Rural providers on edge as Congress eyes $1T in healthcare cuts

Modern Healthcare – Friday, June 20, 2025
By Michael McAuliff

Most of the healthcare sector is watching with trepidation as Congress pursues legislation that would cut more than $1 trillion from the system, but businesses and providers who treat patients in rural America see an existential crisis.

The One Big Beautiful Bill Act of 2025 — already approved in the House and under consideration in the Senate — includes $3.7 trillion in tax cuts partially paid for by more than $800 billion in Medicaid cuts and hundreds of billions more sliced from the health insurance exchanges and other programs. That does not include what analysts expect would be hundreds of billions more in Medicaid cuts states would make in response.

The Republicans who favor the bill say they are only targeting waste, fraud and abuse to shore up the system for low-income people, older adults and people with disabilities. Yet the nonpartisan Congressional Budget Office estimates 10.9 million people would lose health coverage by 2034.

Those who work in rural healthcare — from larger for-profit companies and regional health systems to small medical practices — say the certain result is less access to care, higher costs and painful decisions for providers at a time when rural healthcare is already in crisis.

The main way the bill saves money is instituting Medicaid work requirements and a raft of new eligibility checks in Medicaid and its expanded population under the Affordable Care Act of 2010, as well as in the ACA insurance marketplaces. A large share of rural residents are Medicaid or exchange enrollees.

Broadly, providers say the most obvious impact would be a spike in the number of patients who cannot pay their bills, leaving hospitals and others to bear the expense.

“Our uncompensated care costs will go up,” said Gabe Schneider, the director of government relations for Munson Healthcare, an eight-hospital system based in Traverse City, Michigan, that covers more than 11,000 square miles. “If people are not insured by ACA or Medicaid, we’ll still take care of them. But it’ll be uncompensated care costs.”

Rural health crisis

Exactly how much and what providers would have to do to cope with the loses would vary based on the specifics from the final legislation, but the state of rural healthcare is already precarious.

The American Hospital Association estimates that 48% of rural hospitals lost money in 2023 and reports that 92 hospitals ended inpatient services or closed entirely over the last decade. The consulting firm Avalere Health and the Physicians Advocacy Institute published a study in April that found nearly 3,300 rural medical practices closed over the past five years, which amounts to 11% of the doctors’ offices in those areas.

Dr. Randy Pilgrim, chief enterprise medical officer of Atlanta-based emergency medicine provider SCP Health, pointed to a number of causes, including inadequate Medicare and Medicaid reimbursements. But uncompensated care is already a major factor that contributes to closures.

“There will likely be more of that. And at some point, practices and hospitals will have to deal with the fact that they must be solvent,” Pilgrim said.

While GOP lawmakers largely stick to talking points about people who refuse to work and undocumented immigrants — who would still get care in hospital emergency departments regardless of ability to pay under the Emergency Medical Treatment and Active Labor Act of 1986 — the effects reach far beyond that small subset of Medicaid enrollees.

The AHA estimates rural hospitals would lose 1.8 million patients and $50 billion under the bill.

Smaller losses can be devastating, said Keith Harvey, CEO of Scenic Rivers Health Services in Cook, Minnesota, which runs seven medical clinics that treat 14,000 patients over 8,500 square miles. The provider would face difficult choices if the legislation goes through, he said.

“We’re, at best, a break-even organization. You pull a million dollars out of a $16 million operation, and where am I going to make that up?” Harvey said. “I’m going to have to make it up either by increasing volumes somewhere, finding revenue elsewhere, or I have to reduce services. And that’s when I get worried. That worries me. I don’t want to reduce services, because we are such a critical part of the communities up here.”

Service cuts

There are numerous impacts that providers don’t think lawmakers have sufficiently considered.

For instance, many rural hospitals get paid by the federal government based on how many Medicaid or Medicare patients they treat. If nearly 8 million people are removed from Medicaid, hospitals would lose those patients from their tallies and receive less federal support.

Schneider said some Munson Healthcare facilities just make the cut to be eligible for the 340B Drug Pricing Program, which allows providers to buy discounted pharmaceuticals.

“For context, 340B is a benefit that probably we see about $36 million in savings every year,” Schneider said. “If we lose eligibility for 340B because our Medicaid patient volumes drop, it’ll be a twofold impact.”

Then there are the ways in which restricting Medicaid harms everyone in a region, not just the people who lose benefits, Harvey said.

