Proposed Medicaid Cuts Could Cost Maternal and Children's Health Care Billions

📰 Curated Industry Article

This is a summary of a full article from a trusted insurance publication. Click “Read Full Article” below to read the complete story.

An estimated $19.7 billion in Texas health care funding is at stake under proposed changes to Medicaid payments. The proposed rules from the Centers for Medicare and Medicaid Services (CMS) would limit and reduce State Directed Payments (SDPs), a funding stream that hospitals and other providers rely on to help care for Medicaid patients.

The proposed changes have drawn concern from advocates, providers, and clinics who warned that the cuts could put additional strain on rural hospitals, children’s health services, and families across the state by reducing access to essential care.

“Around 50% of care provided at children’s hospitals in Texas is for patients covered by Medicaid,” said Christina Hoppe, president of the Children’s Hospital Association of Texas (CHAT). “As currently proposed, cuts of this magnitude will restrict access to lifesaving care for children.”

Medicaid is the foundation of Texas’ maternal and pediatric health system. As of March 2026, nearly 3 million children were covered by Texas Medicaid, which pays for 53% of births statewide. Together with the Children’s Health Insurance Program (CHIP), Medicaid covers over 40% of Texas children, making the program a major source of funding for pediatric, maternity, and rural health services.

(function(){function e(){window.addEventListener(‘message’,function(e){if(e.data[‘datawrapper-height’]!==void 0){var t=document.querySelectorAll(‘iframe’);for(var n in e.data[‘datawrapper-height’])for(var r=0,i;i=t[r];r++)if(i.contentWindow===e.source){var a=e.data[‘datawrapper-height’][n]+’px’;i.style.height=a}}})}e()})();

The Rural Costs of Cuts

The proposed changes could disproportionately affect rural communities by weakening hospitals that already operate on narrow financial margins, reducing provider participation in Medicaid, and forcing some facilities to reduce or eliminate services.

“This is bad news for Texas kids and moms,” said Diana Forester, director of health policy at Texans Care for Children. “These proposed Medicaid cuts would hit rural hospitals especially hard because many are already struggling to keep their doors open. Labor and delivery is often one of the first services to disappear when hospitals face financial pressure. Babies don’t wait for you to drive an hour to the nearest hospital.”

According to Texas Health and Human Services data from May 2026, approximately 260,000 pregnant women were covered by Medicaid, over 52,000 of them in rural and exurban counties which have seen some of the most severe service closures for maternity care.

“No Texas family should have to worry whether they’ll make it to a delivery room in time,” Forester said.

In recent years, children’s hospitals have expanded a network of outpatient clinics providing pediatric services in exurban and rural counties. But the proposed cuts could put those clinics at risk.

“If [these changes] really come into fruition, I think we’ll see a contraction of services, both in terms of availability of providers and specialists, as well as actual physical locations that are further out away from the main hospital,” Hoppe said. “So instead of enhancing access, we’ll start seeing a contraction of access kind of across the board.”

The broader cuts could also have far-reaching consequences for children with complex medical needs who rely on Medicaid-funded care and support services.

“We serve children statewide who have every type of developmental disability,” said Linda Litzinger, advocacy director at Texas Parent to Parent. “Their immense level of medical involvement would be unaffordable without keeping Medicaid at its previous level. Furthermore, Texas has 198,000 children languishing on waiting lists for home and community-based services, such as attendant care, private duty nursing, and respite. The severe State Directed Payment cuts would cause Texans to suffer by losing access to both medical and home and community-based services.”

For children across the state, reduced access to care could be dire. Seventy-five percent of children in Texas already live an hour or more from a facility that offers pediatric emergency care or specialty services. Texas children’s hospitals provide care to patients from 97% of the state’s counties, with more than one in three children arriving after being transferred from hospitals that lack the specialized resources needed for their treatment.

“When there’s a level of care that a child needs that’s beyond a rural hospital capability, then they’re most likely going to go to a children’s hospital so that they can get that level of complexity of care,” Hoppe said.

SDPs Help Keep Doors Open

An SDP is a financing tool that allows states to require Medicaid managed care plans to make additional or standardized payments to healthcare providers, increasing reimbursement and maintaining access to care for Medicaid patients.

The proposed 2026 CMS changes would cap many of these payments at Medicare payment rates, while also eliminating the most common type of SDP, known as uniform increases. While Medicare and Medicaid are both public health insurance programs, they serve different populations and operate under different payment systems. Medicare primarily covers adults 65 and over and certain people with disabilities, while Medicaid largely covers low-income children, families, pregnant people, older adults, and most people with disabilities.

In practice, the proposed changes could substantially reduce payments to providers because Medicare payment rates do not exist for many Medicaid-focused services, such as community-based services, pediatric services, and maternal health services. Also, Medicare’s payment structure was not designed for Medicaid’s provider mix or financing. States would have less flexibility to direct funding where it is most needed, potentially leading to lower reimbursement rates, fewer participating providers, and reduced access to care for Medicaid patients.

