More than 300 rural hospitals are at risk of closure, conversion or service reductions due to Medicaid cuts in HR 1, which are estimated to reduce federal Medicaid spending in rural areas by nearly $140 billion, according to a recent report from the American Hospital Association.
The law includes roughly $1 trillion in Medicaid cuts, which are also estimated to increase rural hospital uncompensated care costs by nearly $20 billion.
Roughly 16 million rural Americans and nearly 50% of rural births are covered by Medicaid, and its base rates pay hospitals less than 58 cents on the dollar, the report said.
Closure risks are only part of the puzzle. More than 40% of roughly 1,800 rural hospitals have negative operating margins, with hundreds at “high financial risk.” Many facilities have been forced to end crucial services like chemotherapy and obstetrics services. More than 150 rural hospitals have closed or converted since 2010.
The Medicaid cuts are being compounded by other pressures. The expiration of enhanced ACA premium tax credits is estimated to reduce rural hospital revenue by $1.6 billion in 2026. Medicare Advantage plans paid rural hospitals 91% of traditional Medicare rates on a cost basis in 2024, a gap the AHA estimates cost rural hospitals over $1 billion that year.
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