Cuts to Medicaid, which rural areas disproportionately rely on for health care coverage, have emerged as a significant problem for congressional Republicans as they try to agree on a budget plan.
The House budget resolution approved Tuesday doesn't explicitly call for cuts to Medicaid but the Energy and Commerce Committee would be directed to cut programs under its purview by $880 billion. The only program that much savings could come from is Medicaid.
Hardline conservatives have been pushing to cut Medicaid and other entitlement programs. President Donald Trump has given somewhat mixed messages. Although he has expressed support for the House bill he reiterated Wednesday to reporters that he opposed cuts to Medicaid, Medicare or Social Security except to address fraud. "We are going to be looking fraud" to remove "people who shouldn't be on" those programs, he said.
Rural hospitals and providers tend to rely more heavily on public payers; thus, programs like Medicare and Medicaid make up a larger percentage of coverage and payment.
Rural communities also tend to depend more on Medicaid because fewer employers in those areas offer insurance to their workers, said Edwin Park, research professor at the Center for Children and Families at Georgetown University. Additionally, these communities have lower average incomes, which means more residents are eligible for Medicaid.
Medicaid coverage rates for children and nonelderly adult residents were higher in rural areas compared to metropolitan areas, according to the Georgetown Center. In 2023, 40.6% of children in rural areas were enrolled in Medicaid, compared to 38.2% in metro areas.
About half of rural hospitals operate on negative margins, meaning any cuts to payments could lead to elimination of services, delays in getting equipment or even facility closing, said Carrie Cochran-McClain, chief policy offer at the National Rural Health Association.
This means people who typically rely on these programs may not be able to access care in their communities and have to travel longer distances or may forgo care or preventative screening.
Former Sen. Heidi Heitkamp (Photo by Lydia Johnson)Former North Dakota Democratic Sen. Heidi Heitkamp said that in states that haven’t expanded Medicaid, there’s a higher rate of rural hospitals shutting down. Closing these institutions not only limits medical services but also has consequences on the rural economy as hospitals or nursing homes are often the largest employer in a community.
It’s not clear what changes to Medicaid would be implemented to achieve the cut. If the House and Senate agree on a final budget resolution that requires Medicaid cuts, committees in both the Senate and House would have to determine the details through the budget reconciliation process.
There are indications of cuts that Republicans may pursue, however, based on policy menu options circulated by the House Budget Committee.
Most of the proposals under consideration focus on shifting costs to states or making it more challenging for them to pay their share of Medicaid costs. Park said the Medicaid cuts being considered in the House would have a “devastating” impact.
“States have to balance their budgets, unlike the federal government, and so they’re going to have to cut their Medicaid programs,” Park said.
There have been conversations about block granting or creating a per person cap on Medicaid. This would likely shift more cost to the states, which could change eligibility, how much they provide and what services are covered by Medicaid.
Under current financing for Medicaid, the matching rate varies by state but there’s no limit to federal funding. That means if costs go up, so does the federal share. If a cap on federal funding is added, it would generate federal savings over time because the cap is set at a level where it grows less each year than needed to keep up with healthcare costs, Park explained.
Cochran-McClain also has heard talk of creating or increasing premiums, deductibles or copayments. These are often not included in Medicaid or are included at very low levels because most participants are low-income and don’t have a lot of excess funds to pay for health care.
Such a policy change could lead to more people losing coverage or not being able to afford coverage, which could have consequences for provider sustainability or increase waitlists.
Another policy option is restricting states' ability to use provider taxes. States can support Medicaid through taxes or assessments on providers and managed care plans.
Taxes are typically used for provider-directed payments, allowing states to target issues or close gaps in payments. NRHA proposes using these payments to support rural obstetric care access.
“If that went away, then states would lose their ability to really do targeted support for services and providers that may need additional resources to support the safety net in their communities,” Cochran-McClain said
Another suggestion is to reduce or eliminate the 90% federal match for the cost of Medicaid expansion. Lowering it to a nearly 60% match would require some states to cover as much as five times more, Park said.
Some states have trigger laws that automatically turn off Medicaid expansion if the matching rate is reduced. Other states may need to drop their expansion over time because of the costs.
This could have a disproportionate impact on rural communities. Cochran-McClain said in the 40 states where Medicaid was expanded, rural facilities are performing better.
Others have proposed new work requirements. Cochran-McClain said rural residents tend to be lower wage workers but are employed. NRHA’s perspective is that Medicaid work requirements don’t accomplish what they seek to do and often are adverse for providers and patients.
In the last 15 years, 180, or about 10%, of rural hospitals have closed or discontinued in-patient services, Cochran-McClain said. Independent pharmacies and long-term care like nursing facilities in rural communities also have closed at high rates.
“Having to revisit the conversation about the importance of Medicaid in our rural communities really prevents us from moving forward with some of the more innovative things we’re hoping to do in health care that really truly look to help manage people’s health and allow them to live healthier lives,” Cochran-McClain said.
Although Republicans have insisted that the cuts are focused on eliminating waste, fraud and abuse, Park called that a “misleading claim.” Many of the cuts under consideration were discussed in 2017 during efforts to repeal the Affordable Care Act. The purpose then was openly about cutting Medicaid, he said.
Park added there are already controls under Medicaid to combat fraud, waste and abuse at state and federal levels, and data shows no evidence of significant fraud among eligible individuals.
“These are the exact same proposals that were considered eight years ago,” Park said. “They are on the table again, except now it's under a new rationale about fraud, waste and abuse.”
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