These proposed changes extend beyond the limits established in 2025 by H.R. 1, known as The One Big Beautiful Bill Act.

“CMS has gone way over statute in these proposed limitations to State Directed Payments,” said Lynn Cowles, director of health and food justice at Every Texan. “The proposed rule exceeds the federal cuts established in H.R. 1, which lawmakers approved to protect the populations Medicaid in Texas serves—people with disabilities, people who are pregnant, and children.”

This overstepping could jeopardize rural hospitals across the state and country.

“This administration, its agencies, are overstepping an already cruel and health-jeopardizing law that’s going to cost a lot of people access to their rural hospitals,” Cowles said. “And those rural hospitals can’t keep their doors open because they don’t have access to these funding mechanisms that really make up for pretty chronic underfunding in our Medicaid system in general, because our reimbursement rates are so low.”

In Texas, 27 hospitals are already at risk of immediate closure.

Access to Care in Central Texas

While the proposal would not reduce Medicaid coverage for pregnant women, health advocates said the proposed changes to SDPs could place additional financial pressure on providers, potentially limiting access to care for the communities that rely on their services.

That concern is especially relevant in Central Texas. In Bastrop County, more than 61% of children and more than 1,000 pregnant women are enrolled in Medicaid. In neighboring Caldwell County, Medicaid covers 60% of children and more than 600 pregnant women.

“The biggest barrier that pregnant women face in these and other rural communities in Texas, is a lack of maternal health providers that will accept uninsured or underinsured patients,” said Kristen Lenau, the women’s health policy director at the Texas Women’s Healthcare Coalition. “For a limited [maternal health] access county like Bastrop, further instability in the healthcare infrastructure will jeopardize those providers’ ability to maintain services for any pregnant women, not just those on Medicaid.”

Caldwell County is considered a maternity care desert, meaning many pregnant women already have to leave their county for labor and delivery, neonatal care, high-risk pregnancy services, and other specialized care. If hospitals in the surrounding communities that serve these patients reduce services because of financial pressures, expectant mothers could be forced to travel even farther to receive care.

“The broader concern is what could happen to the regional hospitals, specialists, outpatient practices, and referral networks that mothers in these counties already rely on,” said Stephanie Sword, the founder and executive director of Save Texas Moms. “When hospitals and providers are placed under greater financial pressure, they may reduce the number of Medicaid patients they accept, have fewer appointments available, struggle to recruit or retain staff, or consolidate services in larger communities. A reduction in services outside Bastrop or Caldwell County can still directly affect mothers who live there if that is where they must go to deliver their babies or receive specialized care.”

Sword said Medicaid’s role in maternal health goes beyond providing insurance coverage for half of births in Texas. Maintaining a strong maternal healthcare system also depends on ensuring providers have the resources to continue offering care.

“Coverage is essential, but coverage alone does not create an available prenatal appointment, bring an obstetrician to a rural community, keep an emergency department staffed, or maintain labor and delivery services at a regional hospital,” Sword said. “State Directed Payments are complicated, but why they matter is fairly simple: they are one way Texas provides additional Medicaid funding to certain hospitals and healthcare providers. If that support is reduced, the effects may show up in staffing, appointment availability, provider participation, or the ability to continue offering certain services.”

And a reduction in services affects every patient, regardless of insurance.

“When a community loses a healthcare professional or a hospital reduces a service, everyone who depends on that provider may be affected, including people with private insurance and people who are uninsured,” Sword said.

National Effects

These changes won’t just affect Texans.

As of 2025, 31 states had at least one active SDP. Many of these states have significant rural populations, which stand to lose billions in health care. Behind Texas, Tennessee is projected to lose the second largest amount in funding – about $15.9 billion between 2025 and 2034. South Carolina, Mississippi, and Tennessee are expected to see the largest cuts relative to their Medicaid budgets.

Overall, the policy would reduce Medicaid funding by an estimated $241 billion through 2034.

Across the country, hospitals, providers, and advocacy organizations have submitted comments to CMS outlining the harms the proposed SDPs could have on millions of rural patients.

“Put simply, hospitals cannot maintain or expand access or invest in quality improvements for patients if they are chronically operating at a loss,” the American Hospital Association said in a letter to CMS.

“The reality is that whether or not you have coverage, things are getting more expensive. Medication costs are going up and copays are going up,” Cowles said. “I think one thing that rural residents really should take into account here, as much as possible, is that the decisions they make in November are going to affect the cost of health care moving forward.”

————

The post Proposed Medicaid Cuts Could Cost Maternal and Children’s Health Care Billions appeared first on The Daily Yonder.

The post Proposed Medicaid Cuts Could Cost Maternal and Children's Health Care Billions appeared first on Insurance News | InsuranceNewsNet.

💡 What This Means For You

[fsi_dynamic_insight]

FARMER STOCKMAN INSURANCE

Protecting Your Future with Confidence

No pressure. No jargon. Just honest answers from advisors who genuinely care about your family’s protection.

Get a Quote →