The new law cuts about $1 trillion from Medicaid, primarily through stringent work requirements as well as reductions to how states can fund their Medicaid programs through provider taxes and state-directed payments.  

While most of the cuts won’t happen immediately, rural facilities in particular say they likely will have to make difficult financial decisions about which services they can afford to keep and which may need to be cut. 

Republicans pushed back the start date for the provider tax reductions until 2028, and they won’t be fully phased in until 2031. The bill was only signed into law July 4, so hospitals said it’s too early for them to know specifics on which services they’ll have to cut back on.   

But the discussions are underway because hospitals need to start planning.  

“If they see a very negative outlook in terms of Medicaid revenue reductions, increases in uncompensated care costs, I think that will tip the scales towards cutting services, cutting staff, not hiring, not expanding,” said Edwin Park, a research professor at the McCourt School of Public Policy at Georgetown University. 

Rural hospitals rely heavily on Medicaid funding because many of the patients they care for are low-income.   

Medicaid-dependent services — like labor and delivery units, mental health care and emergency rooms — are some of the least profitable, yet most essential, services that hospitals provide. But experts said those will likely be axed as hospitals try to stay afloat.

Mark Nantz, president and chief executive officer of Valley Health System said once the cuts are fully phased in, his system will lose about $50 million a year in revenue for Medicaid patients. The most likely casualty will be new construction and expansion plans, but he said it’s too early to know more.