How Might the Reconciliation Bill’s Medicaid Cuts Affect Rural Areas?

Approximately 66 million people – about 20% of the U.S. population – live in rural areas, where Medicaid covers 1 in 4 adults (a higher share than in urban areas) and plays large part in financing health care services. In rural communities, Medicaid covers nearly half of all births and one fifth of inpatient discharges. The Congressional Budget Office (CBO) estimates that the Medicaid changes in the House-passed budget reconciliation bill—the One Big Beautiful Bill Act—will reduce federal Medicaid spending by $793 billion, decrease Medicaid enrollment by 10.3 million people, and increase the number of uninsured people by 7.8 million. Senators from both parties have raised concerns about potential impacts on rural hospitals and other providers, particularly given the ongoing trend of rural hospital closures.

To address those concerns, Senate Republicans have proposed adding a rural health fund to the reconciliation bill. Initial reports have pegged the size of the fund at $15 billion, though some Republican Senators have argued it should be bigger. The fund would provide $3 billion per year in fiscal years 2027 through 2031, with half distributed equally across all states and half to be distributed by the Centers for Medicare and Medicaid Services (CMS) based at least in part on states’ rural populations, percent of providers located in rural areas, and the situation of hospitals who serve low-income patients. It is unclear how the funds will be distributed across hospitals, other providers, and various state initiatives and whether the funds would be enough to offset any losses for providers under the bill.

This policy watch estimates how the House-passed reconciliation bill would affect federal Medicaid spending in rural areas and the number of rural Medicaid enrollees.

Building on KFF’s earlier estimates of state-by-state Medicaid cuts, this analysis estimates that Medicaid spending in rural areas could decrease by $119 billion over 10 years (Figure 1). The analysis allocates each state’s estimated spending reductions from the earlier analysis of the One Big Beautiful Bill Act to urban and rural areas using the percentage of Medicaid spending that paid for services used by rural enrollees within each state.

Overall, federal Medicaid spending in rural areas could decrease by 15% ($119 billion), which is far more than the $15 billion that has been suggested for the rural health fund. These estimates may underestimate the effects on rural areas because they do not account for the full change in total Medicaid spending, which would include the federal spending reductions and the associated reduction in state Medicaid spending stemming from lower enrollment. The estimates also do not account for the 8.2 million people who are expected to be uninsured because of changes in the Affordable Care Act. Those coverage losses stem from $268 billion in cuts to Affordable Care Act (ACA) Marketplace coverage from the reconciliation bill, the expiration of enhanced ACA subsidies that were enacted during the COVID-19 pandemic, and the impact of proposed Marketplace integrity rules. Federal spending cuts and coverage losses could have implications for rural hospitals and other providers, including increases in uncompensated care. While providers could potentially offset some of the cuts, financial pressure on hospitals and other providers could lead to layoffs of staff, more limited investments in quality improvements, fewer services, or additional rural hospital closures.

Over half of the spending reductions in rural areas are among 12 states that have large rural populations and have expanded Medicaid under the ACA, each of which could see rural federal Medicaid spending decline by $4 billion or more. Those states include Kentucky, North Carolina, Ohio, Illinois, Virginia, Michigan, New York, Washington, Pennsylvania, Oklahoma, Louisiana, and Arkansas. Kentucky would experience the largest rural Medicaid spending reduction, with an estimated drop of over $10 billion over 10 years. Larger effects in expansion states reflect the fact that expansion states would experience spending reductions under the House-passed reconciliation bill equal to 13% of their projected Medicaid spending, compared with only 6% in non-expansion states. Over half of the estimated federal spending cuts stem from provisions that only apply to states that have adopted the ACA expansions, including work requirements, more frequent eligibility determinations, and new cost sharing requirements. As a result, the effects of the reconciliation bill in rural areas will be larger for expansion than non-expansion states. The $119 billion decline in federal spending does not account for any changes in states’ Medicaid spending.

Building on KFF’s earlier estimates of state-by-state Medicaid enrollment declines, an estimated 1.5 million fewer people could be covered by Medicaid in rural areas under the reconciliation bill in 2034. The analysis allocates each state’s estimated enrollment loss from the earlier analysis of the One Big Beautiful Bill Act to urban and rural areas using the percentage of Medicaid enrollees in rural areas within each state. The same 12 states with the largest spending reductions account for over half of the estimated enrollment losses, each of which could experience enrollment declines of 50,000 or more rural enrollees in 2034. Currently, the uninsured rate is lower in expansion states than in non-expansion states, but it’s unclear whether that could change if the reconciliation bill passes. Research consistently links health coverage to improved health and to reduced mortality. The 1.5 million people who lose Medicaid in rural areas does not account for other increases in the uninsured rate stemming from reconciliation provisions affecting the number of people with coverage purchased through the ACA Marketplaces. It also does not account for the expiration of enhanced premiums tax credits, which were temporarily established during the COVID-19 pandemic, and the impact of proposed Marketplace integrity rules.