Rural hospitals are supposedly in dire financial straits. And the forthcoming Medicaid “cuts” authorized by the One Big Beautiful Bill Act could put hundreds more facilities deep in the red.
At least, that’s the prevailing narrative inside the beltway — and the justification for the $50 billion rural hospital “rescue” fund that Congress included in the bill. But that narrative bears little resemblance to reality. For starters, Medicaid isn’t being cut at all. Total Medicaid spending is still projected to grow by $450 billion over the next nine years, according to Paragon Health Institute. It’ll just grow more slowly than it would have without the One Big Beautiful Bill Act. And rural hospitals account for just 1.3% of Medicaid spending, so it’s unlikely that genuinely rural facilities would lose anywhere close to $50 billion in revenue because of the law.
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Simply put, the rescue fund is a waste of taxpayer dollars that will funnel cash to hospitals that are neither rural nor in peril. The fund comes with a few strings attached, which means it will be easy for wealthy providers to gobble up the money. A recent study in Health Affairs found that over 400 urban hospitals have managed to brand themselves as administratively rural so they can siphon Medicare funds meant for genuinely rural hospitals.
Wealthy urban hospitals have also exploited the 340B drug discount program, which Congress created decades ago to help a few dozen safety-net hospitals serve the poor. But due to lax eligibility guidelines, 340B has morphed into a profit center for giant health systems that purchase drugs at a discount, resell them to insured patients at huge markups, and pocket the spread.
Of course, some rural facilities are genuinely struggling. But their problem is overwhelmingly a market challenge, not a lack of Medicaid funding.
Patients, even those living in rural areas, are increasingly willing to travel several hours to seek top-notch care at big-city hospitals. Outcomes generally improve with volume, and Americans know it. That’s why many patients quite reasonably choose not to get their hip replaced at a hospital that does a handful of hip replacements a year, and instead drive a few hours to a facility that does a dozen such operations before lunch.
No grant program can override the basic economics of specialization.
There are far more practical and less expensive ways to support actually rural hospitals that are actually struggling. Remote emergency care can link small-town emergency rooms to top-tier specialists from urban health systems across the country. Permanent Medicare and Medicaid coverage for telehealth would allow rural Americans to manage their chronic conditions without traveling to see doctors in-person. Patients could get big-city outcomes without big-city overhead.
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What rural medicine doesn’t need is permanent subsidies for underused facilities that patients bypass.
Instead, lawmakers should back the reforms that are already working — by promoting telehealth and competition to give patients the most choices possible. That’s how we strengthen rural care without writing another check that Washington, D.C., can’t cash.
Sally C. Pipes is the president, CEO, and Thomas W. Smith fellow in healthcare policy at the Pacific Research Institute. Her latest book is The World’s Medicine Chest: How America Achieved Pharmaceutical Supremacy — and How to Keep It (Encounter 2025). Follow her on X @sallypipes.