Rural America Nears a Cliff: Federal Funding Cuts Threaten Health Systems and Anesthesia Care

Abstract

Rural hospitals operate on thin margins, sustained largely by federal funding through Medicaid and bolstered by the Affordable Care Act premium subsidies. As these supports erode due to recent federal legislative changes through the One Big, Beautiful Bill Act and a failure of the U.S. Congress to renew Affordable Care Act monies, millions will lose affordable insurance. For anesthesiologists, these changes will translate into closed healthcare systems, cancelled cases, less coverage for medication-assisted treatment used in opioid use disorder, and shrinking surgical capacity. These changes will be disproportionately felt in rural America, where residents already faced disparities in health care. Protecting coverage and rural hospital funding is not just a matter of equity; it is central to maintaining safe, timely anesthesia care for millions of Americans.

Federal Funding Cuts Affect Rural Hospital Systems

Deficits in federal funding due to H.R. 1, the One Big, Beautiful Bill Act, will have profound effects on healthcare access, with disproportionate results for rural Americans. According to the KFF (formerly known as “Kaiser Family Foundation”; San Francisco, California), one in four residents in rural areas rely on federally funded Medicaid for health, ranging from prenatal care in Illinois to trauma surgeries in North Carolina.¹ By comparison, about one in five urban residents depend on Medicaid. Furthermore, in 16 states, the majority of those enrolled in Affordable Care Act markets are from rural populations.² The threat is that cuts to Medicaid, coupled with expiration of the Affordable Care Act enhanced subsidies, will undermine rural hospital viability. The Dobson DaVanzo simulation models predict that safety-net hospitals in expansion states could see Medicaid revenue fall by greater than or equal to 10% with uncompensated care costs rising by greater than or equal to 50%. We anticipate disproportionate impacts on the 66.3 million rural residents, including 16 million Medicaid enrollees and 2.8 million Affordable Care Act marketplace enrollees, among them roughly 776,000 adults aged 55 to 64 yr, a group particularly vulnerable to coverage loss and higher medical costs.²

The loss of Medicaid and Affordable Care Act funding is especially concerning for rural populations. The enhanced premium tax credits of the Affordable Care Act have made coverage affordable in rural areas where premiums are about 10% higher than in urban markets. The Century Foundation (New York, New York) projects that out-of-pocket premiums for Affordable Care Act enrollees will more than double in rural areas, with premium increases outpacing those in urban markets by up to 28%.² Premiums in some rural states, such as South Dakota and Wyoming, are projected by the Center for American Progress (Washington, D.C.) to increase by 300% to 400%. Affordable Care Act losses, along with Medicaid funding cuts, will create financial barriers to coverage and gaps in service.

Importantly, data from Medicaid expansion and Affordable Care Act funding analysis show some benefits when these programs are preserved. Studies demonstrate improved surgical outcomes, higher access to care, earlier cancer detection, increased optimal management parameters, reduced disparities in fetal health outcomes, fewer emergency room visits, improved preventative care, and less opioid abuse–related mortality.^3–5 Other health outcomes have shown few positive impacts due to Medicaid or Affordable Care Act expansion, including in cardiovascular health, diabetes management, and the use of regional anesthesia.^6,7 Financially, Medicaid funding is associated with a 30 to 40% reduction in personal healthcare expenditures and medical debt or other catastrophic costs for individuals and families.^6,8

Rural hospitals already operate on smaller margins compared to urban counterparts with insufficient payments to cover operating costs, often relying on cross-subsidies from other services or external revenue sources to stay open. KFF estimates that, altogether, Medicaid alterations could reduce federal Medicaid spending in rural areas by $137 billion annually, of which only $50 billion would be offset by the government’s “Rural Health Transformation” fund.^9,10 Admittedly, maintaining rural health coverage involves fiscal tradeoffs, as sustaining investments in the healthcare safety net may increase the federal deficit; however, these costs could be offset by options such as repealing less than 5% of the tax cuts enacted under the One Big, Beautiful Bill Act.⁹

Impact on Patients and Anesthesiologists

Nearly 81.4 million Americans (24.4% of the U.S. population) reside in rural communities, which tend to be older, predominantly white, male, native born, and less likely to have graduated from college compared to urban residents. These areas have historically suffered from lack of resources including specialty care like anesthesia. The existing disparities are striking; more than 80% of rural counties lack physician anesthesiologists and more than 50% lack any type of anesthesia provider.¹¹

