Congress eyes healthcare spending cuts as government funding deadline looms

“In my 20-plus years working here, we’ve never had anything this close over this period of time,” said Stuart Chapman, veteran Hill staffer and partner at Thorn Partners, during the CHIME Public Policy webinar on February 11. 

He’s referring to the razor-thin margins in Congress that are already defining President Donald Trump’s second term – margins so narrow that passing even routine legislation has become a high-wire act. With Republicans holding just a four-vote advantage in the House (219-215) and Democrats maintaining their Senate presence, the stage is set for an unprecedented period of legislative brinkmanship with healthcare programs hanging in the balance.

The most pressing challenge is the March 14 deadline to fund the federal government, which includes crucial healthcare provisions such as telehealth flexibility extensions that affect millions of Americans’ access to care. This funding deadline coincides with broader changes to federal healthcare policy from Trump’s aggressive Executive Orders. 

Just 23 days into his second term, Trump has already launched ambitious efforts to reshape federal healthcare agencies through the controversial Department of Government Efficiency (DOGE) initiative led by tech entrepreneur-turned-government-intern Elon Musk.

“There’s really an effort to significantly reduce the federal workforce,” explains JP Brandt, senior health policy counsel at Thorn Partners. “If you’re reducing the federal workforce, you lose all of that institutional knowledge that’s been there for 20 years, [everything like] how the government works and how these programs work.”

The administration has instituted a federal hiring freeze while also offering buyouts to encourage resignations – moves that face ongoing legal challenges but signal an aggressive push to shrink healthcare agencies’ operational capacity.

Congress eyes major program changes

House Republicans are pursuing budget reconciliation to advance their healthcare agenda, but face significant hurdles given the divided Congress. 

“We’re going through a period where you have to almost have a series of failed bills before you can get folks to focus or find…what is that middle ground,” said Chapman. 

The House GOP faces internal challenges too, with leadership pushing for $1 trillion in tax cuts while the Freedom Caucus seeks $2.5 trillion – making it difficult to find sufficient program savings to offset such cuts. Even if they pass a House bill, any reconciliation package would ultimately require bipartisan support given the Democratic Senate majority.

A leaked 50-page memo from the House Budget Committee Republicans reveals potential targets across 11 committees. 

The most important targets related to healthcare are:

• Site neutrality reforms, which would equalize payments between hospital outpatient departments and independent physician offices for the same services. This would reduce hospital revenues and boost revenue for private practices that currently receive lower Medicare reimbursements than hospital-owned facilities for identical services
• Modifications to uncompensated care payments that help hospitals cover the costs of treating patients who cannot pay for their care. This would include removing $229 billion from the Medicare Trust Fund and creating a new fund that would distribute payments to all provider types who deliver uncompensated care
• Changes to hospital wage index calculations that determine how much Medicare pays hospitals based on local labor costs, potentially affecting hospitals in both high and low-wage areas
• Adjustments to disproportionate share hospital (DSH) payments – federal funds that support hospitals serving high numbers of low-income and uninsured patients – to expand beyond just hospitals. This could reduce the total funding available to hospitals that have traditionally received these payments.

Regulatory Uncertainty Looms

The administration has also ordered agencies to eliminate ten existing regulations for every new one created – an escalation of Trump’s previous two-for-one requirement that has healthcare policy experts questioning how agencies will manage statutorily mandated rules.

“The amount of regulations that come out of CMS that are statutorily required is massive,” Brandt explains. “I’m curious to see how that is going to impact those statutorily mandated regulations.”

Early signs suggest a dramatic slowdown in regulatory activity. Sources indicate upcoming hospital payment rules may be stripped down to basic funding formulas, eschewing the policy additions that typically accompany such rules.

As these sweeping changes unfold, healthcare organizations face a period of unprecedented uncertainty. Critical federal health agencies like the Office of the National Coordinator for Health IT remain without confirmed leadership. Meanwhile, courts continue weighing in on executive actions targeting diversity initiatives, censorship, and federal workforce policies.