Medicaid

It’s Still the Economy: How Medicaid Keeps Rural America Alive

By skyforbes No Comments

A Data-Driven Case for Medicaid as Critical Infrastructure Support in Rural Healthcare and Economic Sustainability

Near Red Lodge, MT

Rural economies have always walked a razor’s edge — but now, as policymakers eye cuts to Medicaid, they are preparing to sever one of the last remaining lifelines tethering these communities to healthcare, employment, and basic economic survival.

Having lived in Red Lodge, Montana, from 2003 to 2009, where I worked in clinics and hospitals throughout the surrounding region, I’ve witnessed firsthand how rural healthcare facilities serve as the lifeblood of their communities. In these small towns, the local hospital or clinic isn’t just where residents receive care — it’s often the largest employer, the most significant economic anchor, and a magnet for other businesses and professionals. Many policymakers fail to recognize that Medicaid isn’t simply a healthcare program; it’s the financial foundation that keeps these rural institutions viable. For facilities operating on razor-thin margins, Medicaid reimbursements represent the critical difference between barely sustainable operations and complete closure. When I practiced in rural Montana, I saw how a single hospital closure could trigger an economic cascade affecting everything from the local pharmacy to the school system, as healthcare professionals and their families relocated. Today, with 46% of rural hospitals already operating in the red and 432 vulnerable to closure, we face an existential crisis that threatens not only healthcare access but the economic survival of rural America itself.

The data paints a stark picture: the rural health safety net is under intense pressure nationwide. Since 2010, 182 rural hospitals have closed or converted to models without inpatient care, representing approximately 10% of the nation’s rural facilities. This ongoing crisis threatens not just healthcare access for the more than 46 million rural Americans but also the economic foundation of their communities.

Take-home Points: Medicaid as Rural America’s Economic Lifeline

  1. Rural America’s Math Problem: A 3-percentage-point difference in operating margins between Medicaid expansion and non-expansion states represents a 200% difference between financial viability and insolvency for rural hospitals.
  2. The $2.20 Multiplier: Every dollar spent on rural healthcare generates $2.20 in the local economy. Medicaid isn’t just healthcare funding — it’s economic stimulus.
  3. No Expansion, No Hospitals: 74% of rural hospital closures since 2010 occurred in states that refused Medicaid expansion. This isn’t coincidence — it’s causation.
  4. Montana’s Success Story: Since expanding Medicaid in 2016, Montana has had ZERO rural hospital closures while reducing uncompensated care costs by 35%.
  5. Veterans at Risk: Nearly 2 million rural veterans rely on Medicaid because they’re not enrolled in VA healthcare. Cutting Medicaid abandons those who served.
  6. The Healthcare Cliff: 46% of rural hospitals are currently operating in the red, with 432 vulnerable to closure — representing an existential threat to rural economies.
  7. Care Deserts Expanding: 293 rural hospitals have stopped providing obstetrics services since 2011. When healthcare services disappear, so do jobs.
  8. GOP Waking Up: The “Medicaid Twelve” Republicans and Senator Hawley recognize that their rural voters depend on Medicaid. This isn’t partisan — it’s practical.
  9. When Hospitals Close, Towns Die: Hospital closures trigger economic cascades affecting pharmacies, schools, housing markets, and tax bases. The economic impact extends far beyond healthcare.
  10. The Rural Razor’s Edge: With 10% of rural hospitals already closed or converted since 2010, proposed Medicaid cuts would push hundreds more communities over the edge from economic survival to extinction.

To understand the stakes of proposed Medicaid cuts, we must first examine how deeply embedded it is in the economic scaffolding of rural health systems.

Medicaid is an Economic Pillar in Rural Communities

In the 10 states that have not expanded Medicaid, 53% of rural hospitals are operating at a loss vs. 43% in Medicaid expansion states

The Financial Realities of Rural Healthcare

The financial margins for rural healthcare facilities are alarmingly thin. The national median operating margin for rural hospitals is just 1.0%. Within 16 states, the median rural hospital operating margin is negative. In states with the most precarious situations, the percentage of rural hospitals operating in the red reaches staggering levels — 87% in Kansas, 76% in Washington, and 70% in Oklahoma and Wyoming.

One of the most significant policy factors affecting rural hospital financial viability is Medicaid expansion under the Affordable Care Act (ACA).