If states respond to federal funding cuts by reducing provider and hospital payments, health systems will absorb more uncompensated care, especially in emergency departments. If costs shift to patients, uninsured or underinsured patients will simply delay care until conditions become dire, forcing hospitals to intervene at greater expense to taxpayers. Operating room volume and surgical capacity are significant contributors to hospital revenues and to local economies; closures will reverberate widely.¹² Due to these financing issues, anesthesiologists will become secondary victims of healthcare underfunding. Coverage losses will lead to delayed or canceled surgical cases, and fewer insured patients may lead to more uncompensated care and reductions in service lines, especially those that are considered less lucrative or financially stable (like obstetrics). The consequences include lost personnel from rural America and wider gaps in access to care.

In this vacuum, rural hospitals will likely depend even more heavily on nonphysician providers. While this may help sustain access in some areas, it risks further fragmenting the workforce and making rural practice even less appealing for physician specialists. Such shifts could accelerate scope-of-practice expansions for nonphysician providers, fundamentally reshaping the delivery of anesthesia care in rural America.

American Society of Anesthesiologists (Schaumburg, Illinois) efforts to create additional rural pass-through payments via the Medicare Access to Rural Anesthesiology Act, which called for additional funds for those who practice in rural communities, failed during congressional committee review in 2024.¹³ The current budget shortfalls threaten to reverse hard-won gains in anesthesia access, workforce retention, and hospital sustainability, but the American Society of Anesthesiologists’s ongoing advocacy, including support for pass-through payments, demonstrates sustained leadership and interest in addressing rural staff shortages in anesthesia care nationwide.¹³

What Will the Future Hold for Rural America?

Nationally, rural hospital systems are already closing or restructuring secondary to anticipated changes in federal funding. News reports from Virginia, Washington, Kansas, Pennsylvania, Oklahoma, and other areas are reporting that multiple statewide hospital systems are at risk of closure.¹ When health systems close, advanced services like critical care, surgery, and anesthesia disappear from the community. Even if funding is reinstated, it will not be enough to quickly re-create the complex medical machinery required to provide surgical services to underserved communities.

Individuals with employer-based health care, who are self-pay, or who have Medicare will be affected when hospital systems nearby close, and premiums will rise universally when there is less federal support to prop up the entire healthcare system. An American Hospital Association (Chicago, Illinois) report¹⁴ lists the states most dependent on Medicaid funding and projects potential losses through 2034, ranging from $95 million in South Dakota to over $4 billion in Kentucky.

Due to the complexities of healthcare funding, no clear and optimal path forward can be seen. Affordable Care Act–associated expenses and other healthcare costs have otherwise increased over the past 10 yr with rural hospital systems facing steady shortfalls yearly. There is still debate on whether the Affordable Care Act blunted rises in healthcare costs in general.¹⁵ Unfortunately, medical funding reductions often operate as a zero-sum strategy with unfulfilled winners and losers.

Rural America already suffers from injustices in resource allocation and healthcare services, but it may face a reckoning if federal medical funding is cut. These are not abstract policy tweaks—they determine whether hospitals stay open, whether patients can get surgical services, and whether anesthesiologists have the resources to provide safe care. With the federal government’s current budget uncertainty due to disagreements on how to best move forward, anxiety among Americans is increasing. Governing bodies, medical societies, and other advocacy groups can be bolstered by engagement from physician providers who understand the nuisances of healthcare delivery. Unless stakeholders and policymakers act, a steep healthcare cliff is in sight for rural America and for us all.

Research Support

Support was provided solely from institutional and/or departmental sources.

Competing Interests

Dr. Pritzlaff is a consultant for Medtronic (Minneapolis, Minnesota), Bioness (Santa Clara, California), SPR Therapeutics (Cleveland, Ohio), and Wise Neuro (Milan, Italy); receives royalties from Wolters Kluwer (Alphen aan den Rijn, The Netherlands) and Oxford University Press (Oxford, United Kingdom); and receives institutional education grants from Nevro (Redwood City, California), Abbott (Chicago, Illinois), Medtronic, Boston Scientific (Marlborough, Massachusetts), and Biotronik (Berlin, Germany). The other authors declare no competing interests.