RURAL RISK: Looming Medicaid changes poised to hit already strained hospitals

Peter Kowey says there is “a locomotive motoring down the tracks.”

Its destination — America’s hospitals and access to healthcare.

“And I don't see anything stopping it,” said Kowey, a cardiologist and professor of medicine at Thomas Jefferson University in Philadelphia.

Cuts and changes to Medicaid that are part of President Donald Trump’s Big Beautiful Bill kick in on Jan. 1, 2027.

Medicaid offers medical care to low-income Americans. 

The coming changes include higher income thresholds and work requirements for many enrollees who don't have children or are not disabled.

The new rules require Medicaid recipients to renew their benefit every six months rather than once a year.

In 2028, some Medicaid recipients will be required to pay $35 copays for doctors visits.

There are currently 73.2 million Americans on Medicaid or accompanying Children’s Health Insurance Program (CHIP). That’s 21% of the U.S. population.

The changes look to trim $1 trillion from Medicaid spending over the next decade and reduce enrollment by 10.5 million persons. 

Trump’s efforts to curtail Medicaid and Medicare spending also include moves to restrict immigrants, refugees and asylum seekers from federal health programs.

Some of those restrictions kicked in Oct. 1.

The GOP-backed bill also blocked a federal change that would have made it easier for persons with lower income and disabilities to enroll in Medicare Savings Accounts.

There are currently 70.6 million people enrolled in Medicare, which offers health coverage for older Americans. That’s also approximately 21% of the total U.S. population.

‘MORE WITH LESS’

The federal health changes will hurt hospitals serving poorer communities, especially in rural areas, small towns and urban centers, said Kowey, 

“It’s not looking so good,” said Kowey, of the landscape for hospitals.

Michael Waldrum, CEO of ECU Health, a 1,700-bed hospital and regional health system in North Carolina, said the Medicaid changes will reduce revenue for hospitals by “billions of dollars.”

“Across rural America, the health care delivery system is under extraordinary pressure, and many of the factors driving that pressure are particularly pronounced in North Carolina's rural communities,” said Waldrum, who is also a medical doctor.

“Rural hospitals care for older, sicker, and often economically vulnerable populations while operating in communities with smaller patient volumes and fewer financial resources,” Waldrum said, adding that the costs and challenges of providing care have continued to increase.

“Many rural providers are being asked to do more with less year after year,” he said.

ECU Health partners with East Carolina University’s Brody School of Medicine.

Waldrum said ECU Health is working with the university on access and delivery models and best practices for rural communities that can become a national model.

A number of financially strained hospitals in rural and big cities have gone under or rolled back operations and services over the last two decades.

According to federal figures, 81 hospitals in rural areas closed between 2005 and 2023. Another 65 have scaled back operations and services.

There are approximately 6,100 hospitals in the U.S. with more than 807,200 beds, according to the American Hospital Association.

There were 1,796 rural community hospitals operating in the U.S. last year, according to the Kaiser Family Foundation (KFF).

Trump’s big bill does include $50 billion through 2030 to help rural hospitals stay afloat.

The Trump administration is also looking to reduce fraud in the government health programs.

Medicaid spending totaled close to $932 billion in 2024. Medicare spending came in at more than $1.1 trillion in 2024, according to federal data.

‘OPERATING AT A LOSS’

More hospital cuts and closures could be on the way.

An analysis earlier this year by Public Citizen, a liberal advocacy group, identified 446 U.S. hospitals encompassing 69,000 beds are at heightened risk of closure or scaled back operations because of Medicaid reductions.

Charles Nahabedian, co-founder and CEO of VK Digital Health (a Maryland-based telemedicine firm), said even more hospitals could face peril.

"44% of rural hospitals are operating at a loss — creating urgent demand for cost-reduction solutions. Seven hundred-plus hospitals are at risk of closure, concentrated in underserved rural markets,” Nahabedian said.

That could mean patients having to drive hundreds of miles for specialized care or to have babies. 

Nahabedian said federal help for rural hospitals needs to be more robust, including helping cash-strapped rural hospitals to test out and deploy new medical technologies.

