Medicaid cuts rippling through rural America could bring hospital closures, job losses

WASHINGTON — Americans living in rural communities throughout the country could see their access to health care diminish if Congress changes eligibility for Medicaid or significantly reduces its federal funding.

While rural residents who depend on the state-federal program for lower income people would experience the most substantial impacts, those who have private health insurance or have other coverage, like Medicare, would likely encounter changes as well.

Rural hospitals and primary care physicians’ incomes would likely go down if Medicaid patients are no longer able to afford the same level of health care, potentially leading to reductions in services offered for everyone or even closures, according to experts.

Whitney Zahnd, assistant professor in the Department of Health Management and Policy at the University of Iowa, said that cuts to Medicaid “will disproportionately hit rural communities,” where 24% of people are covered by the program, including 47% of all births and a majority of nursing home patients.

“This is something that’s going to impact them more than those in urban areas and that’s on top of the already lower access to care, higher need for care, older populations,” Zahnd said. “It’s just going to make things that are already a challenge even more challenging for rural communities.”

The Federal Office of Rural Health Policy categorizes about 20.3% of Americans, or 62.8 million people, as living in rural areas, based on 2020 Census data.

Hospital closings in rural America

Rural areas have seen hospitals close their doors at higher rates than facilities in non-rural areas and that trend doesn’t appear likely to reverse any time soon.

The Cecil G. Sheps Center for Health Services Research at University of North Carolina at Chapel Hill has an interactive map showing where 87 rural hospitals have closed completely since 2010, while an additional 65 “no longer provide in-patient services, but continue to provide some health care services.”

And a report from the Center for Healthcare Quality and Payment Reform released in February shows that more “than 700 rural hospitals — one-third of all rural hospitals in the country — are at risk of closing because of the serious financial problems they are experiencing.”

Losing income from Medicaid patients could lead to a “domino effect,” Zahnd said, exacerbating budget challenges for rural health care providers and potentially communities overall.

“Economically in a lot of rural communities, the hospital is the largest employer,” Zahnd said. “So if you have a hospital close, it’s not just that people are losing access to health care, they might be losing their job or their family member may be losing their job.”

Rural health care providers that are able to stay open might have to cut the services they offer to keep their accounts from going too far into the red. Such a decision wouldn’t just harm Medicaid patients, but anyone living in a rural community who goes to that doctor or hospital.

“So those are some risks we would anticipate if there are these big cuts to Medicaid,” Zahnd said.

Winners and losers

Timothy McBride, co-director of the Center for Health Economics and Policy at the Institute for Public Health at Washington University in St. Louis, Missouri, said during a briefing on Medicaid in mid-March that financial margins for rural hospitals are “razor-thin.”

“Even in the urban hospitals, they’re probably just a few percentage points, but in rural hospitals, they can be just a percentage point or 2 or negative,” McBride said. “So if you take away the Medicaid dollars, they’re certainly going to go negative. And if you wonder why rural hospitals close, that’s why.”

McBride also made the point during a March 13 briefing hosted by SciLine, a service for journalists and scientists based at the American Association for the Advancement of Science, that Medicaid provides funding for a lot of rural health care providers.

“In an economic system, if we cut the spending, we can go, ‘Oh, that’s great. We cut $880 billion.’ But whose income is that? It’s income to hospitals, it’s income to doctors,” McBride said. “And that’s going to, you know, be really hard on rural systems and on rural hospitals and urban systems.

“Yeah, it’s going to help the taxpayers, but, you know, just be mindful of who is going to be hurt. There’s winners and losers here.”

Budget process

Republicans in Congress are planning to use the complicated budget reconciliation process to extend the 2017 tax cuts they enacted during President Donald Trump’s first term to the tune of about $4.5 trillion in new deficits. They also want to boost spending on defense and border security by hundreds of billions of dollars and rewrite energy policy.

In order to pay for some of the package, the House’s budget resolution instructs the committee that oversees Medicaid to cut $880 billion in spending during the next decade — the figure cited by McBride.

Republicans in the Senate haven’t yet agreed to that outline, with several expressing concerns about how steep cuts to federal funding would affect their constituents.

Census data shows that more than 85% of the United States remains rural, meaning every one of the 53 Republican senators represents a state with at least some rural areas.

The Senate in the weeks ahead is expected to debate the budget resolution the House voted along party lines to approve in February. Senators are likely to make changes and send it back across the Capitol for the House to give final approval.

Once the two chambers vote to adopt the same budget resolution with identical reconciliation instructions, Congress can formally begin advancing legislation that could restructure Medicaid. But the GOP will need to stay united throughout the process.

Republicans hold a paper-thin majority in the House of Representatives, requiring that any proposed changes to Medicaid garner the support of centrist and far-right GOP lawmakers.

Even a few defections over Medicaid changes, or other elements in the bill, would stop the package from becoming law.

Avoiding high medical costs, bankruptcy

Joan Alker, executive director of the Georgetown University Center for Children and Families, said that in addition to being “a critical backbone to our healthcare system,” Medicaid helps prevent lower-income Americans from going into medical debt and reduces the number of people landing in emergency departments for conditions that can be managed by primary care providers.

“We spend a lot of time, of course, rightly, thinking about Medicaid and the question of access. But fundamentally, Medicaid is an economic support — a critical piece of the puzzle for families who are struggling to pay bills with the high cost of housing and food,” Alker said. “And so that’s the number one most important thing: If you are uninsured in this country, unless you are a billionaire, you are going to be exposed to high medical costs, and those can lead to debt, and even bankruptcy.”

When people lose access to health insurance or programs like Medicaid, they tend to delay or avoid going to primary care providers, who can diagnose issues early and help patients manage chronic conditions.

“That’s not the way we want our health system to work,” Alker said. “Their condition will have worsened. They won’t have had access to prescription drugs that they needed to address chronic conditions, like asthma or diabetes or hypertension. And so they get worse and show up in the emergency room.”

Medicaid also covers health care for about half of the children in the United States and more than 40% of the births, making the program a significant source of income for both pediatricians and OBGYNs. They would see their budgets decreased if patients lose access to the program.

“There are already challenges, and these kinds of cuts will really exacerbate those for families living in these communities, whether they’re enrolled in Medicaid or not,” Alker said.

Entire community affected

Megan Cole, associate professor in the Department of Health Law, Policy and Management at Boston University School of Public Health, said during the SciLine briefing that if Congress cuts Medicaid, it would have wide-ranging effects on rural health care.

“I think these cuts will have impacts not just on Medicaid recipients but on whole economies and health systems; so particularly safety net health systems, community health centers, rural hospitals,” Cole said. “As those institutions have less patient revenue. They may face reductions in services. They may close certain sites depending on finances. They may eliminate staff. So that affects not just the Medicaid enrollees, but also affects anyone who is otherwise served by those providers.”

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