Which state aid uh will stop for hospitals in 2028. And well, and how much is that

Based on current legislation, a major federal funding source for hospitals is scheduled to be reduced starting in 2028. This relates to a program called State-Directed Payments (SDPs) , which will be capped, leading to an estimated $149 billion cut in federal Medicaid spending nationwide over 10 years-8.

Here are the specific details of what is changing and why:

• The Policy Change: Starting in 2028, payments will be capped at 100% of Medicare rates (or 110% in the 10 states that haven't expanded Medicaid) instead of being benchmarked against higher commercial insurance rates -1-6.

• Why It Matters: Many hospitals rely on these enhanced payments to cover costs. Dropping to the lower Medicare rate essentially eliminates the financial "boost" they currently receive, forcing them to operate on significantly thinner margins -10.

• Estimated Impact: Nationwide, this is projected to cut federal Medicaid spending by $149 billion over a decade -8.

• State-Level Variation: The impact varies significantly by state, as shown in the map below -1-3. For example:

• Pennsylvania: Could lose up to $20 billion in federal Medicaid funding (across various programs) from 2028 to 2038 -9.

• South Carolina: Facing a loss of roughly $150 million annually for 15 years starting in 2028 -10.

<span style="display: flex; justify-content: center;"> ```mermaid flowchart TD A[Pre-2016: Standard Medicaid Payments] --> B[2016-2027: State-Directed Payments (SDPs) Allowed] B --> C[Hospitals reimbursed at rates up to<br>commercial insurance levels] C --> D[2028 Onward: SDPs Restricted by OBBBA]

D --> E[Payments capped at Medicare rates (100% expansion states / 110% non-expansion)] D --> F[Existing payments grandfathered, then phased down 10% annually]

E --> G[Financial Impact] F --> G G --> H[~$149B federal cut over 10 years] G --> I[Hospitals face margin pressure & possible closures]

text

</span>

### 🤔 Why is this happening?

This change was included in the **"One Big Beautiful Bill" (OBBBA)** [citation:1][citation:5]. The rationale is that since the ACA expanded coverage, the need for these supplemental payments has diminished [citation:1].

### ⚠️ What are hospitals doing in response?

Facing these cuts, hospitals are taking significant steps to prepare:
*   **Pausing Projects**: Many are freezing capital expansion projects [citation:8].
*   **Risk of Closures**: Experts warn that some rural hospitals, which operate on thin margins, may be forced to close [citation:2][citation:9].
*   **State Actions**: States are scrambling to see if existing payment arrangements can be "grandfathered" in to delay the impact [citation:8].

Are you interested in the specific impact forecast for a particular state, or would you like to know more about the Disproportionate Share Hospital (DSH) cuts that are scheduled separately?