"Most rural hospitals do not have the financial bandwidth to trial new technologies or approaches, so solutions are slow in coming,” he said.

U.S. healthcare spending is expected to hit $6 trillion (19% of GDP) this year and $9 trillion (21% of GDP) by 2034, according to projections. Before COVID, U.S. healthcare spending totaled $3.8 trillion, according to federal figures.

Per capita healthcare spending in America’s market-driven health system approaches $14,900. That’s the most of any country and more than double the spending on medical care in Canada, France and the United Kingdom, who have government-operated systems.

‘CHRONIC CONDITIONS’

Anahita Dua, a vascular surgeon and founder of Healthcare for Action (which looks to elect more medical workers to public office), said the medical care landscape has been getting tougher for rural residents.

“Rural patients are often older, have more chronic health conditions and already travel significant distances for care,” she said. “At the same time, hospitals are struggling financially and communities face serious physician shortages. When a rural hospital or service disappears, there often isn't another option ten minutes down the road.”

Dua said half of the babies born in rural areas are via Medicaid. She also noted challenges hospitals face from Medicare Advantage reimbursements and that overall reimbursements need to better match the costs of healthcare.

The decline in medical access can also be a slow bleed, she said.

“It can happen piece by piece as communities lose obstetrics, specialty care, inpatient beds or emergency services,” Dua said. “Eventually, patients are traveling an hour or more for care they once received close to home.”

SKYROCKETING COSTS

Rural hospitals and other medical providers already face systematic challenges, including for mental health services.

“The cost of medical care has skyrocketed in the United States over the past few decades,” said MaryEllen Eller, a psychiatrist and Southeast Regional Medical Director with Radial Health (a New York-based mental health provider). “Healthcare providers are compensated less now than they were 30 years ago.”

According to the U.S. Bureau of Labor Statistics, health and medical care prices have increased nationally by 32.5% since 2015.

Eller said that for every provider the U.S. health system must employ two or three full-time administrative staff for insurance compliance, billing, and information technology operations.

“There are multiple reasons for this problem but ultimately, the cost to care for clients exceeds what the hospital is getting paid for that care,” Eller said. “State- and federally funded health plans pay hospitals less for medical care than private insurance. Part of the financial issue is that rural areas treat a higher percentage of state and federally insured individuals.”

Melisa Franklin, vice president of healthcare for Seven Corners Healthcare (an Indiana-based telemedicine firm), said access to rural healthcare has been getting worse, especially for patients trying to see specialists.

“We’re also seeing more people turn to cash-only clinics, but these are also difficult to get into and can be booked out a full year in advance. If a provider isn't able to see you for a full year, care is not really accessible,” Franklin said.

She said telehealth and mobile services can help with healthcare access and address another root problem — chronic shortages of medical workers.

“There's simply no way around it — if you don't have the team to see the patients, you can't see the patients,” she said. “The strongest models will need to combine local providers, telehealth and mobile services in partnership with larger regional hospitals and health systems.”

CLOSING CARE GAPS

Greg Carroll, CEO and founder of CliniNEXUS, a California-based medical technology firm that uses artificial intelligence to help connect healthcare providers, also sees peril for rural hospitals with the Medicaid belt-tightening.

But Carroll, who is also a physician, sees opportunities for new care and technology platforms with the $50 billion fund.

“The opportunity is for states to invest in infrastructure that finds and closes care gaps before they become crises,” said Carroll.

Carroll said medical technology, including AI, can help hospitals and providers coordinate better with patient care as well as medical claims processing and billing.

“Rural hospitals’ future depends less on any single facility and more on whether it plugs into a coordinated model,” Carroll said.

Kowey isn't optimistic about healthcare reforms coming from Washington. 

He said with Medicaid enrollment projected to decline more uninsured patients could “deluge” emergency rooms, potentially adding more strain.

Approximately 28 million Americans (8.3% of the population) do not have medical insurance, according to 2025 figures from the U.S. Centers for Disease Control and Prevention (CDC).

In North Carolina, Waldrum said change is required with billions of dollars of losses projected because of Medicaid cuts.

“We are near the point where preserving the status quo is no longer a viable strategy,” he said.