Illinois hospitals could lose billions of dollars in federal funding over the next several years because of changes to Medicaid reimbursement rules.
Estimates from the Illinois Health and Hospital Association and health policy organization KFF put potential losses at $3 billion to $4 billion, with the reductions beginning in 2028.
The changes will limit so-called state-directed payments, which allow states to provide higher Medicaid reimbursement rates to hospitals serving vulnerable populations. New federal rules will eventually limit those payments in Illinois to Medicare reimbursement levels.
Hospital officials warn rural critical access hospitals and safety-net hospitals are especially vulnerable because they rely heavily on Medicare and Medicaid revenue. Those facilities account for roughly half of Illinois hospitals.
The federal law will also gradually reduce the amount Illinois can collect through healthcare provider taxes, which are used to obtain federal Medicaid matching funds.
State budget officials estimate the combined changes could ultimately reduce Illinois Medicaid funding by $6.1 billion annually by fiscal year 2033, including $3.8 billion in lost federal support.
Hospital advocates warn that without additional funding, some facilities could be forced to reduce staffing or services, while financially vulnerable hospitals could face closure.