Medicaid and Hospital Healthcare

Tr__p is planning to cut Medicaid because he can do so with Republican support. Somehow, he has to find a way to pay for the tax breaks for the upper income followers. Doing so will have consequences for both the low-income citizens and also for the healthcare infrastructure.

One Republican Senator is starting to take note.

Sen. Susan Collins (Maine) is one of three Republicans to vote against President Donald Trump’s “big, beautiful bill.” Why so? She is predicting lawmakers make changes to the party-line tax and spending package when it becomes clear the cuts to Medicaid will cause rural health care costs to become untenable. Inside Congress Live.

By that remark, Senator Collins (who at one time worried about chalk on her sidewalk) as shows concern about the politics of doing so. as most of the people impacted by this bill will not be able to afford healthcare. To explain?

Why changes to the BBB? It is pretty obvious. Millions of Americans will no longer have hospital care in their community. Over twenty+ years, nearly 200 rural hospitals have already closed due to costs which are more than what they collect from insurance. As these hospitals close, millions of Americans who live in those communities no longer have access to an emergency room, inpatient care, and many other hospital services. They lose access to healthcare other citizens in much of the rest of the country take for granted.

To survive some hospitals eliminate services. Thirty-one hospitals eliminated inpatient services in 2023 and 2024 in order to qualify for federal grants that are only available for Rural Emergency Hospitals (REHs). More than 7,000 rural residents received inpatient care in those hospitals. Now seriously ill individuals in their communities will end up in a hospital farther from home for the services they need. “Rural Hospitals at Risk of Closing,” Angry Bear

Closures Are Caused by Inadequate Payments from Private Health Plans

The primary reason hundreds of rural hospitals are at risk of closing is private insurance plans are paying less than the increasing cost to deliver services to patients. As shown in the chart below, At-Risk hospitals are losing money on uninsured patients and Medicaid patients. An At-Risk hospital is one which costs surpass funding. The loss leader result from low payments from the private insurance covering patients. These are the largest contributor to overall losses to these hospitals.

Conversely, many other rural hospitals are Not At-Risk of closing because they make sufficient profits on patient services. They receive payments from private health plans covering the costs of delivering services to the patients with private insurance. Those payments also offset the hospitals’ losses on services delivered to the uninsured and Medicaid patients.

The point being made? The smaller and Rural Hospitals suffer from the low volumes of patients using their facilities due to less compensation and costs. There is also a constant cost that must be met in infrastructure. Keep in mind (as Joel one time remarked), hospitals are required to treat people whether they can pay or not.

Most “solutions” for rural hospitals focus on increasing Medicare or Medicaid payments or expanding Medicaid eligibility. This is due to a mistaken belief that most rural patients are insured by Medicare and Medicaid or are uninsured. In reality, approximately half of the services at an average rural hospital are delivered to patients with private insurance (both employer-sponsored insurance and Medicare Advantage plans). Those payments do not cover costs for many of the rural hospitals. To reiterate, the amounts private plans pay (not traditional Medicare or Medicaid payments) can determine whether a rural hospital loses money.

For At-Risk hospitals?

The graph pretty much says what the issues are. As you can see both Medicaid and Medicare do not break even in costs for At-Risk Rural as well as Not-At-Risk Rural Hospitals. Rural At-Risk Hospitals still lose money regardless of whether Medicaid and Medicare pay for the care. The bigger issue for At-Risk hospitals is what private entities pay. Adjustments can be made for Medicaid payments to At-Risk hospitals. A bigger issue being what Commercial Healthcare pays to smaller rural hospitals.

However, we are more than likely looking at an economy of scale. Providing healthcare and having the infrastructure to do so can be more costly amongst some Rural hospitals. The funds from providing care may not cover the costs of providing care in some areas due to fewer patients and greater costs..

So what could be done? Adjustments to private and public insurance programs should make a significant impact in providing funds for At-Risk rural hospital services. It could come in the form of greater government support also. Either would go a long way in preventing rural hospitals closures. Close the gap on Medicaid.

Having rural hospitals is a need for people living in rural areas which should not be ignored. And what of Tr_mp’s plan?

Tr_mp cutting Medicaid worsens the rural hospital of both categories and overall healthcare environment. It will also have an impact in inner-city areas. Tr_mp gives people on Medicaid no alternative except to be ill or die.

Plan should include Medicare Advantage (MA) needing to pay small rural hospitals adequately. The MA plans should pay at least as much as what Original Medicare pays for the same services. All plans should pay claims in a timely fashion. Also, alternative help to At-Risk hospitals is not a luxury, it is a need. Generalities, I know. If I get time, I will look deeper.

“Rural Hospitals Closing Leaving Millions with No Hospital Care,” Angry Bear