By Alyssa Burr for the Michigan Independent.
Broadcast version by Chrystal Blair for Michigan News Connection reporting for the Michigan Independent-Public News Service Collaboration
Rural health care in America is heading into a financial tailspin, experts say, as President Donald Trump’s administration cuts Medicaid, despite its assurances that a new rural health fund would “strengthen and modernize health care in rural communities across the country.”
In December, the Centers for Medicare and Medicaid Services began issuing the first round of money under the Rural Health Transformation Fund, an initiative included in the budget bill Trump signed in July 2025 that is set to provide $50 billion to states over the next five years. The CMS said in an announcement in December, “This unprecedented federal investment will help states expand access to care in rural communities, strengthen the rural health workforce, modernize rural facilities and technology, and support innovative models that bring high-quality, dependable care closer to home.”
Policy experts who spoke with the Michigan Independent point out that the $50 billion to be issued over five years will not offset the $1 trillion in Medicaid cuts anticipated over the next decade.
States were required to apply for a share of the federal rural health funding, which is distributed annually. Michigan is currently accepting applications from providers hoping to receive a portion of the $173 million grant awarded to the Michigan Department of Health and Human Services. The department said in a December press release the funding will go toward supporting regional partnerships among providers, recruiting and retaining rural health professionals, and increasing the adoption of telehealth services, among other initiatives.
Some estimates project that the state will lose over $2 billion annually in Medicaid funding.
“It is highly unlikely that this program is going to make rural health, rural hospitals whole again,” said Michael Shepherd, a University of Michigan professor who specializes in rural health. “These cuts are real. They’re going to be experienced until there are major federal policy changes, and the program cannot and will not entirely fix those problems.”
Trump signed H.R. 1, otherwise known as the One Big Beautiful Bill Act, into law in July 2025. The Republican budget bill contains the provisions for both the Medicaid cuts and the new rural health fund, which was a last-minute addition to the bill in response to bipartisan opposition over the effects slashing Medicaid would have on rural communities.
In Michigan, Medicaid provides health care coverage to more than 2.6 million low-income residents. Rural communities stand to be affected the most from cuts: Of the 41 Michigan counties where over 20% of residents are covered by Medicaid, 37 are rural, according to data from the Michigan League for Public Policy, a nonpartisan research group.
The National Rural Health Association notes that rural populations already face obstacles to health care that are different from those experienced in urban areas: “Economic factors, cultural and social differences, educational shortcomings, lack of recognition by legislators and the sheer isolation of living in remote areas all conspire to create health care disparities and impede rural Americans in their struggle to lead normal, healthy lives.”
Traverse City-based Munson Healthcare is Michigan’s largest rural health care provider. Gabe Schneider, the director of government relations at Munson, said hospital officials began raising concerns about what the Medicaid cuts would mean for their patients and providers as H.R. 1 was being debated last year.
Munson could lose an estimated $30 million once the bill is fully implemented, Schneider said. This comes as the health care industry is grappling with other challenges, such as a decrease in Obamacare marketplace enrollment due to the expiration of expanded Affordable Care Act subsidies, an increase in uncompensated care costs, and new Medicaid work requirements that could lead to more people without health coverage.
“We are hopeful that Munson Healthcare will secure a portion of those [grant] dollars coming back in,” Schneider said. “But again, we certainly recognize that it’s not even a comparison. It’s not really fair to say one offsets the other, because they’re so vastly different in scale.”
The uncertainties surrounding the short-term program present challenges for health care systems that survive on predictability and long-term planning, Shepherd said. KFF notes the program includes strict oversight requirements that give the Trump administration the ability to rescind state funding at any point; the grant dollars for each year throughout the duration of the program haven’t been finalized; and there will be changes in administrations at the state and federal level before the program expires in 2030. Although Munson hasn’t received funding yet, Schneider said its leaders are focused on how to use the money in a way that aligns with the hospital’s goals and objectives before the Oct. 1, 2027, deadline for spending the funds in the first round of grants.
“It’s complicated, but we’re really trying to manage this in a pragmatic and thoughtful way, to make sure that we don’t overextend ourselves or put ourselves in a position where changes in federal policies would result in a negative impact on the system,” Schneider said.
During a Michigan House of Representatives Appropriations Committee meeting in February, Republicans raised concerns about the state’s definition of “rural” and how that would affect which counties will be eligible to apply for grant funding. Since the Center for Medicare and Medicaid Services left the states to define “rural,” Michigan’s health department decided to use the Federal Office of Rural Health Policy classification, and lawmakers objected that it misdefines areas of the state. Northern Michigan lawmakers, in particular, expressed concerns about competing for funding with more urban areas like Wayne and Oakland counties, according to reporting from UpNorthLive.
Munson’s service area spans 29 counties in northern Michigan and roughly 540,000 patients. Schneider said he thinks the state got the rural classification right: “We don’t necessarily qualify as rural in some cases, so having our hospitals qualify because they are sole community hospitals was really important.”
In the coming years, the financial strain facing rural hospitals is going to become more dire without additional federal support, Shepherd said. Labor and delivery units, mental health care and long-term intensive care units would be the first service lines to be considered for elimination because they are the most expensive but least profitable, he said.
Shepherd said guaranteed specific funding for rural hospitals over longer periods would help support them and mentioned as an example changing the way rural hospitals are reimbursed. He added that such funding is not as feasible at the state level, where options are more limited and supporting rural health might come at the cost of other policy initiatives, such as infrastructure or education.
“You’re sort of in a difficult political spot if you’re trying to do something at the state level to promote the financial well-being of rural hospitals specifically,” Shepherd said. “While I do think there are some things that could help … it’s not clear to me that there’s political support for those things at this moment.”
Alyssa Burr wrote this article for the Michigan Independent.
