Michigan rural hospitals at risk under Trump’s ‘beautiful’ bill, experts say

• As Congress advances a major tax and spending plan that would cut Medicaid spending, health providers fear future of rural hospitals
• Medicaid reimbursements have an outsize impact on rural hospital budgets, where there are typically fewer privately insured patients
• Trump administration contends proposed changes to Medicaid would free up resources for vulnerable populations and rural provider

As a Republican and Christian minister in one of the most conservative corners of Michigan, JJ Hodshire’s opinion of President Donald Trump’s so-called “big, beautiful bill" may surprise some onlookers. 

His perspective is informed by his day job as CEO of Hillsdale Hospital.

“This is going to hurt lives in this country — not just in Michigan, but in rural hospitals across the country,” said Hodshire, who also hosts a podcast on rural health issues.

Sweeping legislation approved this week by the US Senate and awaiting final passage in the House would extend tax breaks approved during Trump’s first term, create new deductions and increase spending on other Trump priorities like immigration enforcement. 

But to help offset at least some of those costs, the proposal would significantly cut spending on Medicaid, which provides health care coverage for more than 2.6 million Michiganders, many of whom rely on rural hospitals that could lose significant revenue as a result. 

In Michigan alone, hospitals are bracing for a hit of at least $6 billion over the next decade from proposed federal cuts to Medicaid, according to the Michigan Health and Hospital Association, an industry group.

Among other things, the legislation would require more adults to prove they are working or unable to work to be eligible and reduce state provider taxes used to leverage federal funding for Medicaid starting in 2028. 

Hodshire rejects arguments from the Trump administration and others that Medicaid is rife with “waste, fraud and abuse,” and that the legislation will not jeopardize health care for those who should qualify.

In truth, he said, the fallout will be devastating not only to patients with Medicaid, but to all patients — no matter what insurance they carry. The cuts also have the potential to devastate rural economies, he said.

Experts say impacts will be especially acute in rural hospitals. 

That’s because rural hospitals serve a larger percentage of the poor and elderly than some larger hospitals, which means a larger portion of their reimbursements are from Medicaid and Medicare. Those programs traditionally pay less than private insurance and oftentimes fall far short of the full cost of care, according to Hodshire and others.

“Doctors in the hospital are required to give a certain level of care to people who show up,” said Karley Abramson, a health policy researcher with the nonpartisan Citizens Research Council. If current Medicaid recipients lose their coverage and continue to seek care, “that burden will fall on those rural hospitals that already operate off of tiny margins.”

Even without taking the latest proposal into account, up to 13 rural hospitals in Michigan are at risk of closing, including five that are at immediate risk, according to one report by the Pittsburgh-based Center for Healthcare Quality & Payment Reform, which does not name the hospitals.

Related:

• Senate passes ‘big, beautiful bill:’ What it means for Michigan
• Battle over Medicaid boils over in DC; what it means for Michigan
• Michigan Medicaid has ballooned. Cuts are likely. Here’s what to know

The Trump administration dismissed concerns about possible rural hospital closures as a “myth,” claiming in a white paper that the proposed changes to Medicaid would make more resources available for vulnerable populations and safety net providers.

“We are expanding rural hospital protection, providing targeted funds for rural care, and giving states flexibility to support local providers,” the June 29 White House memo reads. 

But for communities in the Upper Peninsula, northern central and southern Michigan, where many regional hospitals are already operating on negative margins, the changes are expected to be “a major blow,” said Michael Shepherd, an assistant professor at the University of Michigan School of Public Health who studies disparities in rural health.

“If your hospital closes due to Medicaid cuts, it really doesn’t matter what place or entity you get your health insurance from,” Shepherd said. “If your hospital’s gone, your hospital’s gone.”  

‘Hanging from a thread’

The legislation that cleared the Senate in a 51-50 vote Tuesday is estimated to save the federal government more than $900 billion over the next decade by trimming the number of Medicaid recipients and significantly reducing states’ ability to leverage federal funds for reimbursements.

In Michigan, Medicaid provides health insurance to roughly 1 in 4 residents, primarily with lower-than-average incomes. 

Some 200,000 of those people could lose their coverage under the federal legislation, according to Gov. Gretchen Whitmer, who strongly opposes the GOP plan and on Tuesday called the proposed cuts “cruel and extreme.”

In 18 of the state’s counties — primarily rural — more than 40% of the counties’ residents are covered by Medicaid, Meghan Groen, who oversees Medicaid at the Michigan Department of Health and Human Services, recently told lawmakers.  

And while Medicaid covers 45% of the babies born in Michigan, that number is higher in many rural counties. 

At Munson Hospital in Cadillac, more than three in five babies born there — 61% — are covered by Medicaid, Groen said during a presentation at the Senate Health Policy Committee.

Unlike larger, urban facilities, smaller hospitals don’t have the percentage of private insurers to make up for shortfalls in Medicaid reimbursements. 

