Critical Condition: How Medicaid Cuts Would Reshape Rural Health Care Landscapes

A defining theme in early 2025 has been reducing federal government expenditures, with the health care sector not being spared from the discussions.  The withdrawal or reduction of federal support for Medicaid will have potentially devastating impacts on access to essential healthcare services, particularly for vulnerable rural populations such as the elderly, low-income families, and those with chronic conditions. Thus, the National Rural Health Association (NRHA), along with multiple partners both at the federal and state levels have been advocating for maintaining the federal support for Medicaid.  

In rural communities, more people receive and rely on Medicaid coverage than their urban counterparts, due to lower incomes, greater percentage of older adults, higher cost of private insurance, and fewer private coverage options.  Nearly 40% of children living in rural communities are covered by Medicaid and CHIP, while almost 20% of non- elderly adults are covered.ⁱ Cuts to these populations covered under Medicaid and CHIP would be devastating for rural families. Costs of care for our most vulnerable rural residents would rise to unsustainable levels.  

If Medicaid funding is reduced, then it will result in higher rates of uninsurance across the US, with a higher impact in our most vulnerable rural areas.  These are parents, children, and working adults who would no longer be able to obtain needed health care due to it being unaffordable.  These are our neighbors, many of whom have chronic diseases that have to be regularly managed. Without coverage, many would go without care and end up in the emergency room or inpatient facility, resulting in uncompensated care that they will not be able to pay.  

Continuing existing Medicaid funding is critical for sustaining access to care in rural communities. Rural hospitals and clinics are not sustainable without this critical funding.  Medicaid makes up a larger portion of rural residents’ insurance coverage,ⁱⁱ making rural hospitals and clinics more vulnerable to cuts in these programs.  Even as facilities recover in the post-COVID environment, those rural hospitals with a higher dependence upon Medicaid reimbursement are still lagging.ⁱⁱⁱ  

Rural hospital margins are even lower in states where Medicaid expansion has not been accepted.^iv In 2023, the Medicaid and Chip Payment and Access Commission (MACPAC) examined the role of expansion on insurance rates. They found that the rate was nearly half that as in states who had not expanded, demonstrating its effectiveness in providing coverage residents of those states. Mostly notably, hospitals in expansion states had uncompensated care costs substantially lower than in non-expansion states (2.7% vs. 7.3%), reflecting the positive impact upon their financial stability.^v These findings are echoed in more than 600 research papers on the impact of Medicaid expansion.^vi Not only were there reductions in the uninsured population, but also notable economic improvements for both states and healthcare providers. 

Upwards of 45% of rural hospitals are operating with negative margins.^vii States located in the south have been the most vulnerable due to non-expansion on Medicaid which resulted in higher amounts of uncompensated care.  Cuts to Medicaid would force these providers to absorb higher rates of uncompensated care. With already razor thin margins, this further reduces their ability to serve the community, resulting in reductions in services provided, loss of jobs, and then eventually closure. 

The closure of any rural hospital is devastating to the community, as healthcare tends to be one of the top three employers in a rural town and is a strong economic driver. Since most rural hospitals own and operate primary care clinics, when they close, so does that primary care office. That means little to no access to local healthcare, forcing people to travel a long distance for emergency, inpatient, or primary care.  If a rural hospital closes, the negative economic impact is large, with businesses relocating and new ones not being started.  Using an economic model from the American Hospital Association,^viii our rural hospitals have shared that their facility contributes as much as $200,000 per hospital employee to their community.  That means that if the hospital has 300 employees the total economic contribution is $60,000,000 per annum back to the rural community. 

Ultimately, reductions in Medicaid funding will force rural facilities to shut their doors and rural residents to lose access to necessary care. NRHA calls on Congress to act as a unified, bipartisan voice to protect Medicaid funding that is vital to the health and economic sustainability of rural communities across the nation. 

Resources:

i. Alker J, Osorio A, Park E. Medicaid’s Role in Small Towns and Rural Areas. Georgetown University McCourt School of Public Policy, Center For Children and Families. Published January 29, 2025. Accessed April 3, 2025. https://ccf.georgetown.edu/2025/01/15/medicaids-role-in-small-towns-and-rural-areas/.

ii. Ibid.

iii. Levinson Z, Godwin J, Neuman T. Hospital margins rebounded in 2023, but rural hospitals and those with high Medicaid shares were struggling more than others. Kaiser Family Foundation. Published December 18, 2024. Accessed April 3, 2025. https://www.kff.org/report-section/hospital-margins-rebounded-in-2023-but-rural-hospitals-and-those-with-high-medicaid-shares-were-struggling-more-than-others-data-note/ 

iv. Levinson Z, Godwin J, Hulver S. Rural hospitals face renewed financial challenges, especially in states that have not expanded Medicaid. Kaiser Family Foundation. Published February 23, 2023. Accessed April 3, 2025. https://www.kff.org/health-costs/issue-brief/rural-hospitals-face-renewed-financial-challenges-especially-in-states-that-have-not-expanded-medicaid/

v. MACPAC. Chapter 4: Annual Analysis of Medicaid DSH Allotments to States. Published March 2023. Accessed April 3, 2025. https://www.macpac.gov/wp-content/uploads/2023/03/Chapter-4-Annual-Analysis-of-Medicaid-DSH-Allotments-to-States.pdf.

vi. Ammula M, Guth M. What does the recent literature say about Medicaid expansion?: Economic impacts on providers. Kaiser Family Foundation. Published January 18, 2023. Accessed April 3, 2025. https://www.kff.org/medicaid/issue-brief/what-does-the-recent-literature-say-about-medicaid-expansion-economic-impacts-on-providers/

vii. Topchik M, Balfour B, Brown T, Pinette M, Wiesse A. 2025 rural health state of the state. Chartis Center for Rural Health. Published February 11, 2025. Accessed April 3, 2025. https://www.chartis.com/sites/default/files/documents/CCRH%20WP%20-%202025%20Rural%20health%20state%20of%20the%20state_021125.pdf

viii. American Hospital Association. The Economic Contribution of Hospitals. Published June 2012. Accessed April 7, 2025. https://www.kff.org/wp-content/uploads/sites/2/2012/06/11econcontrib.pdf