Jordan Ellis
Hospitals in the US are primarily funded by a combination of federal and state governments, with the federal government providing the majority of funds for programs like Medicaid, which is a federal-state partnership that offers health coverage to low-income individuals and those with disabilities. The federal government also provides grants to hospitals through the Department of Health and Human Services (HHS), which offers financial transparency through its Tracking Accountability in Government Grants System (TAGGS). In addition, hospitals may receive funding through state taxes and local government funds. However, there are discussions and proposals to limit state taxes on healthcare providers and cut federal Medicaid spending, which could significantly impact hospital funding and patient coverage.
| Characteristics | Values |
|---|---|
| Hospitals funded by federal government | Yes, hospitals receive federal funding |
| Hospitals funded by state government | Yes, hospitals receive state funding |
| Hospitals funded by Medicaid | Yes, hospitals receive Medicaid funding |
| Hospitals funded by grants | Yes, hospitals receive grants from the Department of Health and Human Services (HHS) |
| Hospitals funded by insurance companies | Yes, hospitals receive funding from insurance companies |
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What You'll Learn
Medicaid and federal funding
Medicaid is a joint federal-state program that provides health insurance for lower-income Americans. It is jointly financed by the federal government and the states, with the federal government paying close to 70% of the total costs in the 2023 fiscal year. The federal government's contribution varies from state to state, ranging from 50% to 77% in 2023, with the federal medical assistance percentage (FMAP) governing most federal funding for states. The FMAP takes into account a state's per capita income, with lower-income states receiving a higher share of federal funding.
States have flexibility in determining how to finance the non-federal share of state Medicaid payments, which can include state general funds, health-care-related taxes, and local government funds. All states except Alaska finance some of the state costs with taxes on healthcare providers, and provider taxes are a major source of funding. States with larger populations, such as California, New York, and Texas, receive the most federal Medicaid funding.
Medicaid plays a significant role in the US health system and state budgets. It is designed to be countercyclical, meaning enrollment expands during economic downturns when people lose their jobs and employment-based health coverage. It is the largest source of federal revenues for state budgets and acts as both an expenditure and a source of federal funding. States have an incentive to control Medicaid spending because they pay a share of the costs, and federal matching dollars from Medicaid spending have positive effects on state economies.
Federal funding for Medicaid has grown over time as new groups and types of services have been authorized by Congress. For example, the Affordable Care Act (ACA) expanded the Medicaid program to cover otherwise ineligible individuals with incomes up to 138% of the poverty level, with the federal government covering 90% of the cost of this expansion population.
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Federal grants and awards
The federal government also provides capital grants for the construction, renovation, and improvement of healthcare facilities, including hospitals. These grants can be used for various purposes, such as building new facilities, remodelling, purchasing equipment, or financing capital assets. Some states also offer grant programs to support hospitals within their jurisdictions. For instance, the New Jersey Health Care Facilities Financing Authority provides municipal bonds for healthcare organisations in the state.
Healthcare organisations seeking federal grants must comply with the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, commonly referred to as the uniform guidance. Non-compliance poses risks of losing funding, penalties, and suspension from future awards. The uniform guidance applies to funding received directly from federal awarding agencies or indirectly through pass-through entities, such as state governments, local governments, or institutions of higher education.
To find and apply for federal grants, organisations can utilise resources such as Grants.gov, which provides information on federal grant programs and allows users to search, filter, and apply for specific funding opportunities. Additionally, the Community Foundation Locator can help identify grant-making foundations in specific regions. It is important to carefully review grant and award documents to understand the funding source and any applicable compliance requirements.
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Federal budget cuts
Medicaid is a federal-state partnership that provides health coverage for millions of Americans, particularly those from low-income households and individuals with disabilities. The federal government and states share the responsibility for financing Medicaid, with the federal government guaranteeing federal matching payments with no preset limit. In recent years, there have been discussions and proposals to cut federal Medicaid spending through budget reconciliation. These cuts could limit the use of state taxes on healthcare providers and shift more of the financial burden to the states. Such changes would likely result in reduced Medicaid coverage, lower payment rates for healthcare providers, and increased challenges for hospitals in managing uncompensated care costs.
Additionally, federal budget cuts can indirectly affect hospitals by reducing funding for other social services and safety net programs. Hospitals often collaborate with and refer patients to community-based organizations and social service agencies. Cuts to these programs can increase the burden on hospitals, as they may need to allocate more resources to address social determinants of health and provide wrap-around services for vulnerable patient populations.
