Republican Medicaid reforms could strain rural care

Republicans are considering Medicaid reforms that health experts expect could squeeze health access, including for rural populations.

Cutting Medicaid spending could result in coverage losses for low-income individuals and further reduce reimbursements for providers, which are already lower compared to commercial payers, experts told National Journal.

In rural America, Medicaid plays a particularly big role in health access. Larger shares of non-elderly adults and children in rural areas were covered by Medicaid and the Children’s Health Insurance Program than those living in metro areas in 2023, according to a report from Georgetown University released Wednesday.

Under the Affordable Care Act, most states adopted an option to cover low-income adults earning up to 138 percent of the federal poverty level. Currently, the federal government covers 90 percent of the costs for this population. The Medicaid expansion has been considered a positive for rural communities because it reduces the number of uninsured individuals and provides a financial boost to rural providers.

Since President-elect Trump’s first term, Oklahoma, Missouri, South Dakota, and North Carolina decided to expand their programs, leaving only 10 states as holdouts.

But Republicans have had their eyes on reforming the program—and cutting spending—for a long time. Ideas put forward by Republicans and conservative groups include converting the program to block grants or per-capita caps and eliminating the higher federal contribution for the expansion population.

Joan Alker, executive director of the Center for Children and Families at Georgetown University, said cutting Medicaid will impact rural communities across both expansion and non-expansion states.

Nationally, 40 percent of children in small towns and rural areas were enrolled in Medicaid and CHIP, while 18 percent of non-elderly adults were enrolled in Medicaid, according to the center's new report. That’s compared to 38 percent and 16 percent in metro areas, respectively. In six states—New Mexico, Louisiana, Arizona, Florida, South Carolina, and Arkansas—more than half of the children living in rural areas and small towns were on Medicaid or CHIP.

“Medicaid is playing a very broad role as a key backbone to rural health care systems writ large. This is not just about expansion,” Alker said. “We know that in rural counties, there already are access problems and rural hospitals have been closing. There’s a lot of communities that no longer have maternity wards. … That’s why these Medicaid cuts being discussed are so high-stakes for rural communities across the country.”

Both Rep. Brett Guthrie, the new House Energy and Commerce Chair, and Rep. Buddy Carter, the new Health Subcommittee chair, confirmed last week that Medicaid is being eyed for the Republican reconciliation deals. Republicans are looking for ways to pay for the spending increases necessary for immigration crackdowns and the expected revenue losses from broad tax cuts.

“There’s a lot of discussion on Medicaid reform,” Guthrie said. He pointed to per-capita allotments that were considered when Republicans attempted to repeal and replace Obamacare during Trump’s first term.

“We have a $1.8 trillion budget deficit; it’s not sustainable. … Eventually, it’s going to crash if we don’t fix this,” Guthrie said.

In the context of Medicaid, a per-capita allotment would mean the federal government would pay a fixed amount per enrollee and the growth in spending would be at a set rate. Currently, Medicaid has open-ended funding under which the states and the federal government share responsibility and the federal share for covering the traditional population is at least 50 percent. For the expansion population, the federal government pays 90 percent of the costs.

Robin Rudowitz, director of the Program on Medicaid and the Uninsured at KFF, said per-capita allotments could strain reimbursement rates for providers, which are already lower than commercial payment rates.

“If you’re further constraining that growth, it makes it really difficult for Medicaid to continue to purchase services,” she said. “Medicaid is operating in the larger health care marketplace, so it makes it difficult to access providers for enrollees if provider rates go much lower.”

Any cuts to Medicaid are also a “threat to rural hospital viability,” said Alexa McKinley Abel, director of government affairs and policy at the National Rural Health Association. “And those hospitals are obviously a huge critical access point for residents in the community—maybe the only access point.”

Rodney Whitlock, vice president at McDermott+, said the amount Republicans are seeking to get from Medicaid will dictate what the policy will ultimately be. “With a smaller number, they can try to be more targeted,” he said. “With a larger number, they’re looking at using a sledgehammer.”

