How will the recent federal budget legislation – the so-called One Big Beautiful Bill (OBBB) – slowly and inevitably undermine rural hospitals? Here is how it will happen.

The OBBB over time will significantly reduce the number of individuals receiving Medicaid benefits while simultaneously cutting back on Medicaid reimbursements. Cutting beneficiaries and reimbursement simultaneously will hurt all hospitals, but the impact on rural hospitals will be particularly acute.

Both Martha Henley, the CEO of Unity Medical Center in Tennessee, and Chad Boore, the President of Cone Health Annie Penn Hospital in North Carolina, agree that Medicaid is essential to their rural hospitals’ fiscal health. Each of them believes that the bill’s authors must have failed to appreciate the devastating impact the legislation will have on rural health care. They want legislators to revisit the law before it’s too late.

According to Boore, “scaling back on Medicaid is our margin … we are forecasting out over ten years and seeing the entire margin disappear.” Henley concurs. “For rural hospitals like ours, Medicaid isn’t extra revenue – it’s the margin that keeps our ER open, our ICU staffed, and essential care available to our community.”

At a global level, the OBBB will add $3.4 trillion to the debt over 10 years. As a partial offset, Congress is reducing federal spending on Medicaid by $911 billion over those ten years while increasing the number of uninsured people by over 10 million. According to Henley, “while $911 billion may feel abstract in Washington, the reality for small rural hospitals is very concrete. Medicaid accounts for a significant portion of our revenue, and any reduction – even 1 or 2 percent – threatens to erase the thin margins most hospitals depend on.”

How exactly does the OBBB conduct its stealth campaign against rural hospitals? It’s the cumulative impact of several legal changes designed to make it significantly harder to get and keep Medicaid coverage while hamstringing state’s efforts to fund the program for the long run.

The law reduces Medicaid by $326 billion by requiring Medicaid recipients to meet work or volunteer requirements. According to Henley, “[t]he bill’s work and volunteer requirements, on paper, may sound reasonable. But, in practice, they are bureaucratic traps. Ninety-two percent of Medicaid recipients are already working, caregiving, or attending school. The new requirements will not meaningfully change employment, but they will drive eligible people off the rolls through red tape. Every person who loses coverage represents more uncompensated care for hospitals like ours to absorb.”

Next, the law cuts almost $200 billion from federal coffers by adding more bureaucratic hoops and expense for both states and recipients, namely redeterminations every six months, frequent audits, and burdensome reviews. Henley believes that “these are not cost-saving efficiencies; they are deliberate barriers to coverage. Each time someone loses coverage for administrative reasons, rural hospitals inherit the cost.”

Finally, the law saves another $200 billion by interfering in states’ methods of paying for their share of the Medicaid program, capping their ability to tax hospitals and limiting Medicaid health plans’ ability to reimburse hospitals. According to Henley, “when you take away the state’s ability to raise and match Medicaid dollars through provider assessments, you are pulling away on one of the only levers that keeps TennCare viable. The ripple effect lands directly on rural hospitals and the patients we serve.”

Chad Boore emphasizes that the OBBB reductions will also hamstring post-acute health providers like nursing homes and rehabilitation facilities that depend significantly on Medicaid revenue for their margins. The fiscal squeeze on these post-acute providers will “stress rural hospitals ever further as lengths of stay will increase as placement gets more difficult. Since the payment for an inpatient stay is generally fixed based on the diagnosis, there will be additional cost incurred by the longer length of stay for which there is no offsetting revenue.” These patient bottlenecks will impose costs on providers and more importantly make patients miserable as they wait for placements that can speed their recoveries.

These complex strategies that will reduce Medicaid rolls will undermine rural hospitals This is not theory. It is already becoming fact. On August 11, 2025 the Secretary of North Carolina’s Department of Health and Human Services, citing in part the OBBB, proposed a series of rate reductions and benefit reductions based on “federal mandates that increase administrative burden without necessary resources and administrative budget shortfalls [that risk] a fundamental erosion of the NC Medicaid program.”

The OBBB includes a woefully inadequate Rural Health Transformation Fund, which will fail to save rural hospitals because the funding is only $10 billion a year, expires in five years, and has vague criteria for distribution.

Since 2010, more than 130 rural hospitals have closed. Currently, 300 more are at risk of imminent closure, and 600 more may not be able to survive the devastating impact of the OBBB’s cuts when it hits their balance sheets. Henley and Boore will do all they can to not become one of these, as they are gifted, strategic CEOs, but the Medicaid reductions will hit rural hospitals and rural communities hard, jeopardizing services and jobs, while forcing rural Americans to travel further for their healthcare. Without a doubt, the loss of services and facilities paired with additional travel time will result in avoidable tragedies.

In passing the OBBB, Congress ignored the looming insolvency of Medicare. The Medicare Hospital Insurance trust fund will run out of reserves in 2033 and upon insolvency, beneficiaries will face a twenty three percent across-the-board benefit cut. These cuts will impact rural and urban Medicare beneficiaries alike, making matters incalculably worse.

Because the law’s drafters recognized the potential for devastation in rural areas, the OBBB delayed some of the Medicaid changes to avoid alarming rural supporters. Henley and Boore hope that all lawmakers use this time to revisit these provisions and recognize the potential negative impact on rural providers. It is not too late. If they don’t revisit these provisions, the reductions in Medicaid will undercut rural communities and hospitals. Just ask their CEOs.

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