Losing a Lifeline: Medicaid Cuts Would Devastate Rural Hospitals and Communities
Congress is currently considering a budget reconciliation package to amplify and support President Trump’s domestic priorities. A key component of the bill includes $625 billion in cuts to Medicaid over the next ten years, which would have devastating consequences for hospitals across the country, especially rural hospitals, and the communities they serve. This crisis demands immediate, elevated and vocal advocacy by rural healthcare stakeholders. Here, our experts share background on Medicaid’s criticality to rural healthcare and three actionable recommendations to protect this funding stream.
Why Medicaid Cuts Could Push Rural Hospitals to the Brink
Many rural hospitals already walk a financial tightrope. In 2024, 50% of U.S. rural hospitals operated in the red.[1] The steepest year-over-year financial decline on record was driven by lower patient volumes, a higher proportion of Medicaid patients, and staffing challenges across healthcare roles.[2] Medicaid is critical in keeping rural hospitals operational, ensuring they can continue supporting the health and well-being of local communities.[3] However, the reconciliation bill threatens to undermine this support, potentially triggering hospital closures that would strip vital healthcare services from the communities that depend on them most.
The reconciliation bill threatens to cut $625 billion in federal funding from Medicaid over the next decade—that’s $62.5 billion annually in federal funding that rural hospitals depend on for their survival.[4] These cuts could leave at least 8.6 million Americans without health insurance by 2034, with rural communities expected to bear the brunt of the impact:[5], [6]
- More than half of the children residing in six rural states (NM, LA, AZ, FL, SC and AR) are covered by Medicaid/CHIP, meaning hospitals in these areas could risk losing significant revenue as a result of coverage losses due to the reconciliation bill;[7]
- In 15 states, at least one-fifth of non-elderly adults (age 50 to 64) are covered by Medicaid—they risk losing access to health insurance coverage if eligibility reforms (e.g., work requirements) included in the reconciliation bill are implemented;[8]
- Rural counties with large American Indian/Alaska Native populations show even higher Medicaid reliance across all ages, putting their already under-resourced hospitals at extreme financial risk as they would lose funding for their primary patient population.[9]
How Medicaid Cuts Would Detrimentally Impact Rural Healthcare
The proposed cuts would fundamentally alter rural hospitals’ financial foundation through three primary mechanisms:
Restrictions on State Funding Mechanisms: Under consideration are limitations on provider taxes and state-directed payments which will reduce states’ ability to finance their costs for the Medicaid program. All states, with the exception of Alaska, currently use some form of provider taxes within the restrictions imposed by the federal government. While the House bill caps the use of these taxes near current rates and was projected to reduce federal contributions by $89 billion,[10] the proposed language recently released by the Senate would dramatically reduce the amount of the provider taxes leading to a significant reducing in funding for state Medicaid programs. The House bill limits on state-directed payments, which states use to supplement low base payments that typically do not cover the cost of providing care, would reduce funding by another $72 billion.
Work Requirements: Requiring 80 hours monthly of work or qualifying activities for expansion enrollees aged 19-64.[11] When Arkansas implemented similar requirements during President Trump’s first term, for example, 18,000 people lost coverage—many due to website access issues and bureaucratic hurdles.[12] Imposing a federal work requirement on all Medicaid expansion adults, as specified by the House bill could eliminate coverage for up to 7 million Americans, with reductions likely larger under the more restrictive Senate proposal.[13]
Federal Matching Rate Reductions: Several states have “trigger laws” already on the books—automatic provisions that would end their Medicaid expansion programs if federal funding falls below a certain threshold.[14] This could force 12 states to reverse expansion, eliminating coverage for 3.6 million people and increasing uncompensated care costs.[15] The current 90% federal match for Medicaid expansion could be reduced for states that either provide health coverage or financial assistance to purchase health coverage to certain groups of immigrants. This could affect 14 states and Washington D.C.[16]
These changes create a vicious cycle: reduced Medicaid reimbursements combined with increased uncompensated care from newly uninsured patients drives up costs for rural hospitals that they can’t afford. Moreover, rural hospitals cannot simply cost-shift these losses to private payers, as their urban counterparts sometimes attempt to do, because rural markets typically have limited private insurance coverage and less negotiating power.
In short, when a rural hospital’s largest payer reduces reimbursements while simultaneously increasing the uninsured population it must serve, the financial equation becomes unsustainable quickly.
