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Commentary: If Federal Healthcare Spending Is a Target, Then So Is Rural America [1]

['Katherine Hempstead', 'Robert Wood Johnson Foundation', 'The Daily Yonder', '.Wp-Block-Co-Authors-Plus-Coauthors.Is-Layout-Flow', 'Class', 'Wp-Block-Co-Authors-Plus', 'Display Inline', '.Wp-Block-Co-Authors-Plus-Avatar', 'Where Img', 'Height Auto Max-Width']

Date: 2025-02-11

Lists of potential healthcare spending cuts to include in a reconciliation bill are circulating on Capitol Hill, and healthcare is getting star billing.

Proposals include many measures affecting the Medicaid program, including the imposition of block grants, major reductions in the federal share of spending for the ACA expansion population, and the imposition of work requirements. If enacted, these policies would not only reduce coverage but also transfer a huge fiscal burden to states.

Also hanging in the balance are the enhanced premium tax credits in the Affordable Health Care (ACA) marketplace, which increased both eligibility for tax credits and the size of subsidies. These enhancements greatly increase the affordability of marketplace coverage, especially in places where healthcare is expensive, but they will expire at the end of 2025 unless Congress acts to extend them.

The Medicaid program is an attractive target because it is so large. As the nation’s largest source of health insurance coverage, Medicaid covers nearly 80 million diverse Americans, including children, adults, and patients with disabilities.

While the effects of these proposed cuts would be widespread, rural America will feel the most pain, because Medicaid and the ACA marketplace play a disproportionately important role in the financially fragile health care systems of rural communities. And while Medicaid is important everywhere, in rural America it is a lifeline.

A new report from Georgetown’s Center on Children and Families highlights this point, showing that the nearly 46 million residents of small towns and rural areas are more likely than their metro counterparts to rely on Medicaid for coverage. In six states, at least half of rural children are covered by Medicaid. In fifteen states, Medicaid covers more than one third of non-elderly adults living in rural areas.

Even these numbers understate how essential Medicaid is in rural counties all over the country, such as Madison Parish, Louisiana, where 71% of children are covered by Medicaid, Sullivan County, New York, where 36% of non-elderly adults rely on Medicaid, or Starr County, Texas, where more than half of older adults rely on Medicaid for home and community based services and nursing home care.

The ACA marketplace has also become an important source of coverage for rural America, where many people are self-employed, or work for small employers that don’t offer coverage. Many rural areas have high healthcare costs, so the enhanced subsidies make a big difference. A new analysis of Congressional Districts (CDs) shows that districts classified as rural will face the largest median increase in premiums if the enhanced credits are allowed to expire – 58%, as compared with a 28% increase in districts classified as urban. There are more than ten rural CDs where premiums will at least double if the premiums are not renewed. They include a broad cross-section of states including Wyoming, West Virginia, Michigan, North Carolina and Illinois.

Farmers increasingly count on the ACA, especially as premiums have become more affordable in recent years. A Robert Wood Johnson Foundation (RWJF) report on coverage in the ten states where farmers are the highest share of the labor force showed the large combined impact of the ACA marketplace and Medicaid. Overall, more than 25% of the population in these states were enrolled in one of these two programs. More than half of enrollees from these states were rural residents, and use of the Premium Tax Credits was nearly universal.

Because healthcare costs can be so high in rural areas, the tax credits save residents an average of $506 each month. In Wyoming, for example, average monthly premiums were reduced from $937 to $118, thanks to the tax credit. In these states there has been a marked increase in health insurance coverage, thanks to these affordable options, and the uninsurance rate has declined by 26% between 2014 and 2023.

Losing the federal funding that enables affordable coverage puts these gains at risk, and the impact will spread far beyond those who lose their health insurance. The rural healthcare system is financially fragile and highly dependent on federal spending. In rural America, incomes are lower and fewer people have employer sponsored insurance. Rural hospitals face multiple challenges including staff shortages, lack of profitable specialties, and inadequate revenue. More than one hundred rural hospitals have closed in the past decade and hundreds more are at risk for closure. Rural residents are much less likely than their urban counterparts to have access to most kinds of healthcare services, including primary care, maternity care, and oncology. Resultingly, rural and urban disparities in morbidity and mortality are widening.

There are ways that telecommunications and other innovations may improve some aspects of rural healthcare. Reforms that increase telehealth capabilities and create regional hubs for critical specialty care may help to improve both quality and access to care. Yet no amount of technology improvement can compensate for a massive reduction in insured patients. People and communities will suffer if these proposed cuts become policy. Pulling federal dollars out of coverage programs will further starve rural healthcare providers, worsen access, and deepen the rural health disadvantage. Healthcare is not just a business, it is a critical pillar of any community. But when the supply of healthcare becomes truly inadequate to the needs of residents, communities cannot thrive, and perhaps some cannot survive. For this reason, rural communities have much at stake in the current hunt for federal spending cuts.

Katherine Hempstead is a senior policy adviser at the Robert Wood Johnson Foundation, where she focuses on coverage and healthcare costs.

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[1] Url: https://dailyyonder.com/commentary-if-federal-healthcare-spending-is-a-target-then-so-is-rural-america/2025/02/11/

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