He said when it comes to per-capita caps, the key number is the annual growth rates that are put in place, adding, “Just hearing the words 'per-capita cap, block grant, bad'—that’s such a facile approach.”

According to a Center on Budget and Policy Priorities analysis, various Congressional Budget Office estimates of different per-enrollee caps would cut spending by anywhere from $588 billion to $893 billion over nine years, depending on the annual growth rate of federal funding.

A document made public by Politico Friday showed Republicans are looking to cut $2.3 trillion from Medicaid, with $918 billion coming from converting the program to per-capita allotments and $690 billion from efforts to “equalize” Medicaid payments for able-bodied adults, which Alker said refers to rolling back the enhanced match rate.

“We’re going to start with what the right policy is to preserve and save the program, because we’re going to have issues if we don’t deal with it, and that’s going to build the number,” Guthrie told reporters on Tuesday.

While discussions are “throwing mud against the wall at this point,” according to Rep. Carter, policy experts are already concerned about what this could mean for the health coverage of millions of Americans, including in rural areas.

North Carolina is the latest state to adopt Medicaid expansion. Its program started to enroll low-income adults, who wouldn’t have previously qualified, starting in late 2023. Freshman Republican Rep. Tim Moore, who was speaker of the North Carolina House of Representatives, had negotiated for and ultimately supported a legislative measure providing the expansion.

Moore told National Journal Tuesday that he is open to reforming the Medicaid program at the federal level, including applying work requirements.

“We need to make sure that any kind of program like Medicaid does not serve as a disincentive to folks having jobs,” he said.

He also said he was open to capping Medicaid funding, adding, “I want to see when you put pen to paper and when you see how the numbers work, how that actually plays out.”

The North Carolina Justice Center, which supports the expansion policy, said in December that more than 577,000 North Carolinians enrolled in the program in one year after it was expanded. Within that one year, the state had to respond to immense devastation from Hurricane Helene this past fall.

“What we know, unfortunately, is that health problems in disaster-prone areas come in stages: So there’s immediate need, but then there can be longer-term needs, and then of course there’s the mental health aspect of losing everything,” said Rebecca Cerese, a health-policy advocate at the North Carolina Justice Center. “At least so many of our folks, even if they’ve lost everything, are going to be able to have the ability to go to a doctor or get health coverage to deal with that part of it.”

Along with Medicaid expansion, the same legislation also allowed hospitals in the Tar Heel State to enlist in a stabilization program run through the federal Centers for Medicare and Medicaid Services. Eligible hospitals would receive a boost in Medicaid federal reimbursement if they forgave medical debt. The North Carolina Department of Health and Human Services has said that between the hospital program and Medicaid expansion, the state will be able to draw down more than $8 billion each year, benefiting the 4.6 million people living in the 70 rural counties across the state.

But if Republicans in Congress decide to take away the enhanced federal match rate for the Medicaid expansion population, coverage for this population would cease in North Carolina. There are eight other states that have these “triggers,” meaning Medicaid expansion coverage in those states quickly ends if the federal government stops taking on 90 percent of the cost, according to a Georgetown University analysis from November.

McKinley Abel said if expansion is rolled back, coverage losses would translate into smaller Medicaid reimbursements for hospitals and more uncompensated care. A 2023 KFF analysis said that rural hospitals in Medicaid expansion states improved hospital finances and increased operating margins, although they still lagged behind non-rural hospitals in expansion states.

For children, Medicaid expansion means their parents or caregivers have health coverage, and the expansion protects families from medical debt and bankruptcy, said Alker. She said that when states do outreach for adults to enroll in the program, children could gain coverage as parents find out their kids are eligible.

Alker said rolling back expansion is “cutting Medicaid funding for the expansion group, which means that states are going to be absorbing hundreds of billions of dollars of Medicaid cuts, which they cannot make up for.”