Far from endangering rural hospitals, President Trump and Republicans in Congress are helping them by fixing a broken Medicaid system.
Far from endangering rural hospitals, President Trump and Republicans in Congress are helping them by fixing a broken Medicaid system.
I s America on the verge of a rural hospital apocalypse?
That’s the Democrats’ claim now that President Trump’s signature law is in effect. Hardly a day goes by without leftist politicians and their media allies predicting a wave of hospital closures in the nation’s heartland. Democrats even issued a list of 338 rural hospitals they say are threatened. But as we show in a new paper, the One Big Beautiful Law doesn’t hurt rural hospitals. It may even help them financially.
The leftist focus on rural hospitals has a plain political calculation. These hospitals are generally found in communities that voted for Donald Trump and congressional Republicans. If Democrats can peel off enough rural and working-class voters in the 2026 midterm elections, they’ll likely retake at least one chamber in Congress. Yet in their rush to score partisan points, they’re pointing the finger at commonsense policies that won’t put rural hospitals at risk of closure.
The most common target is the Republican reform of so-called provider taxes. Before the bill passed, states levied specific taxes on hospitals, then used the money to pay for Medicaid services. This allowed them to draw a bigger share of federal matching funds, which states used to make the hospitals whole. This money-laundering scheme has bilked federal taxpayers for billions of dollars. Yet now that Republicans have put limitations in place, prohibiting federal matching funds for new or excessive provider taxes, Democrats are screaming that rural hospitals won’t get money they desperately need.
This is not true. We looked at every state to gauge how much each one relies on provider taxes. We found that rural states rely on them significantly less than non-rural states. Just over a third of their state share of Medicaid expenditures is paid for by these taxes, compared with nearly 50 percent in more urban states. Democrats aren’t defending rural hospitals; they’re defending big, bloated Medicaid budgets in states like New York, California, Illinois, and Massachusetts.
It’s a similar story with state-directed payments, which Republicans have also reformed. Previously, states used these payments to hike reimbursement rates for providers. Democrats say new limits, which cap these payments to thresholds closer to Medicare payment rates, will leave rural hospitals in a fiscal hole. But the five states with the highest number of rural hospitals per capita — and nearly a dozen others — don’t use state-directed payments at all. Despite Democrats’ claims, these states won’t be hurt, because nothing is being taken away.
Finally, Democrats are incensed that Republicans have made it more difficult for ten holdout states to expand Medicaid under Obamacare. They say expansion is a fiscal lifeline for rural hospitals. But we found that hospitals in non-expansion states generally have higher profit margins than do those in states that expanded Medicaid. Moreover, of the five states with the most rural hospitals at risk of closure, four have already expanded Medicaid. If anything, expansion puts rural hospitals at greater risk because of Medicaid’s painfully low reimbursement rates. That helps explain why 74 hospitals have closed in expansion states over the last decade, defying the rosy predictions of Obamacare’s defenders.
It’s true that some of these reforms may lead to less taxpayer money flowing into some rural hospitals. But other reforms should more than make up for any losses. Most notably, the One Big Beautiful Law creates a $50 billion Rural Health Transformation Program, mostly dedicated to funding hospitals. The law’s first-ever Medicaid work requirement should also lead to more revenue flowing into rural hospitals. Work requirements will shift millions of people from the low-to-no-margin federal program to superior private health-insurance plans — through either employer-sponsored coverage or the Obamacare exchanges — that reimburse at higher rates.
Tellingly, rural hospitals themselves are admitting they aren’t in danger. After Democrats predicted that 338 hospitals would close, the hospitals themselves publicly refuted the charge. An Ohio hospital said it’s “not at risk of closure or cutting services.” A Michigan hospital accused the media of “spin.” And an Illinois hospital said that not only are there no plans to close, but “services are expected to increase.”
Far from endangering rural hospitals, President Trump and Republicans in Congress are helping them by fixing a broken Medicaid system. They’re putting patients ahead of politics and medical providers ahead of yet more unaffordable taxpayer spending. Democrats and their media allies will no doubt continue to warn of a coming rural hospital apocalypse. But it’s nothing more than partisan fiction.
Hayden Dublois is data and analytics director at the Foundation for Government Accountability, where Paige Terryberry is senior research fellow.