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Texas clinics, in particular, are worried about their ability to meet patient needs once people begin losing insurance under changes from Republicans’ recent megabill.
By Gabby Birenbaum, Graphics by Edison Wu
July 24, 2025
Texas’ already-strained health care system is bracing for deeper challenges when federal Affordable Care Act and Medicaid cuts go into effect as soon as next year, bringing fears of hospital closures, longer wait times and negative health outcomes.
But in the short-term, Texas hospital advocates and CEOs say they averted disaster by keeping the most damaging Medicaid-related provisions out of Republicans’ mega-bill.
Over 4 million Texans are enrolled in the narrowly structured Medicaid program, where eligibility is limited to children, pregnant women, seniors, disabled people and parents with a monthly income of under $300, for a family of four. At various points during negotiations, Republicans had discussed decreasing the federal match rate for Medicaid spending and eliminating provider taxes, a key source of revenue that jurisdictions in the state use to tax private hospitals to fund the state’s portion of Medicaid.
Those provisions could have been catastrophic for Texas hospitals, particularly rural ones that overwhelmingly rely on Medicaid for reimbursement. But ultimately they were not included. And given that Texas never expanded Medicaid to people above the federal poverty limit, the state will not have to impose work requirements or slash its provider tax rate.
Texas is projected to lose out on $1.2 billion in Medicaid funding owing to changes in the bill, but it stands to gain $1.6 billion from the last-minute addition of a rural hospital fund over the next five years, according to estimates from the National Rural Hospital Association.
While Texas Hospital Association CEO John Hawkins said there were unsatisfactory parts of the bill, hospitals and Texas Medicaid, for now, “have not suffered the hit that was initially feared.”
“From THA’s standpoint, there’s simply a sense of deep relief on the other side of this finish line,” Hawkins wrote in an op-ed. “Our concerns were heard, and our Lone Star safety net will remain intact.”
Uncertain future
But the long-term implications of the bill are more concerning for hospitals.
Jurisdictions in Texas, such as cities, counties or hospital districts, can charge a tax of up to 6% on private hospitals, a provision that was grandfathered in to remain intact. Hawkins noted this as a significant win for hospitals in the state. But those rates are now frozen, eliminating the ability for jurisdictions who have not implemented a provider tax or whose rate is lower than the 6% to raise new revenue in the future.
A THA spokesperson said most local government entities are already assessing a tax at the 6% maximum, and the majority of those who were not took steps to do so in anticipation of the mega-bill’s passage.
To offset the potential for lost revenue in rural hospitals in particular, the Senate created a five-year, $50 billion fund for rural hospitals. For the first two and a half years, the money will be distributed equally between states — which disadvantages Texas because it has a significantly larger population than nearly every state. During the second half of the program, Texas should receive more funding because spending will be proportional based on rural hospital expenditures.
Such funding will be critical in Texas, where 15 rural hospitals are currently at risk of closure.
While the fund will theoretically more than compensate rural hospitals for their Medicaid losses, experts cautioned that outcomes could be different by region, town and individual hospital.
John Henderson, the CEO of the Texas Organization of Rural and Community Hospitals, said it is difficult to predict how rural hospitals will fare without a deeper understanding of the rural hospital fund’s effectiveness. But he’s concerned about what happens when the fund expires.
“Coverage matters, whether it be Medicaid or commercial,” he said. “When fewer patients show up with coverage, it just puts more burden on the hospital. So I’m more worried about 2031 than 2026.”
Rise of the uninsured
Close to 5 million Texans are uninsured, a figure projected to rise by 1.7 million once ACA marketplace changes from the Republican mega-bill take effect, according to health policy nonprofit KFF. The high uninsured rate poses a number of negative downstream effects for health care in the state.