Members of Congress will say their fiscal 2025 budget blueprint doesn’t call out Medicaid by name. That might be true, but it’s arguing semantics: To leave Medicare unscathed, as members of Congress vow, the House budget plan’s $880 billion cut to federal health spending almost certainly must come from Medicaid — there’s nowhere else to find it.
Just as certain: a cut that deep would be disastrous for working families and children in small-town America, where Medicaid means health, productivity, and financial stability.
It also would devastate our safety net and the essential hospitals at its core. Americans who face financial challenges — who just need a hand up — depend on essential hospitals, and these hospitals depend on Medicaid to keep the lights on. If you cut Medicaid to the bone, you put health care and jobs at risk for millions of Americans.
Many of those people live in rural communities. We know non-elderly adults and children in small towns and rural areas are more likely than urban dwellers to rely on Medicaid and the Children’s Health Insurance Program (CHIP). In Arkansas, Louisiana, Washington, West Virginia, and nearly a dozen other states, at least one-fifth of non-elderly adults in small towns and rural communities depend on Medicaid.
Medicaid cuts as deep as those in the House plan also would fall hard on children. In Arizona, Arkansas, Florida, Louisiana, New Mexico, and South Carolina, at least half of children in small towns and rural areas depend on Medicaid or CHIP.
Supporters of cuts claim people won’t lose benefits or that work requirements and other eligibility constraints would ensure that only those who truly “deserve” Medicaid have access to it. But ask anyone kicked off Medicaid if their benefits went untouched. Also, lost in the eligibility debate is the simple fact that nearly two-thirds of adult Medicaid beneficiaries already have jobs.
This isn’t surprising when you consider that among companies with three or more workers, only about half offered health benefits to at least some of their workers in 2023. The is particularly true among firms with just three to nine workers, with only 39% offering health benefits.
So, in communities where mom-and-pop shops dominate — again, often rural areas — Medicaid is often the only game in town for low-income workers. Cutting federal Medicaid funding leaves states holding the bag, forcing them into tough decisions on eligibility and services. That can mean loss of coverage for people who have nowhere else to turn and lead to medical debt, bankruptcies, and work days lost to untreated medical conditions.
But the economic consequences of an $880 billion cut to Medicaid ripple far beyond the local diner. Essential hospitals — about a quarter serve rural areas — often are a community’s largest employer. Further, they breathe economic life into communities in a multitude of ways beyond the jobs they provide. In 2022, essential hospitals supported $283 billion in economic activity and 6.7 million jobs nationwide — much of it in low-income communities that need both the most.
All this leads to a perverse outcome for the proposed Medicaid cuts: sicker communities and higher health care costs. Further, as Americans lose access to needed care, job losses and tumbling economic activity (and the tax revenue that goes with it) follow. Small-town America and its children stand to feel the most pain when this happens.
Worse, the hospitals these communities depend on will have fewer resources to give them the safety net they’ll need. Essential hospitals rely heavily on Medicaid; it’s about half their payer mix. Even then, Medicaid payments fall well short of essential hospitals’ costs. So, they rely on a patchwork of other federal, state, and local support to fill the gap. But there is no patch for an $880 billion funding cut.
We need to invest in the safety net, rural communities, and these hospitals — not pull the rug out from under them with unprecedented Medicaid and CHIP cuts. Small towns and their hospitals are looking to Congress to do right by working families and all Americans by protecting the health care they need.