Financial pressures from Medicaid cuts would force many rural hospitals to reduce their services or close entirely, impacting not only the health of rural communities but also their economic stability and social vitality.
The Indispensable Role of Rural Hospitals: More Than Just Healthcare
Forty-six million Americans face a dangerous reality: they live an hour’s drive away from a hospital.[17] In medical emergencies, such distance can lead to fatal consequences, and closures increase the travel time to receive life-saving care. But access to timely emergency medical services is just one challenge impacting rural residents’ ability to protect their health and well-being.
Rural communities across the U.S. also face a critical shortage of medical specialists, especially in oncology. A study by the Cancer Journal found that while a majority of metropolitan residents can find cancer care less than 30 miles from home, nearly 20% of rural Americans live over 60 miles away from a medical oncologist. [18] More than half live over 60 miles from a gynecological oncologist, colorectal surgeon, or surgical oncologist.[19] This causes rural Americans to put off cancer screenings, resulting in disparities in early detection. From 2016 to 2020, individuals in rural areas were more likely than their urban counterparts to be diagnosed with lung, breast, and cervical cancers at advanced stages, when the disease has spread and is more difficult to treat.[20] Even after diagnosis, it’s difficult to access treatment. Since 2011, 382 rural hospitals have stopped providing chemotherapy.[21] Ultimately, the inaccessibility of early cancer detection and treatment in rural America leads to deeply troubling outcomes, including higher cancer mortality rates.[22]
Even in rural towns where basic services like primary care, gynecology, and chronic disease management are available, it’s difficult to get an appointment. About 65% of rural areas have a shortage of primary care providers.[23] It’s challenging to convince doctors to move to small towns, which require more physicians to address patient needs as the population ages.[24] As a physician at a Rural Health Clinic in Georgia explained to NPR, “We have to find someone who likes the lifestyle of living in a small community and enjoys outdoors things, such as fishing and hunting.”[25] With limited options to medical services of all stripes—including emergency care, specialized treatments like cardiovascular care, and basic primary care—patients in rural communities already face systemic barriers to receiving healthcare.
Beyond providing critical medical care, hospitals are an economic lifeline for many rural communities. They are often the largest employers in the area and stimulate local economies by contracting with local vendors and supporting surrounding businesses. [26] Consequently, more rural hospital closures would devastate the economic wellbeing of communities as contracts are terminated and displaced workers leave the area in search of employment, thereby reducing per-capita income and spending on local goods and services.
The economic impact of Medicaid cuts on rural communities: Every $1 saved through Medicaid cuts causes rural communities to lose $5. [27]
This is particularly threatening to the welfare of rural residents, who already face higher levels of poverty than urban populations.[28] Closures would further undermine economic stability, a key social determinant of health (SDOH), deepening health disparities and increasing the risk of premature death for rural residents.[29]
Hospital closures would also decrease access to SDOHs like housing, food, education, and other essential resources that play a pivotal role in shaping long-term health outcomes. In many rural areas, hospitals offer social programs that support individual well-being and community vitality. Kaiser Permanente, which operates hospitals in rural areas, exemplifies this with their whole-person care approach to Medicaid patients.[28] They seek to address physical and mental health in addition to critical social needs. When treating a patient with diabetes, for example, Kaiser might offer support in securing nutritious food and reliable transportation to appointments. These lifeline social programs that directly sustain healthier, more connected, and vibrant communities disappear when rural hospitals close their doors. With the reconciliation bill targeting Medicaid and other social safety net programs, rural communities are at risk of being left without the essential resources they need to thrive.
Rural Hospitals Must Elevate Vocal Advocacy
This crisis demands continued and immediate, coordinated action. While rural hospitals and their advocates have long fought for the needs of rural America, their current outreach seems to be falling on deaf ears in Congress as the reconciliation bill is discussed and debated. Therefore, elevated action is necessary on three fronts:
- Strengthen Strategic Coalitions: Success requires partnerships between rural hospitals, medical associations, community-based food security, housing, mental health services, business groups, community leaders, and patient advocates. Unified coalitions carry more weight with legislators than isolated hospital pleas.
- Engage in Targeted Direct Advocacy: Hospital leaders must actively participate in the legislative process from start to finish. Building rapport with Congressional leadership and representatives with rural or healthcare related interests, testifying at hearings, submitting formal comments on regulations, and partnering with national organizations to coordinate advocacy efforts are all opportunities to influence decisions made regarding rural hospitals.
