Impact of Rural Transformation Fund on potential federal Medicaid cuts

Medicaid serves as a vital source of health insurance coverage for Americans living in rural areas, including children, parents, seniors, individuals with disabilities, and pregnant women. Congressional lawmakers are currently considering more than $900 billion in cuts to the Medicaid program, which would reduce Medicaid funding and terminate coverage for vulnerable Americans. The proposed changes would also result in a significant reduction in Medicaid reimbursement that could result in rural hospital closures.

The National Rural Health Association recently partnered with experts from Manatt Health to shed light on the potential impacts of those cuts on rural health care for over the next decade in the Estimated Impact on Medicaid Enrollment and Hospital Expenditures in Rural Communities. Today's release provides updated impact data reflecting the Rural Health Transformation Fund proposal. The latest Senate text establishes a $25 billion fund for a broad range of health care providers, including rural hospitals, rural health clinics, federally qualified health centers, and community mental health centers 

The new analysis highlights that the $25 billion fund falls short of what is needed. Even if every single dollar of the new fund went exclusively to rural hospitals, it would not fill even half of the gap in funding created by the One Big Beautiful Bill Act (OBBBA). More specifically, the OBBBA generates $58 billion in Medicaid cuts over the next ten years for rural hospitals. But the rural transformation fund is limited to $25 billion over this time period, which is only 43 percent of previous funding levels (if all the funds were to go to rural hospitals). Many of America’s states with large rural populations would fare especially poorly under the fund. Manatt’s estimates show that southern and mid-western states with sizable rural populations that have expanded Medicaid face the largest remaining gaps.

Reductions in Medicaid funding of this magnitude would likely accelerate rural hospital closures and reduce access to care for rural residents, exacerbating economic hardship in communities where hospitals are major employers. A state-by-state analysis of the impacts can be found here.

“We appreciate the recognition of Senate leadership regarding of the plight of rural hospitals and of the significant impacts the reconciliation package may have on rural health care. However, the proposed Rural Health Transformation Fund by itself doesn't offset the cuts to Medicaid coverage. The changes to Medicaid will result in significant coverage losses, reduce access to care for rural patients, and threaten the viability of rural facilities,” said Alan Morgan, CEO of the National Rural Health Association.