Independent agents help healthcare clients manage Medicare and Medicaid cuts

These changes in the healthcare landscape can create risks that may affect the stability of insurance claims. Fortunately, independent insurance agents can help their healthcare clients understand and adjust to evolving trends and developments in the marketplace, and to build insurance programs that meet these and other emerging risks.

Three significant risks for healthcare organizations 

1. Revenue loss: One of the most immediate effects of funding cuts is a significant drop in revenue for healthcare organizations. Estimates show an $80 billion decrease in revenue for the healthcare industry in 2026, which may force many facilities—especially those in rural or underserved areas—to reduce services or shut down entirely.
2. Increase in uncompensated care: Cuts to Medicare and Medicaid can mean more uninsured patients, leading to an estimated $19 billion increase in uncompensated care. Providers may try to recoup losses by negotiating higher rates with private insurers, which in turn, raise prices for patients with private healthcare to maintain profitability.

3. Workforce and operational disruptions: Funding cuts often lead to staffing reductions and/or operational restructuring. These changes can compromise the quality of care, delay administrative processes like appeals, and reduce patient support services—all of which can increase the likelihood of patients or their families making allegations of improper care.

    

Navigating the resulting risks 

• Compromised patient care – Declining quality of care as a result of reduced budgets may put healthcare organizations at a greater risk of malpractice claims as well as reputational damage. This can result from reduced staffing, cuts to training programs, fewer risk management activities and lack of investment in patient-facing technology. Resulting claims can further pressure budgets in the form of increased premiums and retentions. To support a strong culture of safety, healthcare organizations should prioritize the use of incident reporting tools and root cause analysis to efficiently track and respond to adverse events. Regardless of facility size or care complexity, root cause analysis remains essential, particularly during times of staff turnover, the introduction of new technology or other operational changes. Independent agents can help ensure their clients have effective insurance programs in place, including strong risk management and training protocols.
• Compliance challenges – Reduced administrative capacity can lead to missed reporting deadlines, incomplete documentation and failure to meet quality benchmarks. This can mean a higher risk of coding errors, over or under billing, which can potentially trigger audits, penalties, fraud investigations or whistleblower lawsuits. To mitigate these risks, organizations can schedule periodic internal audits to proactively identify gaps in billing, documentation and reporting. When paired with targeted staff training, this approach promotes regulatory awareness, consistent documentation practices and early detection of issues that could lead to external investigations. Agents can ensure their clients’ liability policies include the necessary specialized coverages and limits, helping to protect their clients from the risks of audits and investigations.
• HIPAA and data security gaps – Underfunded IT departments may struggle to maintain cybersecurity and to protect patient data, increasing the of HIPAA violations. Some carriers offer discounted access to cybersecurity vendors that can help protect data and systems. At the same time, certain coverage endorsements can help cover defense costs incurred as a result of a discovery request for HIPAA-related proceedings.
   

What this means for insurance agents 

In today’s evolving healthcare environment, cuts to Medicare and Medicaid represent more than just budgetary adjustments. They signal shifts that could disrupt care delivery, strain provider resources, and introduce new risks. As trusted advisers, independent insurance agents are uniquely positioned to help healthcare organizations prepare for and respond to these changes, ensuring they have the right coverage and risk management strategies in place to protect their operations and the patients they serve. Partnering with The Hanover, a carrier that truly understands the space and can provide the necessary products, tools and services, can make all the difference for agents and customers alike.