- Demonstrate Essential Value: Rural hospitals must quantify their impact through community health assessments and economic analyses. They should publicize the full scope of services—from emergency care to prevention programs and community outreach programming—and share economic impact data with policymakers.
The message: rural hospital closures devastate entire communities.
Kristy Piccinini, a managing director within the Economic Consulting segment of FTI Consulting and Veronica Yaron, formerly a consultant within the Strategic Communications segment at FTI Consulting, contributed to this article.
Related Expertise
References
[1] “The Rural Emergency Hospital Model – Year Two Progress Report,” Bipartisan Policy Center (October 2024), https://bipartisanpolicy.org/download/?file=/wp-content/uploads/2024/10/Final_BPC_Rural_Emergency_Hospital_2024.pdf.
[2] “Unrelenting Pressure Pushes Rural Safety Net Crisis into Uncharted Territory,” Chartis (February 15, 2024), https://www.chartis.com/sites/default/files/documents/chartis_rural_study_pressure_pushes_rural_safety_net_crisis_into_uncharted_territory_feb_15_2024_fnl.pdf.
[3] “Medicaid Coverage Supports Rural Patients, Hospitals, and Communities,” American Hospital Association (last accessed June 12, 2025), https://www.aha.org/fact-sheets/2025-06-05-medicaid-coverage-supports-rural-patients-hospitals-and-communities#:~:text=1.,be%20able%20to%20afford%20insurance.
[4] “Health Provisions in the 2025 Federal Budget Reconciliation Bill,” KFF (May 22, 2025), https://www.kff.org/tracking-the-medicaid-provisions-in-the-2025-budget-bill/.
[5] Mary Kekatos, “’I feel very scared’: Some Americans fear losing coverage due to proposed Medicaid cuts,” ABC News (May 16, 2025), https://abcnews.go.com/Health/feel-scared-americans-fear-losing-coverage-due-proposed/story?id=121793330.
[6] Joan Alker, Aubrianna Osorio and Edwin Park, “Medicaid’s Role in Small Towns and Rural Areas,” Georgetown University (January 1, 2025), https://ccf.georgetown.edu/2025/01/15/medicaids-role-in-small-towns-and-rural-areas/.
[7] Ibid.
[8] Ibid.
[9] Ibid.
[10] “Estimated Budgetary Effects of H.R. 1, the One Big Beautiful Bill Act,” Congressional Budget Office (June 4, 2025), https://www.cbo.gov/publication/61461.
[11] ” Health Provisions in the 2025 Federal Budget Reconciliation Bill,” KFF (May 22, 2025), https://www.kff.org/tracking-the-medicaid-provisions-in-the-2025-budget-bill/.
[12] Amanda Seitz, Andrew Demillo, and Kevin Freking, ”Republicans consider cuts and work requirements for Medicaid, jeopardizing care for millions,” AP News (February 18, 2025), https://apnews.com/article/medicaid-cuts-work-requirements-congress-republicans-90ec1119f1d95de067c76f79eec7fa87.
[13] Elizabeth Zhang and Gideon Lukens, ”Harsh Work Requirements in House Republican Bill Would Take Away Medicaid Coverage From Millions: State and Congressional District Estimates,” Center on Budget and Policy Priorities (May 13, 2025), https://www.cbpp.org/research/health/harsh-work-requirements-in-house-republican-bill-would-take-away-medicaid-coverage.
[14] Elizabeth Williams, Alice Burns, Rhiannon Euhus, Robin Rudowitz, “Eliminating the Medicaid Expansion Federal Match Rate: State-by-State Estimates,” KFF (February 13, 2025), https://www.kff.org/medicaid/issue-brief/eliminating-the-medicaid-expansion-federal-match-rate-state-by-state-estimates/.
[15] Natasha Murphy, ”How Federal Funding Cuts Could Unravel Medicaid Expansion in 12 States,” Center for American Progress (April 14, 2025), https://www.americanprogress.org/article/how-federal-funding-cuts-could-unravel-medicaid-expansion-in-12-states/.
[16] Elizabeth Williams, Drishti Pillai, Akash Pillai, Samantha Artiga, “Proposed Medicaid Federal Match Penalty for States that Have Expanded Coverage for Immigrants: State-by-State Estimates,” KFF (May 22, 2025), https://www.kff.org/medicaid/issue-brief/proposed-medicaid-federal-match-penalty-for-states-that-have-expanded-coverage-for-immigrants-state-by-state-estimates/.
