The Legacy and Consequences of Administrative Cuts to Healthcare
By Kurt Mosley, Associations Practice Leader, HealthSearch Partners
Balancing a federal budget is no easy feat—especially when healthcare accounts for a significant share of national spending. During the 1990s, President Bill Clinton’s administration achieved a balanced federal budget, in part through targeted cuts to healthcare spending—most notably in administrative and provider reimbursements.
Now, as similar cost-cutting conversations resurface in Washington and state capitals alike, it’s worth revisiting what was cut—and what it cost us.
Clinton’s Cuts: Reform or Retrenchment?
To balance the budget in the late 1990s, the Clinton administration implemented major reductions in federal spending through the Balanced Budget Act of 1997 (BBA). Healthcare was front and center.
Key cuts included:
- Reductions in Medicare provider payments to hospitals, nursing homes, and home health agencies
- Caps on graduate medical education funding, reducing support for training future physicians
- New limits on Medicaid administrative costs, particularly for enrollment and eligibility staffing
- Reimbursement streamlining in Medicare, shifting risk to Medicare Advantage and reducing outpatient hospital payments
While these measures helped control federal spending, they also weakened the infrastructure hospitals and providers rely on—particularly in underserved and rural areas.
Trump’s Proposed Cuts: A Familiar Playbook, New Scale
Fast forward to 2025: the Trump administration has proposed significant Medicaid and Medicare reforms. House Republicans have introduced legislation aiming to cut at least $880 billion from Medicaid over the next decade. The proposal includes:
- Work and income verification requirements for Medicaid recipients
- New limitations on care for undocumented immigrants
- Potential out-of-pocket costs for some Medicaid enrollees
The Congressional Budget Office estimates these changes could result in 8.6 million Americans losing coverage within 10 years.
On Medicare, Trump has also advanced cost-cutting through executive action—most notably by reviving the “most favored nation” pricing rule, tying prescription drug costs to international price benchmarks. While intended to lower costs, such policies could also create instability in pharmaceutical access and innovation.
When Administration Is the First Cut
What Clinton’s and Trump’s approaches share is a belief that administrative functions are ripe for trimming. But the reality is more complex:
- Billing delays, staff burnout, and unprocessed claims often follow administrative downsizing
- Compliance gaps can expose providers to risk
- Reduced quality oversight weakens patient safety
When eligibility teams are understaffed, patients wait longer for care. When data systems go underfunded, health outcomes slip through the cracks. What gets labeled as “bureaucracy” is often the invisible machinery that holds the system together.
Smart Reform vs. Costly Retrenchment
Cutting costs isn’t inherently bad—but blunt-force cuts often cost more in the long run. Smart reforms focus on efficiency: interoperable data systems, streamlined billing, and automation. But slashing admin budgets without restructuring workflows leaves hospitals scrambling and patients paying the price.
The Balanced Budget Act of 1997 proved this. Just two years later, Congress was forced to pass the Balanced Budget Refinement Act, undoing some of the harshest effects on rural hospitals and providers.
A Timely Leadership Perspective
Neill Marshall, Board Chairman of HealthSearch Partners, adds:
“When leaders aim to cut costs, administration is often the first place they look—but it’s also the backbone of operational stability. We’ve seen firsthand how weakened administrative capacity leads to lost revenue, compliance risks, and ultimately, diminished care. Cost reform must be smart, not shortsighted.”
A Timeless Reminder
As the debate over healthcare spending continues, we must remember that administration is not the enemy of care—it’s the infrastructure that makes care possible. Whether it’s a hospital CFO, a Medicaid eligibility worker, or a compliance officer, these roles are essential to a functioning healthcare system.
To close, it’s worth recalling the words of President Franklin D. Roosevelt, who in 1940 declared:
“We cannot be a strong nation unless we are a healthy nation.”
That truth still holds—and the strength of our healthcare system depends on more than just front-line care. It depends on the scaffolding that supports it.
