Brace Yourself: The One Thousandth Cut Could Unravel the Rural Safety Net
Research Update – June 2017
The Congressional Budget Office (CBO) projects the House-approved H.R.1628 – American Health Care Act of 2017 (AHCA) bill will reduce the federal deficit by $323B through 2026 but reduce access to healthcare insurance for 23 million Americans in the same period.[1] And, the CBO estimates that the Senate version of this legislation, H.R. 1628, Better Care Reconciliation Act of 2017 (BCRA), would bring that number down to 22 million. Both pieces of legislation make significant cuts to Medicaid, which will have far reaching implications for the neediest communities and the providers who serve them.[2] The Chartis Center for Rural Health (CCRH) has modelled the financial impact of the House and Senate versions of the legislation on the nearly 2,200 rural hospitals that serve as a backstop for the rural health safety net. As the legislation evolves and more specifics emerge, CCRH will revisit the analysis.
Implications of the House approved AHCA
If the AHCA proposed cuts to Medicaid are enacted, we estimate a loss of $1.4B in revenue a year to rural providers. These rural providers are already experiencing shrinking margins and have watched many peers close or contemplate closure in the last 10 years. With 41% of rural hospitals operating with a negative margin, this loss of essential revenue will further weaken their tenuous financial position[3]. If the AHCA moves forward, we further estimate a loss of 37,000 healthcare and community jobs across the country as hospitals cut employees and costs to match the reduction in this important source of revenue. If the loss in revenue pushes more rural hospitals into closure, the associated job loss could be much higher. Combined this would create a $4.1B drag on the nation’s GDP from the rural providers affected.
Our analysis notes wide variation in the impact of these proposed cuts by state and by hospital. Those states that chose to expand Medicaid under the ACA would see nearly twice the cuts compared with states that did not expand Medicaid. Additionally, states with larger Medicaid programs and large rural populations would see greater impact in these cuts as proposed. Medicaid expansion states would generally stand to suffer the greatest losses in rural hospital revenue, especially California, Kentucky, Minnesota, New York, and Oregon. States expected to see the smallest losses include Utah, Wyoming, South Dakota, New Hampshire, and North Dakota.
Similarly, at the individual rural hospital-level, the median annual loss in revenue in Medicaid expansion states is nearly twice as large per hospital as it is in states that did not expand Medicaid. The median loss in revenue in Medicaid expansion states is estimated to be $477,000 per hospital compared with $242,000 per hospital in states not participating in expansion under the ACA. Cuts of this magnitude may be untenable as many hospitals will be forced into the red.
Evaluating the bottom line of rural hospital operating margins offers a sobering glimpse into the potential impact of proposed changes to Medicaid. These cuts, if enacted, would result in more than 150 hospitals seeing their operating margins sink into the red, shifting the balance from 41% of rural providers with negative margins in 2015 (933 hospitals in total) to 48% (1,024 rural hospitals in total).
Impact of the Medicaid cuts of the Senate proposed BCRA
If the BCRA cuts are enacted, we estimate a loss of $1.3B in revenue a year to rural providers, only a moderately smaller cut to rural providers compared to the AHCA. We further estimate 34,000 healthcare and community jobs may be at risk. Combined this would create a $3.88B drag on the nation’s GDP from the rural providers affected.
As with the AHCA there is significant variation at the state and hospital level to proposed Medicaid cuts under the BCRA. In states that expanded Medicaid, the median rural hospital would see an annual reduction of $442,000 per facility. In those states that did not expand Medicaid we estimate cuts in annual revenue of $224,000 per rural hospital.
Under the BCRA proposal, 143 more rural hospitals (48%) would see their operating margins sink into the red. (1,015 rural hospitals in total). Like the AHCA, the BCRA, if enacted, would put strain on the already fragile rural health safety net.
“Rural healthcare providers often use the phrase ‘death by a thousand cuts’ to describe the harsh reality of trying to serve disadvantaged communities in the face of policies which undermine their financial stability,” said Maggie Elehwany, JD, government affairs and policy vice president of the National Rural Health Association. “While the number of Americans who stand to lose healthcare coverage under the AHCA and the pending Senate bill has justifiably grabbed headlines, special attention must also be given to the proposed impact on the facilities that rural communities rely on for healthcare services. If not, we may be fast approaching the delivery of that one-thousandth cut.”
- If you’d like to see the analysis and the impact at a national or state level, please complete the request form.
- To view the methodology for our analysis, click here.
- To learn more about the issues impacting rural providers, read the full Rural Relevance Study.
Feel free to reach to me with questions or comments at mtopchik@chartis.com.
38 comments. Leave new