HR 1, the harmful Republican megabill that delivered trillions in tax cuts for wealthy households and large corporations, also cut $911 billion from Medicaid, $134 billion of which will impact rural areas. Rural hospitals were already under severe financial strain before HR 1’s passage, with 44% of rural hospitals nationwide losing money.
Since around one quarter of rural residents rely on Medicaid for health coverage, the law is expected to sharply increase uncompensated care as millions of Americans lose insurance. For hospitals already operating on thin margins, rising uncompensated care costs could trigger another wave of rural hospital closures across the country.
To blunt the impact of these Medicaid cuts on rural health care providers, Congress created a temporary bailout fund known as the Rural Health Transformation Program (RHTP) as part of HR 1. The program was proposed in an amendment to HR 1 by Maine Senator Susan Collins and provides $50 billion over five years for states to invest in rural health care. But that amount covers barely more than one-third of the cuts rural communities face. In addition, the law only allows 15% of funds to be used for payments to providers for lost revenue. As a result, rural providers can receive at most $7.5 billion to offset losses tied to HR 1. After RHTP expires, hospitals will face growing financial losses, resulting in a net loss of approximately $126.5 billion over 10 years.
RHTP is like lending someone a bucket to catch rain from a leaking roof. It’s too small to hold what’s falling and is taken away before the roof ever gets fixed. The cruel irony is while hospitals scramble to manage the leak, millions of Americans have simply been pushed out of the system entirely and left to fend for themselves. And this was all done to support tax cuts for the wealthy.
Maine is slated to receive approximately $950 million while losing $2.7 billion
Funding for RHTP is divided between two tracks:
- Half of the funding ($25 billion) will be distributed evenly among the states, meaning $500 million per state over the next five years, or $100 million annually.
- The other $25 billion will be distributed by the Centers for Medicare & Medicaid Services (CMS) based on plans submitted by the states.
CMS published a notice of funding opportunity last September outlining how state plans would be judged including conforming to the “Make America Healthy Again” agenda, stabilizing rural health access, and technological innovation. Since this portion of the funding is determined by CMS, the amount will vary substantially from state to state and year to year.
Maine requested $200 million for the first year and received $190 million. This was around the average given, with states receiving $147 to $281 million. Funding will vary, but assuming it remains near the average, the state should expect to receive $950 million over the next five years. Meanwhile, HR 1 cuts to health care are expected to cost Maine $2.7 billion over the next ten years. Even if RHTP is extended for another five years at its current levels, the state and health care providers are looking at a net loss in funding of at least $800 million and, if it isn’t extended, over $1.75 billion.
Provider payment cap hurts rural hospitals even more
Not all the funding provided through RHTP will offset losses. The 15% cap on payments to providers means that Maine expects to set aside $140.6 million over the next five years to pay providers for essential care to uninsured residents with low income. The program also allows Maine to pay an additional $30.3 million during the first year as a bridge until the payment system to compensate them can be brought online in years two to five. That means current providers are slated to receive a total of $170.9 million through RHTP. This amount falls well short of the expected loss of more than $1 billion in payments these same providers would have received during the same period for qualified Medicaid beneficiaries before HR 1 went into effect.
The remainder of the funds will go to workforce development ($204 million), investments in healthcare data sharing and AI ($202 million), alternative medical providers ($183 million), and regional planning and financial management resources ($198.6 million). Some of these funds will be dedicated to setting up new providers. Services like mobile care centers and health services based in schools will be implemented to create an alternative to the providers that may close. Even if all these funds went to existing providers and were used to offset additional costs of care or support more cost-effective delivery systems, they would still fall well short of the amount needed to make providers whole. Maine is at most receiving $2 billion from RHTP, but providers are set to lose $2.7 billion. As a result, services will continue to be cut and facilities will close.
Phasing in the full impact of the cuts may delay the pain, but it still doesn’t fix the problem
HR 1 is designed to delay its negative effects. Cuts are small at first but rapidly grow, resulting in a disproportionate share (76%) in the last five years. RHTP funds will also partially offset the smaller cuts in the first five years but not the latter half, making the net effect manageable for providers over the first few years and exorbitant later.
In 2025 Maine providers received a $134,000 cut and no additional funding, leading to a negligible loss. In 2026 providers will receive $30.3 million in RHTP funding and face a cut of $50.7 million for a loss of $20.4 million. In 2027 funding from RHTP rises slightly to $35.2 million while the cuts nearly triple ($137.2 million) leading to a net loss of $102 million.
As the cuts accelerate and the support from RHTP eventually ends, the negative impact of HR 1 for providers gets worse. The largest loss is in 2034 with providers losing $492 million and receiving no support.
RHTP can’t shield a fragile rural health system from the risks of HR 1
RHTP is sold as a fix for the threat HR 1 poses to rural hospitals. However, it only provides $50 billion in funding compared to $911 billion in cuts. Further, only 15% of the funds can actually be used to help these hospitals. This means Maine providers face $2.7 billion in cuts while only receiving $170.9 million in reimbursement — a net loss of $2.5 billion.
Many of these providers — including up to 10 in Maine according to one analysis — are rural and already at risk of closing. Without state action to backfill these cuts or federal policy reversals, these already struggling hospitals will be under significant strain. Mainers in rural areas already must drive great distances to receive medical care, especially maternity care, and HR 1 will only make this worse. With little change to be expected from the federal government over the next few years, Maine must do what it can to protect this critical health care infrastructure.