The evidence is clear:

In Medicaid Expansion states Positive 1.5% vs. Negative 1.5% in Non-Expansion

In expansion states, the median rural hospital operating margin is positive 1.5%, with 43% operating in the red. By comparison, in the 10 states that have not expanded Medicaid, 53% of rural hospitals are operating at a loss, with a median operating margin of negative 1.5%.

This 3-percentage-point difference in operating margins isn’t just a minor statistical variation — it represents the critical threshold between financial viability and insolvency for facilities operating on such thin margins. For math nerds, the percent difference in median operating margins between expansion and non-expansion states is 200%. In real terms, this means the difference between being able to reinvest in facilities and services versus cutting staff, eliminating essential care, or closing entirely.

For math nerds, that percent difference in median operating margins between expansion and non-expansion states is 200%.

The Ripple Effect Through Rural Economies

When rural hospitals close, the impact extends far beyond healthcare access. As Kevin Stansbury, CEO of Lincoln Health in Hugo, Colorado, noted in his May 2025 New York Times opinion piece:

If you have ever felt stress after passing a highway sign warning, “No gas next 90 miles,” you understand the importance of my hospital. I am the chief executive of Lincoln Health, a 25-bed county-owned hospital in Hugo, Colo., a town of about 800. We are the only hospital on the I-70 corridor between Denver, 85 miles to our west, and Burlington, near the Kansas state line, some 80 miles to the east.

Healthcare facilities typically represent one of the largest employers in rural areas. When these institutions struggle or close, the economic impact ripples throughout the community:

  • Loss of high-paying professional jobs
  • Reduction in support business activity
  • Decreased attractiveness for new businesses and residents
  • Diminished tax base for local governments

Research from the National Rural Health Association underscores this economic significance: for every dollar spent on rural healthcare, approximately $2.20 is generated in the local economy through wages, purchases, and related business activity. This multiplier effect means that Medicaid funding doesn’t just sustain hospitals — it serves as a crucial economic engine for entire communities.

National Rural Health Association study

The Natural Experiment: Medicaid Expansion vs. Non-Expansion States

The decision by some states to expand Medicaid while others did not has created what researchers consider a natural experiment, allowing us to observe differing outcomes based on this single policy choice.

Hospital Financial Stability

Rural hospitals in states that have expanded Medicaid under the ACA continue to perform better financially than their counterparts in the 10 remaining non-expansion states (i.e., Alabama, Florida, Georgia, Kansas, Mississippi, South Carolina, Tennessee, Texas, Wisconsin, and Wyoming).

These non-expansion states account for nearly 30% of all rural hospitals. The financial disparity is stark: 53% of rural hospitals in non-expansion states operate in the red compared to 43% in expansion states.

Montana: A Case Study in Successful Expansion

Montana’s experience with Medicaid expansion provides compelling evidence of its positive impact. Since implementing expansion in 2016, Montana has witnessed significant improvements in the financial health of its rural hospitals. Most notably, Montana has had no rural hospital closures since the expansion took effect. This contrasts sharply with national trends, where 136 rural hospitals closed between 2010 and 2021, with 74% of those closures occurring in states that did not expand Medicaid.

The expansion has led to a substantial decrease in uncompensated care costs for Montana’s critical access hospitals and rural health clinics, with a reported 35% decline since implementation. This reduction alleviates the financial burden on these facilities, allowing them to maintain operations and continue providing essential services to their communities.

Medicaid expansion has been instrumental in reducing Montana’s uninsured rate, providing coverage to nearly 110,000 low-income adults as of 2023. This significant increase in insured individuals improves access to healthcare services and ensures a more stable revenue stream for hospitals, reinforcing their financial sustainability.

Hospital Closures and Service Reductions

The pattern of hospital closures follows a similar geographic distribution. The states suffering the most significant loss of inpatient care since 2010 are Texas (26) and Tennessee (16), followed by Georgia, Kansas, Mississippi, Missouri, and Oklahoma, each with 11 communities losing inpatient care. The loss of inpatient care is generally highest across the South from the Carolinas to Texas and into the Midwest, regions with significant overlap with non-expansion states.

Beyond complete closures, many facilities have reduced essential services:

Between 2011 and 2023, 293 rural hospitals stopped providing obstetrics services. This represents 24% of the nation’s rural OB units. Similarly, between 2014 and 2023, 424 rural hospitals stopped providing chemotherapy services. This represents 21% of all rural hospitals that previously offered chemotherapy.

These service reductions create “care deserts” that disproportionately affect vulnerable populations, forcing patients to travel greater distances for critical care.

