Why Should Delaware Care?
Medicaid covers about a quarter of Delaware’s population, but new federal spending reductions and eligibility requirements could see tens of thousands in the state lose their coverage. On top of that, privately insured patients could also feel the pinch as hospitals look to close revenue gaps.
Privately insured patients could face higher costs in the wake of an estimated $840 billion cut to Medicaid over the next decade, Delaware health care experts say.
Hospital executives and a lobbyist for the industry told Spotlight Delaware that cuts to the federal program from the One Big Beautiful Bill Act signed into law last month could strip their facilities of enough revenue that they would need to charge more to other patients to compensate.
Additionally, they said those who may lose Medicaid insurance could flood emergency rooms when they need care – also leading to higher costs.
In all, the cuts are likely to stress hospital budgets in a state that the federal government already considers to be a health care shortage area.
“We will make up the revenue somewhere, or perhaps consider closing particular services that might lose more money than another service,” TidalHealth CEO Steve Leonard said.
Among the country’s largest health care subsidies, Medicaid is relied upon by 71 million people for health insurance. Hospital finances also depend on the program, with 19% of revenues coming from Medicaid nationwide in 2023, according to the Kaiser Family Foundation.
What the hospitals say
Signed into law in July by President Donald Trump, the One Big Beautiful Bill Act imposes drastic cuts and stricter work eligibility requirements for Medicaid clients. The non-partisan Congressional Budget Office estimates the cuts will leave 10 million people uninsured by 2034.
Leonard, who manages TidalHealth Nanticoke hospital in Seaford and other facilities in Maryland, said the “concern level is rising” in the wake of federal cuts not only to Medicaid, but also Medicare.
The One Big Beautiful Bill Act also enacted an estimated $490 billion in spending reductions on Medicare, the nation’s prime subsidy for the elderly, according to the Congressional Budget Office.
Despite the CBO report, the White House asserts that “absolutely nothing in the bill reduces spending on Medicare benefits.”
Because of expected cuts in their revenue streams, Leonard said hospitals and insurers may negotiate higher rates for different kinds of medical services. Historically, the practice has been common to cover deficits left by Medicare, which he said underpays hospitals. But with new cuts to Medicaid, Leonard said hospitals will have to find revenue somewhere else.
Though he expects changes overall in his hospital system, Leonard stressed that he doesn’t expect the pending federal cuts to impact TidalHealth’s planned emergency room in Millsboro, or the other services it provides there.
TidalHealth Nanticoke is considered a “Medicare dependent hospital,” making it eligible for larger reimbursements from Medicare.
According to an annual report for Fiscal Year 2024, 72% of all patients in the TidalHealth system, including its Maryland facilities, had Medicaid or Medicare as their primary insurance.
Longer emergency room waits?
Dr. David Tam, president and CEO of Beebe Healthcare in Lewes, said there were already multiple levels of uncertainty when it comes to payments reaching hospitals. As a result, he said his hospital has prepared in years past for possible cuts.
In 2024, close to 52% of Beebe payors were either on Medicare or Medicaid, according to an annual report submitted for investors of the hospital’s municipal bonds.
He said one way of minimizing the revenue uncertainty as a result of Medicaid cuts is maximizing and streamlining payments from insured patients.
“If we can make the billing process more accurate and easier than ever before, we can ensure that we get every penny we deserve from insurance companies using the contracted rates,” Tam said.
Beyond insurance payments, hospitals may also face higher costs to their emergency services from people who lost Medicaid coverage.
Brian Frazee, president of the Delaware Healthcare Association, which represents the interests of state hospitals, said people without insurance are more likely to delay or avoid medical care, which could later lead to a medical emergency.
This, he said, could lead to longer emergency room wait times for all patients.
According to a poll from the Kaiser Family Foundation, which monitors health care policy in the United States, a total of 75% of uninsured respondents under 65 years old said they had put off care in the last year.
“In the short-term and long-term, frankly, cuts to Medicaid are going to mean that less people have health insurance coverage, and we know that uninsured individuals are more likely to delay or even completely avoid needed care,” Frazee said.
Asked how Beebe could encourage uninsured people to seek care outside of the emergency room, Tam said his hospital would invest in free preventative programs, as well as expand outpatient operations that provide lower cost medications or procedures.
Aside from cuts, the One Big Beautiful Bill did set aside $50 billion for rural hospitals across the country.
Officials from both TidalHealth and Beebe said they intend to apply for funding through the program, but it remains unclear how funds will be allocated.
In a memo shared with Spotlight Delaware, the White House said that states seeking the funding must apply with a “detailed rural health transformation” plan that would improve access to doctors and other medical providers. The White House said the program would “transparently and efficiently transform rural health access” through five years of investment.
Bayhealth Medical Center, Kent County’s flagship health system, declined to comment for this story.
Dr. Janice Nevin, president and CEO of Delaware’s largest hospital system, ChristianaCare, said in a written statement to Spotlight Delaware that her facility is investing further in Delaware to expand treatment options. ChristianaCare has announced plans to open an 87,000-square-foot medical center in Middletown amid an $865 million investment in Delaware facilities.
Nevin also said the federal cuts have increased the urgency to grow the hospital system across the region.
Last month, ChristianaCare announced it is exploring a merger with Virtua Health, the largest health care provider in southern New Jersey.
According to an annual report submitted for investors of municipal bonds, 49% of the ChristianaCare’s revenue came from Medicaid or Medicare in Fiscal Year 2023.
“The serious concerns I have about anticipated cuts to Medicaid, Medicare and support for the [Affordable Care Act] marketplace are driving ChristianaCare to act now,” Nevin said in the statement.
What others say
Steven Ullmann, a professor and director of the Center for Health Management and Policy at the University of Miami Herbert Business School, said hospitals regularly increase commercial prices to compensate for reductions from other revenues, through a process called “cross-subsidization.”
“Private insurance companies are going to then be increasing their premiums as the pressure will be put on them, passing those costs on to either individuals that are buying health insurance or to the employers that are providing health insurance,” Ullmann said.
Additionally, Ullmann said states that signed onto Medicaid expansion during the Obama administration – including Delaware – will feel the effect of federal reductions more severely. As a result, they will have to examine their own budgets, he said.
In 2014, when states began to expand their Medicaid programs, the federal government began to absorb 90% of the additional costs.
With the One Big Beautiful Bill Act, Ullmann said that additional federal support to the states is largely going away. As a result, states will have to pick up the slack, which Ullmann said may leave a gap that some states may not be able to close.
“If states cannot cover that, then basically you have governors saying and state legislatures saying, ‘Woah, this is something we cannot cover,’” Ullmann said.
In a statement to Spotlight Delaware, Gov. Matt Meyer’s office said the state is examining the potential impacts that Medicaid cuts would have on the state budget in the coming years.
“The ability for the state to absorb some of those cuts will depend on the overall budget, priorities, and financial picture,” the statement said. “The state does not have a contingency fund set aside to replenish federal reductions.”
In Delaware, those cuts could amount to $5 billion in federal funding over the next decade and 50,000 people without Medicaid coverage, Frazee said.
Additionally, because of new paperwork that people on Medicaid will need to complete to maintain their eligibility, Frazee said some may “fall through the cracks” and lose their coverage.
And, if fewer people have insurance that would cover health care costs, hospitals will likely write those expenses off as part of what is known as uncompensated care, or “charity care,” Frazee said.
But, he said, when uncompensated care increases, so do prices for insured patients, as hospitals look to close revenue gaps left by large amounts of charity care.
“When you have higher uncompensated care or more people uninsured, that’s not good for even the people who are insured, because that raises costs for everyone,” Frazee said.