[17] Obed Manuel, Milton Guevara, Adam Bearne, and A. Martinez, “Rural U.S. health care is in a crisis. We went to a Georgia town to see how people there experience it,” NPR (June 4, 2024), https://www.npr.org/2024/06/04/nx-s1-4964724/rural-u-s-health-care-crisis-georgia.
[18] Peiyin Hung MSPH, PhD, Songyuan Deng MD, Whitney E. Zahnd PhD, Swann A. Adams PhD, Bankole Olatosi PhD, Elizabeth L. Crouch PhD, and Jan M. Eberth PhD, “Geographic disparities in residential proximity to colorectal and cervical cancer care providers,“ Cancer (November 8, 2019), https://doi.org/10.1002/cncr.32594.
[19] Ibid.
[20] Farhad Islami MD, PhD, Jordan Baeker Bispo PhD, Hyunjung Lee PhD, MS, MPP, MBA, Daniel Wiese PhD, K. Robin Yabroff PhD, Priti Bandi PhD, Kirsten Sloan BA, Alpa V. Patel PhD, Elvan C. Daniels MD, MPH, Arif H. Kamal MD, MBA, MHS, Carmen E. Guerra MD, MSCE, William L. Dahut MD, and Ahmedin Jemal DVM, PhD, “American Cancer Society’s report on the status of cancer disparities in the United States, 2023,” CA: A Cancer Journal for Clinicians (November 14, 2023), https://doi.org/10.3322/caac.21812.
[21] See supra note 2.
[22] “Cancer in Rural America,” Centers for Disease Control and Prevention (May 16, 2024), https://www.cdc.gov/rural-health/php/public-health-strategy/public-health-considerations-for-cancer-in-rural-america.html.
[23] Tanya Albert Henry, “AMA outlines 5 keys to fixing America’s rural health crisis,” American Medical Association (June 6, 2024), https://www.ama-assn.org/delivering-care/population-care/ama-outlines-5-keys-fixing-america-s-rural-health-crisis.
[24] Obed Manuel, Milton Guevara, Adam Bearne, and A Martínez, “Rural U.S. health care is in a crisis. We went to a Georgia town to see how people there experience it,” NPR (June 4, 2024), https://www.npr.org/2024/06/04/nx-s1-4964724/rural-u-s-health-care-crisis-georgia.
[25] Ibid.
[26] Rick Pollack, “Ensuring Access to Quality Care for Patients in Rural America,” American Hospital Association (February 21, 2025), https://www.aha.org/news/perspective/2025-02-21-ensuring-access-quality-care-patients-rural-america.
[27] Alex Kacik, “$1 in Medicaid cuts costs rural areas $5: community hospital CEO,” Modern Healthcare (May 21, 2025), https://www.modernhealthcare.com/providers/community-hospital-jim-kendrick-lobbying-medicaid.
[28] Tracey Farrigan, “Rural Poverty & Well-Being,” USDA Economic Research Service (January 14, 2025), https://www.ers.usda.gov/topics/rural-economy-population/rural-poverty-well-being.
[29] “Social Determinants of Health (SDOH),” Centers for Disease Control and Prevention (January 17, 2024), https://www.cdc.gov/about/priorities/why-is-addressing-sdoh-important.html.
[30] Shannon McMaho and Claire Horton, MD, “Our nation’s health suffers if Congress cuts Medicaid,” Kaiser Permanente (February 20, 2025), https://about.kaiserpermanente.org/news/nations-health-suffers-congress-cuts-medicaid.
The views expressed herein are those of the author(s) and not necessarily the views of FTI Consulting, Inc., its management, its subsidiaries, its affiliates, or its other professionals.
FTI Consulting, Inc., including its subsidiaries and affiliates, is a consulting firm and is not a certified public accounting firm or a law firm.
FTI Consulting is an independent global business advisory firm dedicated to helping organizations manage change, mitigate risk and resolve disputes: financial, legal, operational, political and regulatory, reputational and transactional. FTI Consulting professionals, located in all major business centers throughout the world, work closely with clients to anticipate, illuminate and overcome complex business challenges and opportunities. ©2025 FTI Consulting, Inc.
All rights reserved. fticonsulting.com
