June 26, 2025
Congress and the federal government are considering changes to healthcare policy and funding to address the national deficit and finance the federal budget. New Yorkers and New York’s $300 billion healthcare industry stand to be significantly affected. The full direction of the Trump administration and Congress’s healthcare agenda remains uncertain, but in addition to “make America Healthy again,” the frame of program integrity—reducing fraud, waste, and abuse, as defined by the Trump administration and Congress in this context—has become a primary lens through which healthcare funding and policy decisions are being approached. This appears to include the framing of how current budget targets in Congress will be reached, even as such measures are not typically or technically considered in reaching those targets. Once more, many of the federal proposals outlined or policies referenced thus far have the potential to significantly impact New York’s healthcare programs and budget and the coverage available to residents under existing federally funded programs. Given the evolving nature of these events, there will inevitably be new proposals and policies that unfold concurrently with and following this publication. This includes the recent portions of the House Reconciliation bill moving through Congress with initial approvals in the House. As the bill moves through Congress, additional changes are anticipated. Future work will look at that and other proposals that are moved forward in greater detail. The following provides a high-level summary and analysis, which examines key areas where federal policy shifts could materially impact New York’s healthcare system and the New Yorkers for whom it cares.
New York’s Medicaid, Child Health Plus, and Essential Plan programs provide public health insurance benefits for nearly 9 million residents. The programs rely heavily on federal funding. Federal spending reductions could come through rulemaking, waiver rescissions, or legislation that disproportionately impacts New York due to its broader eligibility criteria, extensive benefits, and use of a variety of Medicaid financing arrangements.
Potential policy changes and their impacts include:
Despite statements by President Trump and Congressional Republicans that they will not cut “traditional” Medicaid, Medicaid funding reductions are all but certain to be necessary if they are to meet the required federal spending targets established by Congress and supported by the Trump administration. The initial bills proposed by the House through the Reconciliation process include significant reductions to Medicaid funding for New York in the form of cost shifts and eligibility reductions. Those types of proposals are described in greater detail throughout this paper.
Despite assurances that Medicare, which covers over 3.9 million New York residents, would not be cut, structural changes remain possible, including how providers are reimbursed. Expansion of Medicare Advantage plans could shift enrollees from traditional fee-for-service models, affecting provider reimbursements, which differ between the two programs. And, potential cuts to graduate medical education (GME) funding through Medicare could also impact New York, which trains 12 percent of the nation’s physicians. While the initial House Reconciliation bills did not make dramatic changes to Medicare financing, eligibility changes included limiting eligibility for Medicare for certain citizens and delaying implementation of the Biden-era rule streamlining eligibility for the Medicare Savings Program. Additionally, it’s still possible that proposals not in the House bill could resurface or be implemented administratively.
Already, through proposed rulemaking, the Trump administration has advanced potentially significant changes to the guidelines for purchasing coverage on a state insurance exchange (or marketplace). The House Reconciliation bill largely codifies and expands such changes in its initial bill draft, passed by the House. Additionally, the potential expiration of COVID-19-era enhanced subsidies, available to consumers to reduce the cost of purchasing coverage, could lead to steep premium increases. Notably, an extension was not included in the House Reconciliation bill. The Kaiser Foundation estimates that without legislative action, individual market insurance costs could rise by over 75 percent, with New York projecting a 58 percent premium increase based on 2022 estimates. New York recently updated its estimate to a potential 38 percent increase, following the passage of the House Reconciliation bill. Premium increases could disproportionately affect the roughly 140,000 New Yorkers who currently receive such subsidies, making coverage less affordable and potentially shrinking New York’s individual and small group health insurance markets.
Further, the Trump administration and Congress could promote short-term and association health plans, which shift more costs to consumers. And, if federal support for state-mandated coverage expansions is reduced, New York would need to cover additional costs or reduce benefits.
Program integrity refers to the measures taken to reduce fraud, waste, and abuse in public programs. The Trump administration and Congressional Republicans are heavily focused on using this approach to achieve spending targets and reform existing programs. While some of these measures are not traditionally considered as metrics towards achieving budget targets, it’s anticipated that proposals that can be framed through this lens or to close perceived loopholes will be prioritized, as was the case with the initial proposals approved by the House.
The Trump administration has already taken actions to limit the ability of states to cover noncitizens, and the House proposals would further restrict states’ option to cover noncitizens. New York, along with other states, provides health insurance to noncitizens in certain circumstances, a portion of whom the state was required to cover, per litigation. Proposed changes in the House bill, which penalize the state for using state-only dollars and restrict the availability of federal funds, could necessitate further discussion between the governor, the legislature, and stakeholders on future coverage
One-third of New York’s hospitals are financially distressed. The availability of federal funding to support distressed hospitals at current levels is at risk. Further, recent federal proposals include a reference to limiting hospital consolidations in the name of avoiding unnecessary price growth and maximizing competition. New York hospital systems are smaller than those nationally, and Congressional or Trump administration proposals could impact consolidation in New York that New York State officials see as necessary to address financial sustainability and preserve access to care. Recent data suggests uncertainty related to pending reductions has already had a cooling effect on hospital consolidation nationally. The Reconciliation bill moving through Congress limits the availability of additional federal financial participation to support distressed hospitals through the directed template program by capping future payments or payment changes to the Medicare rate, and expands access to enhanced payments for certain rural hospitals.
Already, the Trump administration has made clear in executive orders and guidance that they intend to challenge states and providers that use federal funds in conflict with the administration’s policies regarding gender. Initial Congressional proposals also included limits on such care for minors; the version of the bill ultimately approved by the House extended such restrictions to adults.
The Trump administration has already sought to limit access to medication-induced abortions, defund Planned Parenthood, and reinstate restrictions on Title X funding. While New York has enacted strong related protections, federal defunding could require the state to make a decision on whether to backfill lost resources. Restrictions on payments to abortion providers were a component of the initial House Reconciliation bill moving through Congress.
Federal efforts to lower drug prices include greater regulation of pharmacy benefit managers (PBMs) and renewed scrutiny of pharmaceutical practices and pricing. Statutory changes to effectuate these proposals are included in the Congressional Reconciliation bill, and additional actions may be proposed.
New York’s healthcare system, which is deeply intertwined with federal funding and policies, faces significant uncertainty under proposed and potential Trump administration and Congressional policy proposals. While not all proposed policies will advance, shifts in Medicaid funding, insurance subsidies, and regulatory oversight could create financial and operational challenges for the state, entities operating within it, and residents trying to access care.
Already, the proposals advancing through the Congressional Reconciliation process would have significant impacts to New York in current and future fiscal years. Such proposals both reduce funding for public insurance programs and modify eligibility for such programs.
The magnitude of proposals advanced in the Reconciliation bill, in combination with potential actions and/or actions already taken administratively by the Trump administration, is significant. The level of funding and eligibility reductions proposed in the Reconciliation bill moving through Congress will necessitate conversations between the governor, the legislature, and stakeholders on healthcare funding and program design. The Rockefeller Institute of Government will continue to closely monitor federal actions in order to allow state policymakers to better anticipate and mitigate any potential impacts on New Yorkers and New York’s healthcare sector.
