More than 66 million Americans live in rural areas, according to the 2020 census. In these communities, Medicaid is a source of coverage for more than 18 percent of adults under 65 and provides financial support to keep rural hospitals operating.
Small rural hospitals are often responsible for delivering most of the health care services for people living in the communities they serve, including long-term care and primary care. These hospitals can be rural communities’ only source of emergency, preventive, and specialized care—including obstetrics and behavioral health services.
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Nearly one-third of rural hospitals across the United States are at risk of closure due to financial instability. According to the Center for Healthcare Quality and Payment Reform, more than 300 rural hospitals are at “immediate risk” of closure because they have suffered multiyear financial losses or have very low financial reserves. In other words, these facilities are in such a precarious financial condition that closure could come at any time. Some facilities have already closed entire units or cut back on certain types of care as part of cost saving measures. For example, between 2011 and 2023, 293 rural hospitals stopped providing obstetrics services, representing 24 percent of the country’s rural obstetric units.
Against this backdrop, congressional Republicans are considering proposals that would amount to the largest Medicaid cut in the program’s history. For rural hospitals that rely on Medicaid to finance care, such cuts could accelerate a crisis already on the brink.
What are rural hospitals?
Medicaid helps keep rural hospitals afloat
Rural hospitals are generally less profitable than urban hospitals and tend to hold fewer beds and have lower occupancy rates. Medicaid is the financial backbone that, in many cases, can help keep doors open, as these hospitals operate on very thin margins. All hospitals depend on Medicaid funds, and the program plays a vital role in keeping rural hospitals, clinics, and community health centers open.
The Affordable Care Act (ACA) strengthened this support by expanding Medicaid eligibility to adults with incomes up to 138 percent of the federal poverty level (FPL), providing coverage to 20 million people. This expansion has been particularly important for rural hospitals, which rely on Medicaid reimbursement to offset the costs of care. Notably, rural hospitals with low margins are more likely to be located in the 10 states that have not adopted expanded Medicaid. Accordingly, the Chartis Group found that rural hospitals in Medicaid expansion states are 62 percent less likely to close than nonexpansion states, and the U.S. Government Accountability Office found states that increased Medicaid eligibility and enrollment had fewer rural hospital closures.
Congressional Republicans’ Medicaid cut proposals would threaten already vulnerable rural hospitals
Congressional Republicans in both chambers have passed a budget resolution that directs the House Committee on Energy and Commerce to cut at least $880 billion over the next 10 years. Medicaid accounts for 93 percent of the committee’s spending, meaning cuts will have to come from the program in some form. Proposals under consideration include reducing the federal medical assistance percentage (FMAP) for the Medicaid expansion population and/or imposing work-reporting requirements for Medicaid expansion enrollees.
FMAP reductions would be particularly dangerous: If the federal share of funding for Medicaid expansion enrollees declines below the current 90 percent, several states could be forced to end their Medicaid expansions altogether. Nearly 50 percent of rural hospitals already operate with negative margins. Such a rollback would leave millions without coverage, which would increase uncompensated care costs—costs for the care hospitals provide without being reimbursed for those services—for providers and potentially push already strained rural hospitals in expansion states to closure. Reductions in Medicaid funding could force many rural facilities to reduce or eliminate essential services or close their doors entirely.
Reductions in Medicaid funding could force many rural facilities to reduce or eliminate essential services or close their doors entirely.
As Table 1 demonstrates, 190 rural inpatient hospitals are already at risk of immediate closure in 34 of the states* that have expanded Medicaid, based on an April 2025 report from Center for Healthcare Quality and Payment Reform. Those 190 hospitals represent roughly 12 percent of all rural inpatient hospitals in Medicaid expansion states. In some expansion states, that proportion is particularly high: Around 1 in 4 rural inpatient hospitals in Pennsylvania and Virginia—and close to 1 in 3 inpatient rural hospitals in Oklahoma and New York—are at imminent risk of closure.
Medicaid cuts would also harm rural families
Residents of rural areas are more likely than people in urban communities to rely on Medicaid or the Children’s Health Insurance Program (CHIP) for their health insurance. For example, in Virginia, almost 40 percent of children in small towns and rural areas were covered by Medicaid/CHIP, and almost 20 percent of adults younger than 65 in small towns and rural areas were enrolled in Medicaid in 2023. As a consequence, Medicaid funding cuts are likely to cause greater harm to families in rural areas and small towns than those living in large metropolitan areas.
Conclusion
As Republicans in Congress weigh historic cuts to the Medicaid program, the stakes could not be higher for people living in rural communities. Funding cuts—whether through shrinking the FMAP or imposing burdensome work-reporting requirements—aimed at Medicaid expansion enrollees could push the nearly 200 rural hospitals at immediate risk of closure in 34 expansion states past the brink. Protecting—rather than gutting—Medicaid funding is essential for maintaining access to quality health care for rural families and supporting the economic well-being of rural communities.
*Authors’ note: Analysis only considers expansion states that have at least one rural inpatient hospital at immediate risk of closure.
Acknowledgements
The authors would like to thank Jill Rosenthal for her fact-checking assistance.