The impact of federal budget cuts on hospitals can vary across states. Some states with higher provider taxes and robust healthcare infrastructure may be better positioned to absorb the reductions without significant disruptions. However, states with rural or under-resourced hospital systems may struggle to maintain the same level of healthcare services, potentially leading to reduced access to care for their residents.
Overall, federal budget cuts in the healthcare sector can have far-reaching consequences for hospitals. They may result in financial strains, shifts in coverage and reimbursement rates, and challenges in maintaining the quality and accessibility of healthcare services, especially for vulnerable and underserved populations.
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Federal law and hospital requirements
Medicaid is a federal-state partnership that provides health coverage for about 2 million people in Georgia, including about 2 in every 5 children. The program is jointly financed by the federal government and the states, with the federal government paying close to 70% of the total costs in the fiscal year 2023. States are responsible for administering Medicaid, and most contract with private insurance companies. Federal law says that state Medicaid programs must reimburse out-of-state hospitals for beneficiaries' emergency care.
The federal government also awards grants to hospitals through the Department of Health and Human Services (HHS). HHS's Tracking Accountability in Government Grants System (TAGGS) is a database that provides detailed descriptions of grants, loans, and financial assistance awarded by HHS. In Fiscal Year (FY) 2024, the total funding for discretionary and cooperative agreements was $73.32 billion, a decrease from FY 2023's total of $84.08 billion.
The American Rescue Plan Act (ARPA) provides a financial incentive for states to expand Medicaid to low-income adults, offering a 90% federal match for newly eligible enrollees. This has the potential to bring in additional federal revenue for states, helping to offset the costs of full Medicaid expansion.
Additionally, the Emergency Medical Treatment and Labor Act, a 1986 law, requires hospitals that receive federal funding to treat, stabilize, or transfer emergency patients to a facility that can provide care, regardless of their insurance status or ability to pay. This law aims to discourage hospitals from turning away patients who lack the financial means to pay for treatment.
However, there have been discussions about potential cuts in federal Medicaid spending, which could impact hospital funding. The Congressional Budget Office (CBO) estimates that restricting provider taxes would lead to downward pressure on payment rates for hospitals, particularly those that are institutional providers.
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Federal funding and abortion laws
In 2025, President Trump revoked two executive orders made by Joe Biden in 2022, which were aimed at protecting and expanding access to abortion care. The revocation was based on the Hyde Amendment, which restricts abortion coverage for federally funded healthcare recipients. The amendment, introduced in 1977, was enacted to prevent federal funding of elective abortions, stating that taxpayers should not be forced to pay for the practice.
The Biden administration's orders had violated the Hyde Amendment by embedding federal funding of elective abortions in a variety of government programs. For instance, the Department of Veterans Affairs allowed hospitals to provide abortions, and the Department of Health and Human Services paid for abortions for illegal immigrants. President Trump's revocation of these orders aimed to restore the longstanding policy of preventing taxpayer funding of abortions.
The Hyde Amendment does not prevent women who receive healthcare through the US government from paying for the procedure out of pocket. However, critics argue that the amendment disproportionately affects low-income women, women of color, younger women, and immigrants, as many abortion recipients live below the poverty line.
Additionally, President Trump reinstated the Mexico City Policy, ensuring that taxpayer money is not used to fund abortion globally. He also cut funding to the United Nations Population Fund, which supported coercive abortion and forced sterilization. These actions reflect the administration's commitment to stopping taxpayer funding of abortion and allowing states to determine life policies through a vote.
The revocation of Biden's mandate has raised concerns about the confusion it creates for hospitals and the potential impact on emergency abortions in states that ban or restrict them.
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Frequently asked questions
Yes, federal governments do fund hospitals. Medicaid, for example, is a federal-state partnership that provides health coverage for about 2 million people in Georgia, including about 2 in every 5 children. The federal government also guarantees federal matching payments with no pre-set limit.
Federal governments fund hospitals through grants, loans, direct payments, and other types of financial assistance. The Department of Health and Human Services (HHS) has a database of grants called the Tracking Accountability in Government Grants System (TAGGS). TAGGS provides detailed descriptions of grants, loans, and financial assistance awarded by HHS.
Federal funding has a significant impact on hospitals and their ability to provide care. For example, federal funding can help support hospitals in treating uninsured or underinsured patients and covering the costs of uncompensated care. Additionally, federal funding can help hospitals expand their services and improve their facilities.
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