The Real Cost of Cutting Medicaid in a Broken System
This isn't just about budget cuts. It's about whether the safety net can hold - and what happens if it doesn't.
Around 60 million Americans—roughly 20% of the U.S. population—live in rural areas and rely on their local hospitals for essential healthcare services, including emergency care, obstetrics, and chronic disease management. For many of these communities, the nearest alternative facility may be hours away. The proposed Medicaid cuts threaten to destabilize these critical access points—especially in areas where hospitals already operate on razor-thin margins. [3]
I’ve Lived in This World
I’ve been a hospital CEO. I’ve walked through units that were kept open—not because they were profitable, but because the community depended on them. Yet right now, nearly 48% of rural hospitals are losing money, and 92 have closed in the past decade. [1][2]
This Isn’t Just Medicaid
There are nearly 1,800 rural hospitals in the United States—representing approximately 35% of all community hospitals—and they collectively serve over 46 million people. [4] In many counties, they are the only source of inpatient, emergency, and maternal care. Medicaid funds nearly half of all births in rural areas. [5] These hospitals are not optional amenities; they are foundational components of the healthcare safety net.
You Can’t Cut Your Way to Stability
According to Families USA, independent rural hospitals would lose an average of 56% of their net income in 2026 alone—a hit that puts 55 more hospitals at risk, a 17% increase. [6] With razor-thin margins, many already unable to stay afloat, a wave of closures isn’t hypothetical—it’s statistically likely.
This Isn’t About Blame
Whether red or blue, policymakers helped build this fragile structure. Now, both parties are flirting with financial cuts that assume the system can absorb them.
What We Need Instead
We need smart restructuring, not slashing. Consider this:
- Preserve Medicaid as a foundational safety net
- Shift to outcomes-based care, not volume payouts
- Invest in primary care and prevention
- Reevaluate how much we expect rural hospitals to deliver for what little they get
A Call for Perspective
This isn’t a partisan talking point. The numbers don’t lie:
- 338 rural hospitals are in financial peril [7]
- Almost half are operating at a loss, and 92 have closed in just 10 years [1][2]
- Medicaid backs nearly half of all rural births [5]
If this bill passes, we won’t just lose services—we’ll lose lives, voices, and communities. And we’ll bear the cost in every ER wait and every ambulance rerouted.
These hospitals are not luxuries—they are essential to the stability of the healthcare system in rural America.
Let’s stop talking about cutting costs and start talking about rebuilding stability.
The Public Narrative
I’ve seen the recent headlines calling Medicaid financing a scam. I understand the frustration. From the outside, it’s easy to assume that hospitals are flush with cash and manipulating government rules to pad their bottom line. [8]
But I’ve also sat in hospital boardrooms balancing a budget that’s 70% government payers—and trying to keep a labor and delivery unit open in a rural county that hasn’t had an OB/GYN in five years.
Supplemental payments aren’t a loophole. They’re a patch. A rough, bureaucratic workaround for a system that chronically underpays for care. Are some large systems profitable? Yes. But profitability isn’t evenly distributed—and it doesn’t trickle down to the hospitals most at risk.
We need reform. But let’s not pretend we can do that by cutting funding and walking away. If this system breaks further, it’s not CEOs who’ll pay the price. It’s patients who will lose access, communities that will lose care, and frontline workers who will lose their livelihoods.
Sources
1. American Hospital Association, June 2025 Fact Sheet on Rural Hospitals.
2. Chartis Center for Rural Health, Rural Hospital Closures – 2024 Update.
3. U.S. Census Bureau; Bipartisan Policy Center Report (2024).
4. Kaiser Family Foundation, 10 Things to Know About Rural Hospitals.
5. CDC/KFF Data Brief, 2023.
6. Families USA, Impact of Medicaid Cuts on Independent Rural Hospitals, June 2025.
7. Center for Healthcare Quality and Payment Reform, 2024 Report on Rural Hospital Vulnerability.
8. Wall Street Journal Editorial, ‘Hospitals’ Medicaid Scam’, June 2025.
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