The People We Serve Are Still Coming. The Money Is Not.

Before the next bill. Before the crisis. Five actions every healthcare and behavioral health leader needs to take now.

Tamika Curry, Ph.D., Founder and CEO, Morse Regent.

Last week, many of us were with family. Some honored Good Friday. Some enjoyed spring break. Some simply took a few days away from the pace of work. In Washington, on April 1, 2026, President Trump hosted a private Easter luncheon at the White House for faith leaders. In remarks at that event, he stated it is not possible for the federal government to fund Medicaid, Medicare, and childcare, and that states should take on those responsibilities. He also suggested that states could raise their own taxes to fund these programs, and that the federal government might lower federal taxes slightly to offset that shift. 

The challenge with that proposal is that the states carrying the highest Medicaid burdens, those serving the largest concentrations of low-income adults, rural communities, and people with disabilities, are often the states with the least fiscal capacity to absorb that cost. A funding responsibility that shifts to states does not become more affordable simply because it moves. 

Whether or not those remarks become policy, they landed on top of a law that is already in effect and already cutting. For leaders of healthcare and behavioral health organizations, the time to treat this as a future problem has passed.

What is already the law of the land

On July 4, 2025, the president signed the federal budget reconciliation law. The American Medical Association called it the largest cut to Medicaid in the program's sixty-year history. The Congressional Budget Office estimates it will reduce federal Medicaid spending by $911 billion over ten years and leave 10 million more Americans without health insurance by 2034. A KFF analysis of those Congressional Budget Office estimates found the cuts will hit every state, with some seeing reductions in federal Medicaid funding of up to 17% over the decade.

That money does not disappear. It shifts to states that cannot cover the gap. And from there it shifts again to the hospitals, clinics, community health centers, and behavioral health organizations serving the people who lost coverage.

To be clear about who we are talking about: Medicaid covers low-income children, families, people with disabilities, and adults who cannot afford private insurance. Medicare covers Americans 65 and older and certain people with disabilities. Together they are the primary source of coverage for the people most dependent on the organizations in this sector.

For hospitals and health systems, the financial exposure is direct and significant. Medicaid is a primary revenue source across the continuum of care, from acute care and primary care to specialty services and long-term care. When Medicaid enrollment contracts and reimbursement rates face additional pressure, the organizations most dependent on public payers absorb the loss first and feel it hardest. A KFF analysis published in October 2025 found that hospitals where Medicaid covered a high share of patients were already significantly more likely to have negative operating margins, at 45% compared to 35% among hospitals with lower Medicaid shares. That gap will widen.

For behavioral health organizations, the exposure carries an additional layer of risk. Medicaid funds more than a quarter of all mental health and substance use disorder services in the country, making it the single largest payer in that space. And because those services are classified as optional benefits under Medicaid, they are among the first things states cut when budgets tighten. The organizations most at risk are not always the ones that look the most distressed from the outside. A behavioral health program running at full census looks financially healthy until the payer mix underneath it shifts. A community health center absorbing uncompensated care to maintain access looks mission-driven until the cash runs out. By the time the numbers make the problem obvious, the window for addressing it has already started to close.

What this looks like inside real organizations

This is not abstract. It is already happening across care settings, and the consequences are clinical, operational, and financial all at once.

In urban safety-net hospitals and community health centers, Medicaid and Medicare together often represent the overwhelming majority of the patient population. These institutions serve the highest concentrations of low-income residents, unhoused individuals, people with behavioral health conditions, and communities of color. When a patient loses Medicaid coverage, they do not stop needing care. They show up anyway, in the emergency room, in crisis, further along in their illness than they would have been with consistent treatment. That uncompensated care does not disappear from the system. It transfers to the organization at the exact moment the organization has less revenue to absorb it.

In rural hospitals, the picture is equally stark. According to KFF, Medicare and Medicaid together covered 72% of rural inpatient hospital discharges in 2023. More than 300 rural hospitals are currently at risk of closure under the cuts already in law. A rural hospital closure is not only a clinical event. It is an operational collapse and an economic one. When that hospital closes, the community loses its primary source of emergency and preventive care, and typically one of its top three employers.

Family planning clinics and reproductive health providers are already living this reality. The reconciliation law blocked federal Medicaid reimbursement from family planning clinics that also provide abortion services, including Planned Parenthood affiliates, organizations operating across 39 states and providing contraception, cancer screenings, prenatal care, and testing and treatment for sexually transmitted infections.

These organizations absorbed tens of millions of dollars in uncompensated care in a single month to keep serving patients, according to KFF. Nearly 70 clinics closed in 2025, with 20 of those closures directly tied to this law. When the financial model collapses, the healthcare access disappears with it.

The workforce will not be spared

Workforce is where the clinical and financial consequences of these cuts converge most visibly, and most painfully.

When an organization loses revenue, it reduces staff. But in healthcare and behavioral health, a staffing reduction is never just an operational decision. Therapeutic relationships in behavioral health take months or years to build. When a clinician leaves because the organization can no longer sustain the position, the patient does not simply lose a provider. They lose continuity of care at the very moment the system around them is becoming harder to navigate.

