By Shalina Chatlani for Stateline
- At least 70.8 million people are enrolled in Medicaid
- The new Trump law will reduce Medicaid spending by $149B over the next decade
President Donald Trump’s new tax and spending law will likely force more than half the states to reduce payments to doctors and hospitals that treat Medicaid patients, a change critics warn will be particularly harmful to rural hospitals struggling to stay afloat. Medicaid, the joint state-federal health insurance program for those with a low income, reimburses doctors, hospitals and nursing facilities for treating enrollees. The new law will reduce Medicaid spending by $149 billion over the next decade, and reduce Medicaid provider payments in as many as 31 states.
Why This Matters: To help providers cover losses and continue to serve poorer populations, the federal government allows the 41 states, plus the District of Columbia, that have contracted with Medicaid managed care organizations (MCOs) to run their Medicaid programs to direct them to pay providers more in some cases, as much as commercial plans. Ultimately, taxpayers cover the costs of these so-called state-directed payments and those costs are growing. As of August 2024, the higher payments were projected to add $110.2 billion per year to Medicaid spending, nearly 60% more than the previous year’s projection.
Hospital leaders dispute that. Earlier this year, the American Hospital Association asserted that without the extra payments, Medicaid managed care organizations in 2023 only covered about two-thirds of the actual cost of care. Additional payments are especially critical in a rural state such as Kansas, where some researchers have found that 87% of rural hospitals are in the red and many hospitals are at risk of closure. This is because health care providers see fewer patients, which makes it hard to spread out the cost of care and make up for losses that come from serving underinsured.
Situational Awareness: With Medicaid being the primary insurer for low‑income people, hospitals may be forced to cut services, or even close, particularly in rural or underserved areas. Patients may need to travel further or wait longer for care. In a nutshell, it widens the wealth gap because nutrition, housing, and access get worse.
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