in business, leaving entire populations without proper access to care.

Conclusion

The OBBA will intensify and worsen the effects of an already unstable healthcare infrastructure, accelerating hospital closures and widening health disparities across the United States.  Currently, health center funding, which supports FQHC’s and safety-net hospitals, is operating on a continuing resolution set to expire on January 30th, 2026 [27].  It is currently unclear whether lawmakers will include or increase appropriation funding for health centers, but as this article has proven, the consequences of not doing so are dire.  Thus, the survival of these health centers rests on the shoulders of lawmakers.  Lawmakers must increase federal funding for health centers across the nation.  They must enact legislation that supports the ability of expansion states to fund centers, which will now have the burden of millions of newly uninsured.  Rather than destroy the primary care institutions of vulnerable Americans, they must strive to work towards creating an environment where they, too, can thrive.  The millions of Americans across the nation who enrolled in Medicaid post-expansion reveal that the need for healthcare is not a partisan issue; it is on lawmakers from both sides of the aisle to alter the status quo. 

Works Cited:

[1] Ashley, Madeline. 2025. “7 Healthcare Bankruptcies in 2025 | Becker’s.” Becker’s Hospital Review | Healthcare News & Analysis, October 8. https://www.beckershospitalreview.com/finance/7-healthcare-bankruptcies-in-2025/.

[2] Enumah, Samuel J., and David C. Chang. 2021. “Predictors of Financial Distress Among Private U.S. Hospitals.” The Journal of Surgical Research 267 (November): 251–59. https://doi.org/10.1016/j.jss.2021.05.025.

[3] Investopedia. n.d. “Financial Distress: Definition, Signs, and Remedies.” Accessed December 1, 2025. https://www.investopedia.com/terms/f/financial_distress.asp.

[4] Id. at 2. 

[5] “Impact of the Health Center Program | Bureau of Primary Health Care.” n.d. Accessed November 25, 2025. https://bphc.hrsa.gov/about-health-center-program/impact-health-center-program

[6] Id. at 2. 

[7] Id. at 2. 

[8] Id. at 2. 

[9] “Private Equity Drives Health Care Inequity:  Regulatory Guardrails for Private Equity Investment In Health Care  | Black Pre-Law Society.” n.d. Accessed November 30, 2025. https://blackprelaw.studentgroups.columbia.edu/news/private-equity-drives-health-care-inequity-regulatory-guardrails-private-equity-investment.

[10] Id. at 5. 

[11] kffjaredo. 2025. “Enrollment Growth in the ACA Marketplaces.” KFF, April 2. https://www.kff.org/affordable-care-act/enrollment-growth-in-the-aca-marketplaces/.

[12] “Medicaid Expansion Enrollment | KFF State Health Facts.” n.d. KFF. Accessed December 1, 2025. https://www.kff.org/medicaid/state-indicator/medicaid-expansion-enrollment/.

[13]“Distribution of People Ages 0-64 with Medicaid by Race/Ethnicity | KFF State Health Facts.” n.d. KFF. Accessed November 30, 2025. https://www.kff.org/medicaid/state-indicator/medicaid-distribution-people-0-64-by-raceethnicity/.

[14] Id. at 5. 

[15] Id. at 13.

[16] kffjessicam. 2025. “5 Key Facts About Medicaid Expansion.” KFF, April 25. https://www.kff.org/medicaid/5-key-facts-about-medicaid-expansion/.

[17] Id. at 16.

[18]Rep. Arrington, Jodey C. [R-TX-19. 2025. “Text - H.R.1 - 119th Congress (2025-2026): One Big Beautiful Bill Act.” Legislation. July 4. 2025-05-20. https://www.congress.gov/bill/119th-congress/house-bill/1/text.

[19]kffheathers. “How Might Federal Medicaid Cuts in the Enacted Reconciliation Package Affect Rural Areas?” KFF, July 24, 2025. https://www.kff.org/medicaid/how-might-federal-medicaid-cuts-in-the-enacted-reconciliation-package-affect-rural-areas/.

[20] NCMS. 2025. “700+ Rural Hospitals at Risk of Closing.” North Carolina Medical Society, March 19. https://ncmedsoc.org/700-rural-hospitals-at-risk-of-closing/.

[21]By. 2025. Medicaid Cuts Likely to Affect Urban Safety-Net Hospitals | Harvard T.H. Chan School of Public Health. November 17. https://hsph.harvard.edu/health-quality/news/medicaid-cuts-likely-to-affect-urban-safety-net-hospitals/.

[22] Id. at 21.

[23] Id. at 21.

[24] Id. at 21.

[25] Kinnucan, Emily Eisner, Michael, and Emily Eisner. 2025. “New York Hospitals Will Close under the ‘One Big Beautiful Bill Act.’” Fiscal Policy Institute, June 27. https://fiscalpolicy.org/new-york-hospitals-will-close-under-the-one-big-beautiful-bill-act.

[26] Id. at 3. 

[27] “Health Center Funding.” n.d. NACHC. Accessed December 3, 2025. https://www.nachc.org/policy-advocacy/policy-priorities/health-center-funding/.