Registered nurses and physicians working in safety-net hospitals, community health centers, and rural facilities are among the most directly at risk. These are the settings where staffing ratios are already stretched, vacancy rates are already elevated, and the margin between sustainable and unsustainable operations is thin. When an organization loses Medicaid revenue and begins cutting costs, direct care positions are rarely spared. A staffing reduction in these settings is never purely an operational or financial decision. It changes the care patients receive, the workload carried by those who remain, and the safety of the environment for both patients and staff.

The clinical consequence of workforce loss is measurable in readmission rates, crisis presentations, and outcomes. The operational consequence is measurable in vacancy rates, overtime costs, and productivity. The financial consequence is measurable in revenue per visit and contract compliance. All three move together.

Those providing direct care in behavioral health face an additional layer of exposure. A 2024 study by RTI International found that insurance reimbursements for behavioral health visits are on average 22% lower than for comparable medical and surgical visits, a gap that has long made it difficult to recruit and retain clinical talent in this space and that will widen as states lose the financing tools they have used to bring those rates closer to parity.

What the president's statement signals

The April 1 remarks are not legislation. But Families USA warned in a statement responding directly to those remarks that a second reconciliation process is likely and could be used to advance additional cuts beyond what is already law. The administration's proposed 2027 federal budget would further dismantle behavioral health programs and eliminate many of the programs designed to address the health disparities that make Medicaid essential to the communities these organizations serve. For organizations whose financial models depend on federal reimbursement, that is a business risk that demands a response.

A second round of cuts landing on organizations that have not restructured after the first round will not be survivable for many. The question is not whether your organization will be affected. The question is whether you are building the capacity now to withstand what has already happened and what may still come.

Five things every CEO should do right now

Financial distress in the organizations directly impacted rarely announces itself through the financials first. It announces itself through operational strain, clinical quality pressure, workforce instability, and compliance gaps, long before it shows up clearly on a balance sheet. By the time the numbers are undeniable, the options have already narrowed. These five actions are designed to be taken now, while options still exist.

1. Model your Medicaid exposure this week. Know exactly what percentage of your operating revenue flows through Medicaid, which service lines carry the most exposure, and what your organization looks like financially if that revenue contracts by 10%, 20%, or 30%. Behind those percentages are real people with chronic conditions, complex diagnoses, and limited alternatives for finding care elsewhere. Their health reality and your financial reality are the same problem. Revenue concentration is a primary indicator of organizations at acute risk when a funding shock occurs, and the shock is no longer hypothetical. Everything else you do depends on having this picture clearly in front of you.

2. Begin diversifying revenue now. Identify and pursue revenue streams that are not dependent on federal reimbursement. Philanthropic partnerships, grants, and earned income strategies all reduce reliance on a single dominant payer. This takes time to build and it requires operational infrastructure to sustain. Organizations that start now will have options that organizations waiting for a crisis will not.

3. Assess your administrative capacity for what is coming in late 2026. The law does not only cut revenue. It adds significant new administrative work at the same time. Starting in late 2026, states must check Medicaid eligibility twice a year instead of once, and most Medicaid expansion adults will have to document 80 hours per month of work or community service to keep their coverage. Every time someone misses a deadline or cannot navigate the paperwork, they lose coverage even if they were still eligible. Your patients will cycle on and off Medicaid more frequently. Your staff will spend more time helping them stay enrolled, documenting compliance, and managing a higher volume of administrative work, all while your revenue is contracting. The states that piloted these requirements before this law passed found them operationally overwhelming. Map where your administrative gaps are now, before the requirements hit.

4. Put your board in the room with the real numbers. Not the optimistic scenario. The realistic one and the conservative one. Bring your Medicaid exposure analysis, your cash position, your days of cash on hand, and your financial scenario projections. Pair the numbers with the clinical and operational story behind them. If you have a senior clinical leader, make sure they are in the room. A board that understands only the financial dimension of this risk will make incomplete decisions. Your board has a fiduciary obligation to see the full picture. If that conversation has not happened, it needs to happen at your next meeting.

5. Mobilize your advocacy voice before the next bill is drafted. The April 1 statement is a signal of intent, not a legislative action, which means the window to influence what comes next is still open. Engage now. Join or strengthen your participation in state and national advocacy coalitions including your state hospital association and your state behavioral health association. At the national level, organizations like the National League for Nursing, the American Nurses Association, the National Council for Mental Wellbeing, and the American Hospital Association are actively engaged on these issues. When you meet with elected officials, bring your data and bring your clinical story. Policymakers respond to numbers, but they remember people more. Tell them both. Waiting until a bill is introduced to begin that conversation is waiting too long.

None of this requires certainty about what future legislation will or will not pass. The law already signed is reason enough to act. The remarks last week are all the more reason not to wait.

Morse Regent is a turnaround advisory and interim executive leadership consulting firm partnering with mission-driven organizations, particularly those in healthcare, behavioral health, and education, at pivotal inflection points in their financial and operational performance, so that the organizations doing the most important work in our communities can continue to make the impact they were built to deliver. If any part of this resonated with you, let's talk.

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