Gov. Dan McKee sprung to action, pledging to “activate” his cabinet to prepare for federal funding cuts in a video clip released hours after Congress passed the “One Big Beautiful Bill” on July 3.
But weeks later, state leaders are still parsing through the 870-page reconciliation package, trying to make sense of how sweeping changes to federal tax code, health care funding and social assistance programs will play out in Rhode Island.
“All of those, we need to find out exactly what they do,” House Speaker K. Joseph Shekarchi said. “Just as important as what they do, is when they go into effect.”
Among Shekarchi’s top concerns: stricter eligibility requirements for Medicaid beneficiaries, cuts to hospital funding and increased state costs for the Supplemental Assistance Nutrition Program (SNAP.)
Most provisions of the federal tax and spending cuts package don’t take effect for several years, giving federal and state administrators time to prepare — or, as Shekarchi notes, postponing the discontent with federal Republican-led cuts until after the 2026 mid-term elections.
And state lawmakers were already anticipating the prospect of sweeping federal funding cuts even before they were cemented. They inserted specific language into the state’s fiscal 2026 budget calling for a series of state agency-led working groups to analyze changes to federal tax codes, Medicaid programs, and other cuts, with recommendations due to lawmakers no later than Oct. 31.
Until then, Shekarchi said it’s premature to schedule meetings with state administrators or Rhode Island’s congressional delegation.
But anticipatory grief is growing, especially over what could happen to the state’s already precarious health care system. Preliminary analysis suggests 38,000 Rhode Island Medicaid recipients could lose coverage over a 10-year period — out of 10.5 million people nationwide — with a corresponding $3 billion-$5 billion decline in federal aid to the state, according to estimates from KFF.
The biggest contributor to people losing coverage is a new work requirement that creates a red tape-ridden obstacle course for low-income people, even those with jobs, to keep their insurance, said Robert Hackey, a health sciences professor at Providence College.
“If we look at states like Arkansas and Georgia that have implemented work requirements already, the biggest challenge is that a lot of folks don’t know they need to complete the paperwork to meet the requirements,” Hackey said.
Roughly three-quarters of the 309,000 adults on Medicaid in Rhode Island already work, according to KFF But lack of notification, or obstacles with technology access or language barriers could render them unable to prove they meet the new requirements, potentially costing them coverage, Hackey said.
“It’s a back-door way to reduce Medicaid eligibility,” Hackey said. “You don’t cut eligibility, you just erect a barrier that makes it extremely difficult for people to continue to receive service.”
Similarly, more stringent and frequent redetermination of eligibility for public health insurance under the Affordable Care Act, combined with the expiration of tax credits that lowered premiums, will eliminate coverage for another 5,500 Rhode Islanders on the state health insurance marketplace over the next 10 years, according to KFF’s estimates.
Pressure on hospitals
Projected insurance losses for a total of 43,000 people across Medicaid and HealthSourceRI represents a roughly 4% drop over the current covered population. More uninsured patients could force hospitals to look to commercial payers to make up the difference, with commercial insurance companies in turn potentially hiking their premiums.
Health insurers in Rhode Island are already seeking the steepest year-over-year premium increases on individual and employer-sponsored plans in a decade, according to 2026 rate filings with the Rhode Island Office of the Health Insurance Commissioner.
“That could be a really big deal for people,” Health Insurance Commissioner Cory King said of the requested private insurance premium hikes, which stem partially from expiring federal tax credits separate from the latest budget reconciliation act. “The broader expectation is we are going to see an increase in uninsured rates even before the cuts from the new legislation take effect.”
Uninsured residents with nowhere else to seek treatment for routine or preventable health care needs places more stress on hospital emergency departments. Yet, hospitals are bracing for cuts to two key federally regulated funding sources: state directed payments and provider taxes.
“Hospitals in Rhode Island are already under strain due to the ongoing health care crisis,” said Howard Dulude, interim president of the Hospital Association of Rhode Island. “Any reduction in funding could lead to further destabilization.”
Or, potentially, shuttering entire facilities. Hackey worries about Our Lady of Fatima Hospital and Roger Williams Medical Center, which are already “hanging on by a thread” as prospective new owners look to sell $165 million in bonds to finance the sale of the safety net urban hospitals.
