President Donald Trump signed a sweeping spending package into law on July 4, which includes provisions that will drastically reduce Medicaid spending by more than $1 trillion over the next decade. This legislation is expected to leave an estimated 11.8 million Americans without health insurance, with rural communities facing the brunt of the effects.
Rural areas, home to nearly 20% of Americans (approximately 66 million people), are heavily reliant on Medicaid, reports ABC News. According to nonprofit KFF, Medicaid covers one in four rural adults, compared to lower reliance in urban areas. The reduced funding will disproportionately affect these communities, where individuals are already at increased risk of losing health coverage.
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Studies conducted by rural health experts predict that changes to Medicaid and the Affordable Care Act (ACA) will amplify financial pressures on hospitals serving rural populations, reports the Conversation. Many of these hospitals, already struggling to stay afloat, will face reduced Medicaid payments. Hospitals in rural America depend heavily on these payments to provide care, meaning they will need to make difficult decisions such as reducing services, delaying new equipment investments, laying off staff, or — even worse — closing their doors permanently.
The consequences of these closures are destructive. Since 2010, 153 rural hospitals have already shuttered or stopped offering inpatient services, and projections suggest more closures are likely to follow. Maternity care is especially vulnerable, as more than half of rural hospitals no longer provide childbirth services, forcing pregnant women to seek care far from home.
Work Requirements and Policy Changes Add Burdens
The Medicare reduction stems in part from new restrictions on how states fund their share of Medicaid programs. States must also impose work requirements by 2027, demanding that most Medicaid enrollees work at least 80 hours per month or attend school half-time. Historical precedent shows the pitfalls of such policies. A brief implementation of Medicaid work requirements in Arkansas in 2018 resulted in increased bureaucracy, making it harder for eligible individuals to retain their benefits without significantly altering employment rates.
Additional hurdles include new requirements for states to verify Medicaid eligibility every six months rather than once a year. This increase in administrative checks risks further disenfranchising people who are otherwise eligible for benefits. These changes are projected to cause nearly 5 million individuals to lose Medicaid coverage, according to Congressional Budget Office (CBO) estimates.
ACA Marketplace Enrollment at Risk
The legislation also reduces access to health coverage under the ACA, partly by allowing premium tax credits introduced during the COVID-19 pandemic to expire. These credits had enabled millions of Americans to secure insurance who previously could not afford it. Combined with fewer enrollment periods, stricter income documentation requirements, and other modifications, the ACA Marketplace is projected to lose an additional 7.2 million enrollees by 2034.
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The reduced insured population will create another challenge for rural hospitals, which already face high numbers of Medicaid patients and rely on these payments to provide care. A decrease in paying patients further increases unpaid hospital bills, adding to the financial strain on facilities at risk of closure.
Rural Health Transformation Program Offers Limited Relief
While the legislation includes $50 billion in funding for a new Rural Health Transformation Program, health experts believe the support pales in comparison to the estimated $155 billion in spending cuts rural areas are expected to endure over the next decade. The new program will give states access to two pools of funding, one distributed equally among applicants and another allocated based on criteria yet to be determined.
Despite these additional funds, experts estimate this relief will be insufficient to offset the combined losses stemming from Medicaid cutbacks, ACA changes, and reduced federal support for rural health facilities.
Long-Term Impact on Rural Hospitals and Healthcare
University of North Carolina researchers anticipate significant changes for rural hospitals by June 2025, with 338 hospitals at risk of service reductions, conversions to smaller emergency facilities, or closure. Reductions in Medicaid payments, compounded by high fixed costs and lower patient volumes, make financial stability an increasing challenge for these facilities.
Women in rural areas are likely to face particularly dire outcomes, as declining availability of maternity care will compel longer travel distances for labor and delivery, putting them and their babies at risk.