Lamp shade in my House, looking into my back yard in Red Lodge, MT 2005

The Existential Threat of Medicaid Cuts

Given the already precarious state of rural healthcare, recent proposals to cut Medicaid funding represent an existential threat to these essential community institutions.

Current Proposals and Their Potential Impact

A House Energy and Commerce Committee bill advanced in May 2025 would cause millions of Americans to lose Medicaid coverage. According to a partial analysis from the Congressional Budget Office:

The healthcare section of the legislation would reduce federal spending by an estimated $912 billion over a decade as part of the broader GOP reconciliation package, and cause 8.6 million people to become uninsured. Specifically, ‘the Medicaid portions of the GOP megabill would already lead to 10.3 million people losing coverage under the health safety-net program and 7.6 million people going uninsured.

Direct Impact on Rural Systems

Rural healthcare systems are particularly vulnerable to these cuts. Kevin Stansbury of Lincoln Health in Colorado explains in a NY Times piece:

“(Nearly three-quarters of our revenue, for example, is from Medicaid and Medicare.) These programs are essential, but, unlike commercial insurance, they don’t always cover the total cost of care, which has been rising as drugs and supplies become more expensive. We also serve fewer patients than big city hospitals but still have fixed costs to stay operational. The result is that we run on minimal or negative operating margins.”

Looking at the potential consequences in Montana specifically, the prospect of repealing Medicaid expansion poses significant risks to the state’s rural healthcare infrastructure. The loss of reimbursement for services currently covered under the expansion could increase the risk of rural hospital closures and service reductions, affecting all Montanans, not only Medicaid recipients. Without the financial support provided by Medicaid expansion, hospitals would face increased uncompensated care costs, undermining their operating margins and potentially leading to the reduction or elimination of critical services.

Hospitals would face increased uncompensated care costs, undermining their operating margins and potentially leading to the reduction or elimination of critical services.

Veterans in Rural America

This crisis hits especially hard among rural veterans — one in four veterans lives in rural areas, and nearly half have a service-connected disability. For the almost 2 million rural veterans not enrolled in the Veterans Health Administration (VHA), Medicaid often serves as a critical safety net, providing coverage for essential healthcare services that would otherwise be financially out of reach.

Nearly 25% of all veterans reside in rural communities. Access to care challenges mean that this segment is particularly vulnerable. Of the 4.4 million veterans living in rural communities, almost 2 million are not enrolled in the VHA and must rely on other coverage options, including Medicaid. More than 40% of rural veterans have a service-related disability, 54% are over the age of 65, and 31% earn less than $35,000 per year — demographic factors that make Medicaid’s role as a coverage backstop vital for this population.

More than 40% of rural veterans have a service-related disability,..demographic factors that make Medicaid’s role as a coverage backstop vital for this population.

The Rural Health Disparity Context

These financial challenges exist against a backdrop of significant rural-urban health disparities:

Social determinants of health indicators show rural communities have lower median household income (-36 percentile points) and higher rates of child poverty (+16 percentile points) than their urban peers. Rural Americans carry a larger share of the chronic disease burden, with higher rates of adult obesity (+30 percentile points) and premature death (+20 percentile points) than their urban counterparts.

A Bipartisan Case for Preserving Medicaid

As Senator Josh Hawley (R-MO) stated in a May 2025 op-ed:

Republicans need to open their eyes: Our voters support social insurance programs. More than that, our voters depend on those programs. And there’s a reason for this that Republicans would do well to ponder. Our economy is increasingly unfriendly to working people and their families.

If Republicans want to be a working-class party — if we want to be a majority party — we must ignore calls to cut Medicaid and start delivering on America’s promise for America’s working people.

This bipartisan concern is further exemplified by the “Medicaid Twelve” — a group of House Republicans who formally opposed Medicaid cuts in an April 2025 letter to House leadership. Eight of these twelve representatives hail from predominantly rural districts where healthcare facilities serve as economic anchors: David Valadao (R-Calif.), Don Bacon (R-Neb.), Rob Bresnahan Jr. (R-Pa.), Juan Ciscomani (R-Ariz.), Jen Kiggans (R-Va.), Robert Wittman (R-Va.), Young Kim (R-Calif.), and Jeff Hurd (R-Colo.). Their letter stated they “will not support a final reconciliation bill that includes any reduction in Medicaid coverage for vulnerable populations.” These lawmakers recognize what their constituents experience firsthand: “Many hospitals — particularly in rural and underserved areas — rely heavily on Medicaid funding, with some receiving over half their revenue from the program alone. Providers in these areas are especially at risk of closure, with many unable to recover. When hospitals close, it affects all constituents, regardless of healthcare coverage.”