Yet all hospitals face fixed costs — light bills, insurance, salaries for on-call doctors — so low Medicare and Medicaid reimbursements have an outsized impact on smaller budgets. 

That means Medicaid cuts would create a larger budgetary hole for smaller hospitals, potentially forcing them to close a birthing center, psychiatric floor, or other non-emergency units that operate at a loss, or to eventually shutter altogether, said Shepherd, the U-M researcher. 

Across the country, financial pressures already forced 293 rural hospitals to stop offering birthing services between 2011 and 2023; 424 ended chemotherapy services between 2014 and 2023, according to an analysis earlier this year by Chartis, a national health care consulting firm.

Some hospitals “are already hanging from a thread, and this will just be another blow to their ability to serve their communities,” state Sen. Kevin Hertel, a Macomb County Democrat who chairs the health policy committee, told Bridge Tuesday.

What lies ahead

The plight of rural hospitals has been a sticking point in congressional debates, where some Republican senators advocated for ongoing funding. 

US Sen. Susan Collins, a Maine Republican, said she voted against the bill because of “the harmful impact it will have on Medicaid, affecting low-income families and rural health care providers like our hospitals and nursing homes.”

It could also complicate the legislation’s future in the US House, where lawmakers must sign off on the changes before the bill can head to Trump’s desk. Politico reports that dozens of House Republicans remain concerned about the bill’s Medicaid provisions.  

The Senate plan initially included a $25 billion fund for rural hospitals, with payouts starting in 2028 and spread out over five years. A last-minute amendment bumped that amount up to $50 billion.

Industry experts noted the $50 billion figure represents less than half of the expected total losses rural health care is expected to face over the next decade. The funds are also designed to be split amongst hospitals, health clinics and other care centers, meaning it’s unclear how much help rural hospitals would actually get. 

“It's very odd that we would cut hospital funding and then say, ‘But we'll add this funding back,’” said Laura Appel, executive vice president of the Michigan Health and Hospital Association. “A simpler way to do it would have been to not cut the funding.”

In Michigan, where the vast majority of Medicaid funds come from the federal government, officials would have to figure out how to reduce services, trim people from the program or backfill the cuts with millions of dollars from other programs — public safety and infrastructure, for example.

“We wouldn't be creating more money out of nowhere — if it's not the loss to Medicaid, it would be the loss to other areas in the state budget,” said Abramson, the Citizens Research Council researcher. “It's not like the state will just be able to create the money to be able to compensate for this loss.”

A recent report from the Democratic-led state Senate warned the federal legislation could “blow a $2 billion hole into the state budget,” noting that roughly 70% of state spending on Medicaid comes from federal sources.

Despite the possible budget implications, state-level Republicans see the proposed federal cuts to Medicaid and food assistance as a positive move for Michigan to scale back spending and keep eligibility limited to those with highest need. 

“I’m not convinced that the Whitmer administration is doing all of the proper checks that are needed to ensure that only eligible people are receiving welfare programs: whether it’s food stamps, whether it’s Medicaid, whether it’s cash assistance,” House Speaker Matt Hall, R-Richland Township, recently told reporters. 

The ripple effect

Several observers who spoke with Bridge predicted the proposed cuts could have a ripple effect extending well beyond the initial loss of coverage for many Medicaid recipients. 

When smaller hospitals no longer can keep open their birthing center or emergency department, rural patients have to travel further for care.

That, in turn, means longer waits, even in larger hospitals that now have more patients to serve, along with potential complications for people facing health emergencies with no hospital nearby. 

The debate over Medicaid should not center around whether an individual is “deserving” of taxpayer-funded health care, said Anne Scott, operations officer for health centers in the Michigan Primary Care Association. It’s about helping the nation’s entire health care system stay afloat. 

More than 80,000 of the more than 700,000 patients seen each year by Michigan’s federally-qualified health centers — represented by Scott’s association — could lose Medicaid coverage under the plan, she said.

But those people will continue to get sick and chronic conditions will need tending, forcing the health centers to absorb costs without reimbursements. That, in turn, will mean centers will likely have to close services or shutter locations altogether to close budget holes, she said. 

“This is like yanking the rug out on a whole healthcare system that counts on this payer system (Medicaid) being there,” Scott added. “The more people covered is more cost savings for all of us.”

Hospital closures threaten entire economies, said Hodshire, the Hillsdale Hospital CEO. Hillsdale employs 560 staff members and about 100 contract workers, who are purchasing groceries, buying cars, “and the list goes on and on.”

But the bottom line for Hodshire is guided by his faith. 

Cuts will yank health care from the poor — which he sees as a violation of Christ’s direction: For ye have the poor always with you, the part-time minister noted.

“This is an issue that is aligned with my morality,” he said. “We have to take care of the least among us. We have to take care of the widows. We have to take care of the sick and those who need care.”