Medicaid Cuts Could Lead to Hospital Closures, Studies Show

Proposed Medicaid changes that are part of the federal budget overhaul could end up closing hospitals that serve thousands of patients.

The potential changes to Medicaid are estimated to reduce the federal support for the program by over $700 billion over 10 years, shifting the costs to the states and stopping coverage for millions of beneficiaries who otherwise may not be able to afford health insurance. 

To put this into perspective, in 2023, the national Medicaid shortfall—the difference between a hospital’s cost of serving Medicaid patients and the payments it receives for services—was $27.5 billion, according to the American Hospital Association (AHA). Individual states do not have the financial resources to fill that gap, even if they dip into other areas such as education to help cover costs.

As a result, hospitals will need to make changes that the AHA says will impact communities across the nation.

“Hospitals will be forced to make difficult decisions about whether they will have to reduce services, reduce staff, and potentially consider closing their doors,” said Colleen Kincaid, vice president of media relations and strategy at AHA.

If hospitals and other health facilities are forced to close, especially in rural areas, patients will be forced to travel farther to get health care. For seniors who don’t drive long distances or at all, longer travel times are barriers to critical care, which can prove deadly.

Medicaid also pays for about two of every five births in the U.S., and some states—such as Louisiana and Mississippi—have more than half their births funded by the program, according to health care think tank KFF.

“Everybody gets impacted, the entire community, whether you’re Medicaid eligible or not, no matter your age, no matter your financial situation,” Maria Freese, senior legislative representative at the National Committee to Preserve Social Security and Medicare.

Even if hospitals and other health care facilities don’t close, AHA’s Kincaid said the impact of the Medicaid cuts will likely lead to longer wait times for care, more crowded and overwhelmed emergency departments, and hospitals lacking the resources to invest in technology and innovations for clinical care.

A report from the Center for Healthcare Quality and Payment Reform found that 742 rural hospitals are at risk of closing in the U.S., with over 300 of those considered at “immediate risk.” Texas has the largest number of rural hospitals at risk of closure with 78, followed by Oklahoma and Kansas.

The Republican budget, which includes these proposed Medicaid cuts, has moved to the Senate after a 215-214 House vote Thursday. Some senators have been vocal about opposing Medicaid-related provisions.