A Path Forward for Sustaining Rural Healthcare

The Future of Rural Health Summit in 2024 outlined several key strategies for preserving and strengthening rural healthcare systems:

  1. Financing Rural Health Services: Obtain capital to support rural hospitals, maintain and enhance current payment rates and methodologies to stabilize providers, and address Medicare Advantage challenges.
  2. Support Workforce Initiatives: Invest in rural health workforce development, focusing on clinicians with a comprehensive scope, administrators, and community healthcare workers.
  3. Enhance Technology and Data: Expand reliable broadband access, make pandemic-era telehealth provisions permanent, and develop shared analytics tools for rural providers.
  4. Strengthen Collaboration: Create regional centers of excellence, establish networks that can function as purchasing coalitions, and fund mechanisms to support the rural health leadership pipeline.

My experience in Red Lodge and the surrounding communities taught me a truth that data now confirms: Medicaid is not merely a safety net for individuals — it’s the economic lifeline for entire rural communities. When discussing Medicaid funding, we’re not debating abstract budget numbers; we’re determining whether rural towns across rural America will have accessible healthcare, sustainable employment opportunities, and economic viability. I’ve seen patients who depended on Medicaid for their care. Still, more profoundly, I’ve seen communities whose economic vitality hinged entirely on rural hospitals that would collapse under the weight of uncompensated care without Medicaid reimbursements stabilizing their balance sheets. The hospitals and clinics where I worked teetered perpetually on that critical margin between sustainability and extinction. Today’s policy choices will echo through generations in these communities. Will we strengthen the programs that sustain rural healthcare and the economies built around them? Or will we force more communities to join the growing number of healthcare deserts, where residents must travel hours for basic services and local economies wither without their largest employers? The answer will determine not just rural Americans’ health but rural America’s economic survival.

Red Lodge, MT

Take-home Points: Medicaid as Rural America’s Economic Lifeline

  1. Rural America’s Math Problem: A 3-percentage-point difference in operating margins between Medicaid expansion and non-expansion states represents a 200% difference between financial viability and insolvency for rural hospitals.
  2. The $2.20 Multiplier: Every dollar spent on rural healthcare generates $2.20 in the local economy. Medicaid isn’t just healthcare funding — it’s economic stimulus.
  3. No Expansion, No Hospitals: 74% of rural hospital closures since 2010 occurred in states that refused Medicaid expansion. This isn’t coincidence — it’s causation.
  4. Montana’s Success Story: Since expanding Medicaid in 2016, Montana has had ZERO rural hospital closures while reducing uncompensated care costs by 35%.
  5. Veterans at Risk: Nearly 2 million rural veterans rely on Medicaid because they’re not enrolled in VA healthcare. Cutting Medicaid abandons those who served.
  6. The Healthcare Cliff: 46% of rural hospitals are currently operating in the red, with 432 vulnerable to closure — representing an existential threat to rural economies.
  7. Care Deserts Expanding: 293 rural hospitals have stopped providing obstetrics services since 2011. When healthcare services disappear, so do jobs.
  8. GOP Waking Up: The “Medicaid Twelve” Republicans and Senator Hawley recognize that their rural voters depend on Medicaid. This isn’t partisan — it’s practical.
  9. When Hospitals Close, Towns Die: Hospital closures trigger economic cascades affecting pharmacies, schools, housing markets, and tax bases. The economic impact extends far beyond healthcare.
  10. The Rural Razor’s Edge: With 10% of rural hospitals already closed or converted since 2010, proposed Medicaid cuts would push hundreds more communities over the edge from economic survival to extinction.

Cited References and Further Reading

By skyforbes

Related Posts

Medicaid

Elder abuse: Mapping the Republican scheme to force disabled seniors to work to get Medicaid

skyforbes
Medicaid

Confidence Crashes: Markets React to Trump’s Tax Cuts, $880 Billion Medicaid Rollback

skyforbes
Medicaid

If They Eliminate Medicaid, Who Will The Come For Next?

skyforbes

Leave a Reply

You Missed

Men's Health

Top 14 Benefits & Uses of Damiana

Chat GPT

Downloads

How to Automatically Download and Store Daily Stock Prices Using the Polygon API and Python

Reviews

I Really Don’t Know Why I Waste My Time: A Saltburn Review