(The Center Square) – Rural healthcare providers in Michigan are warning that federal Medicaid reforms could intensify financial pressures on already struggling hospitals.
Others, however, argue the changes were necessary to curb spending and reduce fraud.
Hospital leaders and healthcare advocates argue changes included in H.R. 1 – the federal budget package signed last year by President Donald Trump – could threaten essential services in rural communities, including maternity care, mental health treatment and emergency services.
“It’s very important to share our story and to talk about this devastating impact to rural hospitals like Hillsdale,” said Hillsdale Hospital CEO J.J. Hodshire at a news conference at Hillsdale Hospital in Southeast Michigan last month.
Hodshire explained rural hospitals depend heavily on Medicaid and Medicare reimbursements, with government programs accounting for the majority of payments many facilities receive.
“Historically, in rural communities, you find that 50 to 60% of that population utilizes Medicaid,” Hodshire said. “Seventy percent of the population utilizes Medicaid for obstetrics.”
Hodshire said Hillsdale Hospital projects losing roughly $6 million annually under the Medicaid changes.
“We’ve been able to hang on to most all of our services,” Hodshire said. “But this story will not end well if these cuts continue.”
Healthcare advocates warned the consequences could extend beyond hospitals themselves.
“These hospitals aren’t just healthcare lifelines in communities,” said Dianne Byrum, state director for Protect Our Care Michigan, who organized the press conference. “They support local economies and local jobs.”
Supporters of the federal reforms, however, dispute some of these claims. Naomi Lopez, an adjunct scholar with the Mackinac Center for Public Policy, said the legislation slows Medicaid spending growth rather than reducing overall funding.
“Only in Washington or a state house would curbing the rate of growth be called a cut,” Lopez told The Center Square in an exclusive interview. “These are not actual cuts to the program.”
Yet, according to Byrumm about 300,000 Michiganders could lose healthcare access because of Medicaid and Affordable Care Act policy changes, while tens of thousands more could struggle to afford insurance coverage.
“We know that there are a lot of people enrolled in Medicaid that should actually be on the ACA exchange,” Lopez said.
During the press conference, the Michigan Health & Hospital Association said rural hospitals are already facing financial distress before the federal reforms are fully implemented.
“According to the latest study, 19 rural hospitals are under significant financial distress in the state of Michigan,” said Adam Carlson, senior vice president for advocacy at the association.
Carlson said nine Michigan hospitals have stopped offering obstetrics services since 2018 because of financial strain, adding that Michigan hospitals could see reimbursements decline by more than $6.5 billion through 2032.
“When a hospital closes, it really harms that community and their ability to attract businesses,” Hodshire said. “It really decimates communities.”
Lopez said the reforms primarily target expansions under pandemic-era enrollment policies and focus on reducing fraud, waste and ineligible participation in Medicaid.
“The idea that allowing this program to continue on automatic pilot is absolutely absurd,” she said.
According to Lopez, Congressional Budget Office projections show Medicaid spending will continue growing from roughly $708 billion this year to about $981 billion by 2036 despite the reforms.
She added that states also cannot allow Medicaid spending to grow unchecked because balanced-budget requirements force tradeoffs with other priorities such as infrastructure and education.
“Every dollar that Michigan spends on Medicaid in an environment where state coffers are shrinking means that spending in education and infrastructure and transportation and other areas will be cut,” Lopez said.
Lopez encouraged rural healthcare providers to focus on innovation, including expanded telehealth services and direct primary care models.
“Michigan is very behind in terms of adoption of telehealth,” Lopez said. “Especially for a state that has a very large rural population and a very large land area.”
She argued that, while it might require providers to rethink how care is delivered in underserved communities, hospitals should not be handed a “blank check” to spend taxpayer funding through programs like Medicaid.
“It’s not uncommon for hospitals to cry poor and to be upset at any change in funding,” Lopez said. “There’s a responsibility to innovate and to adopt policies and services that really do better meet the needs of individuals in their area.”
Still, Hodshire said rural providers cannot absorb major reimbursement losses without eventually reducing services. Because of that, he called for a renewed focus on the issue throughout Michigan communities.
“We have to speak up. We have to speak out rationally and intentionally,” he said. “There has to be a focus back on rural health in rural communities.”