“They’re especially vulnerable to losing paying patients,” Hackey said. “It’s going to put them under increased financial stress. It doesn’t take much to put a hospital that’s a safety net hospital into a tailspin.”
Otis Brown, spokesperson for CharterCARE Health Partners, the local subsidiary for the now-bankrupt existing owner of Fatima and Roger Williams, did not respond to requests for comment on Thursday.
Dulude declined to comment on which hospitals will be most negatively impacted by the federal funding cuts. The Hospital Association is modeling different scenarios but it’s too early to say definitely ahead of the final rules yet to be adopted by the Centers for Medicare and Medicaid Services.
SNAP cuts fuel food insecurity
As health care supports shrink, so will food assistance. The budget package severs 20% of federal funding through 2034 for Supplemental Nutrition Assistance Program — the largest cut in its history with ramifications for 40 million low-income children, adults and seniors, according to the Center on Budget and Policy Priorities.
States that make frequent mistakes in determining payments to recipients — too much or too little — will end up shouldering more of the cost. Rhode Island is among 21 states poised to see the largest cost increase— up 15% in its required match for food assistance because its error rate exceeds 10%. In fiscal 2024, the most recent year available, Rhode Island had a 12.29% error rate.
The Rhode Island Department of Human Services, which administers the food assistance program to roughly 144,000 state residents, was working to reduce the overall error rate even before the federal reconciliation bill passed, Shekarchi said. In order to avoid a federally mandated cost-hike altogether, the state would need to cut errors by more than half — to under 6% — by the Oct. 1, 2027, start date.
To meet this ambitious, potentially impossible, benchmark, Rhode Island will have to become stingier with its food assistance program, in turn increasing food insecurity, said Michael DiBiase, CEO and president of the Rhode Island Public Expenditure Council and former state administration director.
“We’re going to see a lot more pressure and need for food banks and other nonprofits,” DiBiase said.
Melissa Cherney, incoming CEO for the Rhode Island Community Food Bank, also said the food bank was “deeply concerned” about the impacts of the reconciliation bill.
“As always, we will roll up our sleeves and work together to ensure no Rhode Islander goes hungry,” Cherney said in a statement.
Finding extra money for food banks and nonprofits in the state’s annual budget won’t be easy with a growing budget deficit, forecasted to balloon to $462 million by fiscal 2030, according to state legislative analysts.
What’s next?
In early June, Shekarchi suggested lawmakers may hold a special, October legislative session to deal with fallout from federal funding cuts, which had not been finalized by the time the state approved its fiscal 2026 spending plan. That’s now unlikely, since most federal changes don’t take effect for several years, Shekarchi said.
Senate President Valarie Lawson shared his view.
“The state budget enacted last month contains numerous safeguards put in place in anticipation of federal cuts, including preservation of state income tax revenue,” Lawson said in an emailed statement. “It appears that the most serious impacts will be in future years.”
Even with President Donald Trump’s signature, Rhode Island’s congressional delegates say efforts to blunt the effects of the federal reconciliation package will continue
“This isn’t the end of the fight,” U.S. Sen. Jack Reed said in a statement. “We’ve got to work even harder to limit the damage and then reverse it in the years ahead.”
U.S. Rep. Gabe Amo also pledged to “fight this reverse Robin Hood scheme every step of the way,” decrying the “tax handouts to billionaires.”
Congressional Republicans could face public blowback as soon as next year in the mid-term elections. But there’s no real chance of undoing any of the bill’s tax and spending provisions while Trump is still in office, Hackey said.
A change resulting from the 2028 presidential election could reverse some of the consequences, Hackey said, but not before initial cuts and lost health insurance coverage take hold.
“We need to have a plan for the immediate concerns,” Hackey said.
Devising that plan will also be no small task in a state already grappling with staffing shortages in key service agencies.
“We struggle now with just answering the phone from time to time at DHS,” DiBiase said. “This is a very heavy lift for the administration to carry out. It will be very taxing.”
This story was originally published by the Rhode Island Current.
