Federal Medicaid cuts could hobble state budget and healthcare system, business leaders warn

Arizona’s leading business organizations are urging the state’s congressional delegation to reject potential cuts to Medicaid in the budget reconciliation bill currently under debate on Capitol Hill.

In a joint letter sent to Arizona’s congressional delegation, a coalition of major business and economic development groups across the state cautioned that proposed reductions in federal Medicaid funding would have sweeping negative consequences—not just for the state’s healthcare system, but for the overall economy. The letter warns that federal cuts would shift billions of dollars in healthcare costs onto Arizona taxpayers, threaten coverage for hundreds of thousands of residents, and impose serious financial strain on hospitals, healthcare providers, and businesses alike.

Impacts of cuts

The business leaders estimate that as many as 500,000 Arizonans could lose health coverage if the cuts are enacted, with ripple effects that would increase private health insurance costs and overwhelm hospitals already facing capacity and workforce challenges.

“The impact of these cuts is potentially catastrophic for Southern Arizona,” said Ted Maxwell, president and CEO of the Southern Arizona Leadership Council. “This isn’t just a health care issue—it’s an economic issue that affects every employer and community in Arizona. A drastic reduction in AHCCCS funding would create an economic ripple effect, forcing hospitals to scale back services, employers to absorb higher healthcare costs, and state budget officials to scramble for solutions. That’s why business groups across Arizona are urging the congressional delegation to stand up for our state and reject these misguided cuts.” 

Economically, the coalition paints a dire picture: a potential loss of nearly 300,000 jobs statewide and a projected $30 billion reduction in economic output—an impact they describe as comparable to the downturn experienced during the Great Recession. Such cuts, the letter notes, would undermine Arizona’s progress in healthcare access and economic recovery, while imposing avoidable costs on employers and families.

The success of AHCCCS

The coalition underscores the success of Arizona’s Medicaid program, AHCCCS, which has long been recognized as one of the most efficient and well-managed systems in the country. By utilizing a managed care model that incorporates private sector expertise, the program has consistently controlled costs while maintaining quality care for Arizona residents. It has also demonstrated effectiveness in eliminating waste, fraud, and abuse—giving taxpayers assurance that public funds are being used responsibly. Business leaders warn that slashing federal support would destabilize this well-functioning system, forcing Arizona to absorb significant fiscal burdens without viable alternatives to bridge the gap.

Further, the coalition points to encouraging trends: since the start of the state’s fiscal year last July, more than 155,000 people have left the AHCCCS rolls—largely due to gaining employment that allowed them to transition off the program. Business leaders argue that Congress should support these kinds of positive outcomes by giving states like Arizona the flexibility to pursue innovative, cost-saving solutions, rather than imposing funding cuts that risk undoing progress and creating further economic uncertainty.

“As business leaders, we are deeply concerned about the devastating impact that federal Medicaid cuts would have on Arizona’s economy and health care system,” Arizona Chamber of Commerce & Industry President and CEO Danny Seiden said. “AHCCCS is a national model for cost-effective health care delivery, and gutting its funding would lead to skyrocketing uncompensated care costs, job losses, and a serious blow to our state’s economic momentum. We urge the Arizona congressional delegation to protect Arizona’s ability to provide stable, responsible health care access.” 

The coalition represents a broad swath of Arizona’s business leadership, underscoring the far-reaching concern about the potential fallout. The organizations signing the letter were:

• Arizona Chamber of Commerce & Industry

• Arizona Hispanic Chamber of Commerce

• Buckeye Valley Chamber of Commerce

• Greater Flagstaff Chamber of Commerce

• Greater Phoenix Chamber

• Greater Phoenix Economic Council (GPEC)

• Greater Phoenix Leadership (GPL)

• Nogales Santa Cruz County Chamber of Commerce

• Sky Islands Regional Partnership

• Southern Arizona Hispanic Chamber of Commerce

• Southern Arizona Leadership Council (SALC)

• Southwest Veterans Foundation & Chamber of Commerce

• Tucson Metro Chamber