Rural, inner city communities brace for Medicaid cuts

Hospitals and medical providers serving rural and lower-income communities are on edge after President Donald Trump's mega bill passed by Congress includes looming Medicaid cuts.

Some of them are on the financial edge, literally — and fear the worst.

Trump's One Big Beautiful Bill Act of 2025 will cut close to $1 trillion from Medicaid and the Children's Health Insurance Program by 2034, according to the Congressional Budget Office.

The government programs offer medical services to low-income Americans. Close to 78.4 million Americans are enrolled in Medicaid and CHIP, 23 percent of the U.S. population. The sweeping tax cuts aim to reduce Medicaid and CHIP roles by 10.5 million people by 2034 via tougher eligibility rules and work requirements.

"Everyone's panicked," said Jennifer Mensik Kennedy, president of the American Nurses Association.

She worries about the Medicaid cuts prompting layoffs, hiring freezes, reduced staffing, missed payrolls and hospital closures.

Medicaid reimbursements accounted for 19 percent of all U.S. spending at hospitals in 2023. That totals $283 billion of the $1.5 trillion Americans spent on hospital care, according to the Kaiser Family Foundation.

"Rural hospitals were already in dire straits," Mensik Kennedy said of the financial situation and short financial reserves already facing some small-town hospitals.

New work requirements require adult Medicaid recipients without exemptions for disabilities to work 80 hours per month. Trump's signature tax cuts also institute copays of up to $35 for Medicaid-related doctor appointments. Work requirements go into place in 2027, while the federal funding changes and copays go into effect in 2028, according to an analysis of the legislation's Medicaid impacts by Hirija & Chau LLP, a Los Angeles-based law firm.

More than hospitals

Rural and inner-city hospitals in lower-income areas will feel the brunt of the Medicaid and CHIP cuts, according to health care industry experts and executives.

"They're the most vulnerable," said Peter Kowey, chair of cardiovascular research and a professor of medicine and clinical pharmacology at Thomas Jefferson University.

"They don't have the high-end stuff like cardiovascular surgeries or neurology or orthopedic surgeries that generate a lot of revenue," said Kowey, who has authored a new book, "Failure to Treat: How a Broken Healthcare System Puts Patients and Practitioners at Risk."

Kowey said hospitals have already been struggling since the pandemic and those overly reliant on Medicaid are facing "very fragile" operating margins.

A report by the Center for Healthcare Quality and Payment Reform found that as many 700 rural U.S. hospitals are financially struggling and 300 are at risk of more immediate closure.

David Navazio, CEO of Gentell Corp., a Philadelphia-based medical company specializing in wound care, said rural hospitals don't have the population or revenue bases to give them financial resilience.

Some hospitals "never recovered" financially from the pandemic when other procedures, appointments and surgeries were canceled or not pursued, he said.

Navazio said the U.S. health system needs more preventive care and more community and other health clinics to serve communities.

"Maybe we have too many hospitals," he said. "There's so much more to health care than hospitals."

But he also worries about how Medicaid cuts will impact health centers in rural and underserved communities with significant Medicaid patient populations.

"Those clinics are the ones who are the most vulnerable to closure," Navazio said.

He called the signature tax cuts "short-sighted" and cautioned that the result will be more uninsured Americans putting off health needs until they are more serious, then showing up at emergency rooms.

Navazio said the American health care system still struggles to provide medical services to the uninsured, who are often workers in lower-paying sectors or for smaller businesses whose health care plans are not affordable.

"The uninsured are really the working poor," he said.

According to federal data, 27.2 million Americans were uninsured in 2024. That accounts for 8.2 percent of the U.S. population and is up from 25 million in 2023, according to the National Center for Health Statistics. The CBO estimates the Medicaid pullbacks could increase the number of uninsured persons by 10 million.

Mensik Kennedy and others worry about the creation of more health care deserts with patients having to potentially drive long distances to deliver babies or for more specialized care.

"You are going to see nurses and providers leave," Mensik Kennedy said of the Medicaid cuts' potential impacts on rural and other underserved communities.

"Once they leave those communities, they aren't coming back," she said.

Struggling hospitals could go toward an emergency room-centric model in order to survive, dispatching other practice areas because of the financing challenges.

Debt crisis

Conservative backers of the Medicaid cuts say they are needed to cut out waste and fraud and help curtail federal spending and debt loads.

Medicaid spending will total $873 billion this year, according to federal projections.

In 2023, the federal government accounted for 69 percent of total Medicaid spending and states 31 percent.

Medicaid accounts for 18 percent of total U.S. health care spending (compared to 30 percent for private insurance, 21 percent for Medicare and 10 percent for out–of–pocket payments), according to federal data.

Conservatives favor the Medicaid changes, saying they are needed to root out waste and fraud to help better control federal debt, which now totals $37 trillion.

"Along with Medicare, Medicaid is the main reason the federal government is hurtling toward a debt crisis. A debt crisis would trigger significant economic hardship and require drastic cuts to both programs," the conservative Cato Institute said in an analysis.

Cato said U.S. Government Accountability Office (GAO) reports found $31 billion in improper Medicaid payments in 2023 and $500 billion over the last decade.

Critics of the Trump bill say tax cuts in the measure will magnify federal debt and shift money from the poor via cuts to Medicaid and food stamps to the wealthy via tax reductions.

'A dirty word'

There have already been efforts from congressional Republicans to recoup some of the Medicaid cuts and help vulnerable hospitals.

A $50 billion fund was created to help rural hospitals — though skeptics say that falls short of the cuts Medicaid providers will face.

U.S. Sen. Josh Hawley, R-Mo., wants to double that fund to $100 billion and has introduced a measure to block future Medicaid cuts.

States, who accounted for 31 percent of Medicaid spending in 2023, could try to fill the void of federal cuts. But that is not easy with state balanced-budget requirements and a hesitancy even in Democratic states to raise taxes, including on the wealthy.

"Raising taxes is a dirty word," Navazio said.

Christoph Dankert, chief network officer at Carrum Health, a San Francisco-based health care technology firm, said hospitals and other providers poised to be impacted need to start forging paths forward well before the Trump tax cuts commence.

"They are going to have a shortfall of funds," Dankert said. "You have to make it somewhere."

He said a drop in Medicare revenue from hospitals and the potential increase in more uninsured, uncompensated care will put upward pressures on private insurance rates.

"It's going to create upward pressure on employer rates," Dankert said.

The American Hospital Association opposes the Medicaid cuts, saying they will reduce access to care and adversely impact "the most vulnerable populations" such kids and those with disabilities.

'Cost controls'

The Medicaid cuts will propel more health care industry efforts to control costs, said Nate Favini, chief medical officer with Pair Team, a California-based digital health company focused on Medicaid.

"Controlling costs is a major priority, and there's recognition that the system has significant inefficiencies in how care is delivered," Favini said.

He said there will also be efforts to help Medicaid patients stay eligible once the work and other eligibility requirements begin.

But financially strained hospitals don't have a lot of wiggle room to take more hits, said Eddie Qureshi, CEO and founder of Rainfall Health, an artificial intelligence-focused health technology firm.

Quareshi said some hospitals have less than 30 days' cash on hand.

"We are going to see some hospitals close because they aren't able to keep up with the changes," he said.

Both Qureshi and Favini say Medicaid and other changes with health care — including a Trump administration's push for more data sharing of medical records and other information — will propel more technology, including AI.

"Our most forward-thinking health system partners recognize they can't continue with business as usual," Favini said.