How Trump’s Spending Package Could Impact Rural Hospitals: What You Need to Know

The recent health care changes from President Trump’s budget plan signed on July 4, 2025, are set to significantly cut Medicaid funding—by over a trillion dollars across a decade. This could lead to around 11.8 million people potentially losing their health insurance.

Research shows that these cuts will hit rural America the hardest, impacting about 66 million people living in those areas. Many residents depend on Medicaid for their health insurance, and losing this coverage could increase unpaid medical care. Local hospitals might have to make some hard choices, such as limiting services, laying off staff, or even closing down.

Rural Health in Jeopardy

The most significant change is how Medicaid financing will work. New restrictions on state funding will likely shrink payments to rural hospitals, which rely heavily on Medicaid to operate. This is a huge rollback in health care coverage in the U.S.

Moreover, starting in 2027, states will implement work requirements for Medicaid recipients, demanding proof of employment or school attendance. Past experiments with similar rules, like in Arkansas, showed that these policies often increase bureaucratic hurdles rather than help people find jobs. This could mean millions lose their coverage due to more inspections and paperwork.

According to the Congressional Budget Office, nearly 5 million people could drop off Medicaid roles because of these changes. That means rural hospitals will see fewer paying patients, leading to more unpaid services they have to provide.

Changes to the Affordable Care Act (ACA) also pose a risk. The revised rules could reduce the number of people eligible for premium tax credits, possibly cutting around 3 million from health insurance coverage by 2034. This is problematic because many people benefited from expanded tax credits during the COVID-19 pandemic, which helped them obtain insurance.

Inadequate Support

Worries have emerged from both political parties regarding the financial stability of rural hospitals, leading to the allocation of $50 billion over five years for a new Rural Health Transformation Program. However, this $50 billion falls short, especially considering that rural areas may experience a $155 billion drop in funding over the next ten years, mainly from states that expanded Medicaid under the ACA.

This lack of sufficient funding means rural health facilities might still struggle to keep up with the demands and remain operational.

Escalating Hospital Closures

Rural hospitals have been dealing with significant challenges for years. Issues like aging buildings, a sicker population, and geographic isolation have made it tough for them to stay open. Since 2010, over 150 rural hospitals have closed or stopped offering patients inpatient services. The trend is particularly troubling in states that chose not to expand Medicaid, affecting those who live in rural areas the most.

As of June 2025, around 338 hospitals were at risk of reducing services or closing. Maternity care is especially threatened; over half of rural hospitals no longer provide childbirth services. Patients often find themselves needing to travel farther for care, risking complications.

Rural residents depend more on Medicaid than urban ones, intensifying the impact of funding cuts on these hospitals. This could lead many already struggling hospitals further down the path to closure.

Broader Implications

Rural hospitals aren’t just health facilities; they’re vital parts of their local economies. When a hospital closes, it often means fewer jobs and less local income, which can hurt the community overall. Residents are left with fewer health care options, leading some to delay medical care until it’s too late.

Moreover, rural areas play an essential role in producing food and resources for the nation. Weakening rural hospitals could harm not just local economies but also the broader U.S. economy. Ensuring these hospitals remain operational is crucial for the health and well-being of both local communities and the country as a whole.