“If health centers are required to reduce services, that’s reducing services for everyone. Whether you have Medicaid or Medicare or commercial insurance, you’re going to be impacted,” Harvey said.

Schneider pointed to maternity services at Munson Healthcare as an example.

“Like 60% of our patients that we see for maternity or birthing care at our Cadillac Hospital are Medicaid,” Schneider said, referring to the Munson Healthcare location in Cadillac, Michigan. “We cannot, by law, just see the non-Medicaid patients. So that cut, that reduction, that impact from those changes, will impact maternity care for all patients in Cadillac, not just Medicaid patients. And that’s really the story we’ve been trying to tell lawmakers.”

Red tape

Those legislators also may not fully understand why a new regime of eligibility checks would ensnare people they say they don’t want to harm.

In northern Minnesota, where lumber and mining operations have been closing and where there are only a few people per square mile, jobs, schools and volunteer opportunities that would satisfy new requirements for keeping coverage can be hard to come by.

“If people are required to work before they can get care, there aren’t enough jobs for them to get work,” Harvey said. “Not only are they not able to find work, now they’re going to get kicked off their medical insurance, and that’s a double whammy.”

People with serious chronic conditions who may not be considered disabled would also be at serious risk, said Dr. Scott Donaldson, co-director of the University of North Carolina Adult Cystic Fibrosis Care Center in Chapel Hill.

In his specialty, Donaldson sees people who suffer flare-ups that land them in the hospital for weeks at a time, followed by weeks more in recovery. Many are on Medicaid. Depending how a state draws up the rules, such patients could easily be out of work long enough to jeopardize care, especially if they miss bureaucratic steps during convalescence.

“You can imagine trying to prove that you’re either working or getting your activities — your 80 hours a month in or whatever — not being able to do any of those things, and suddenly you’re ineligible just as your health condition varies from month to month and over time,” Donaldson said.

Losing coverage can prove fatal for patients like these, Donaldson said, especially when the medications for cystic fibrosis cost more than $300,000 a year.

“We’ve had people die very rapidly when they stop these therapies,” Donaldson said. “That’s something we’re very familiar with. It’s very dangerous for people to lose access.”

Coverage losses on the scale the CBO predicts could lead to as many as 12,626 medically preventable deaths a year, according to a study Harvard Medical School researchers published in the Annals of Internal Medicine on Monday.

Administrative burden

Dr. Steven Furr runs the Family Medical Clinic of Jackson, Alabama, a town with about 5,000 residents. He said the new hoops would challenge not just people in rural areas, but their physicians, as well. “There’s going to be a lot more work for us and for our staff,” he said.

“We already are overwhelmed with administrative burden, and this is going to make it even more difficult,” said Furr, board chair of the American Academy of Family Physicians. “We’re going to have to try and assist our patients, because a lot of them just are not going to understand.”

Several providers noted that requiring modest co-payments, as the House bill would do to people in the Medicaid expansion population, would dissuade many patients from seeking care.

“People wait later to go get care, and sometimes that can have catastrophic results,” Furr said.

Providers have been telling lawmakers what would happen if the bill passes, and pointing to polling data that show scant support for the measure.

Some providers said they’ve made headway, citing a provision in the House bill that would peg future Medicare pay updates to medical inflation. They’ve also focused on issues such as extending telehealth rules and payment programs that are due to expire, and are especially important in more far-flung areas.

Political dynamics

Providers have run into polarization, too.

Harvey said one member of Congress strongly supported community health centers and was committed to getting them better funding. Harvey asked where that money would come from, and the answer was savings from Medicaid. “Well, that doesn’t help us,” Harvey said. “It doesn’t solve our problem. It just takes it from one pocket, puts it into the other.”

While not backing off the Medicaid cuts, Senate Republicans are considering some kind of relief funding to support rural providers, Bloomberg News reported Wednesday.

Furr worried the push to advance President Donald Trump’s tax-cut agenda was simply too much for many GOP lawmakers to buck. “They’re so focused on getting the income tax things that they’re looking at ways to make the cuts,” he said.

That won’t stop him from trying to dissuade Congress from moving ahead with the legislation, Furr said.

“We’re just trying to tell them it’s not as simple as it seems, that the system is really incredibly fragile right now, and that’s why we’re seeing so many physicians sell out their practice, or even close their practices now,” Furr said. “There’s just not much of a healthcare network in the rural and medium-sized towns to support it anymore.”

Taking more than $1 trillion out of the system would not help, Furr said.

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