Medicaid changes, Medicare Advantage frustrations hit providers’ payments
Growing challenges will increasingly impact provider margins, as uncompensated care costs and business office expenses soar.
Providers have never had an easy time getting paid for the healthcare services they deliver. Those challenges have become greater this year, even as margins shrink and fewer people carry health insurance.
Two of the largest streams of payments to providers – Medicaid and Medicare Advantage Plans – are undergoing pressures of their own related to federal health policies, and the downstream effect on providers is substantial. It comes down to less certainty over payments delivered, or at best, the likelihood of more uncompensated care without certain payment.
These difficulties will increasingly impact provider margins, as uncompensated care costs rise in tandem with business office costs to get payment for services.
Medicaid pressures
Cuts to the Medicaid program have received wide coverage since the passage last summer of the reconciliation bill (at the time, called the One Big Beautiful Bill), with an estimated $911 billion expected to be trimmed over 10 years.
While those significant cuts to federal Medicaid financing won’t take effect until October 2027, some potential impacts are already raising concerns.
In particular, most states in the U.S. are beginning to take steps that will ensure they are able to implement Medicaid work requirements. Under those requirements, recipients of aid will need to demonstrate that they log work hours, or prove they’re students or working as volunteers, under requirements of last year’s reconciliation bill.
That burden to ascertain work requirements will fall on state agencies, and a recent survey by KFF indicate rough waters ahead. The research gathered from Medicaid officials from 43 states show that while work requirements are moving forward, key components of implementation have yet to be figured out, particularly around eligibility and verification systems.
Under the new requirements, states must verify compliance continually, with most states saying they plan to check eligibility every six months, although some say they may check eligibility quarterly.
The KFF survey found that administrative capacity at the state level generally has not grown to meet the new requirements of the law. In fact, only 14 of the 43 states interviewed for the research report plans to increase capacity of their eligibility staffs, despite the fact that verification is expected to become more frequent and complex.
Other KFF findings paint a bleak picture of preparedness for the new requirements. Some 23 of the 43 states haven’t identified data sources they’ll need to verify compliance or exemptions. Beyond that, states are reporting challenges linking data across systems – among impediments they listed are time and cost constraints, as well as limitations related to interoperability.
Advanced technological solutions may not be part of the early solution – only six of the 43 states say they’ll use artificial intelligence to support implementation, documentation processing or data matching. Rather, the new requirements will consume significant manual effort to review documentation and pull information from fragmented sources.
This looks like a bad mix for providers, which are downstream from state eligibility determinations. For example, in 2018, Arkansas launched a work requirement program for Medicaid; before it was struck down by the courts, 18,000 people lost Medicaid coverage, primarily because they couldn’t navigate the system for reporting their employment. More recently, in 2025 nearly half of Medicaid disenrollments in Nebraska were a result of procedural reasons rather than confirmed ineligibility.
Thus, providers treating large Medicaid populations may be at more risk for losses after they treat patients who may have lost coverage because of work requirements or other efforts to shrink Medicaid expenses.
“Increased verification requirements create operational strain across the healthcare system because providers are often left managing coverage disruptions tied to paperwork and verification delays rather than true eligibility issues,” says Peter Justen, founder and CEO of AmeriTrust Solutions. “When eligible patients lose coverage for procedural reasons, providers face higher uncompensated care costs, interrupted treatment continuity, and additional administrative workload tied to re-enrollment and eligibility resolution.”
But overall, patients and state agencies will face the greatest challenges, he adds. “Patients must navigate more frequent reporting and documentation requirements, while agencies are tasked with scaling verification, staffing and data-matching processes within systems that are already under significant administrative pressure.”
Medicare Advantage woes
Provider organizations are also getting frustrated with the amount of work they’re taking on to gain payment from Medicare Advantage plans, often related to contentious prior authorization and documentation requirements.
Already this year, 21 health systems have dropped out of participation with Medicare Advantage plans as of April 1. Most recently, CarolinaEast Medical Center decided to no longer participate in two Advantage plans, charging that continuing to do so would have been “financially and operationally unsustainable.”
That trend is a big deal for providers, because Medicare Advantage represents 35 million beneficiaries, more than half (55 percent) of all Medicare beneficiaries nationwide. And the reasons for providers’ queasiness stem from growing challenges in resolving reimbursement disputes. The downstream result could be that more patients might switch to traditional Medicare coverage and, in the interim, more providers may drop Medicare Advantage participation.
A March report by the American Hospital Association found that organizations spent $43 billion in 2025 pursuing payments that had been denied, were tied up in prior authorization disputes or mired in documentation requests. While many claims are ultimately reimbursed, the process of getting paid is taking more time and effort.
That’s additional strain on providers, says Matt Seefel, CEO of MedEvolve, a technology provider with workforce automation and analytics solutions. He calls the growing operational burden on providers the “denials tax” — the cumulative rework, follow-up activity and administrative effort required to move claims from submission to payment.
“A denial rate only measures the outcome,” Seefeld says. “It doesn’t measure how much work it actually takes to recover reimbursement. A claim may be reimbursed, but if it required five or six staff interactions to get there, the organization has absorbed a real operational cost.”
He sees a growing backlash against Medicare Advantage plans as hospitals are increasingly burdened by payer relationships.
Fred Bazzoli is the Editor in Chief of Health Data Management.