MEDICAID AND THE FRACTURING OF AMERICAN HEALTHCARE

INTRODUCTION

Some of the most controversial and closely monitored provisions of the recently enacted “Big, Beautiful Bill” were proposed changes to Medicaid, the U.S. health insurance program intended to provide coverage to Americans who have “limited income and resources”. Much of the discussion about these changes has focused on the impact they will have on rural communities where Medicaid enrollment rates are higher, community resources are less abundant, and people tend to live further apart. 

In retrospect that focus was justified. In the two weeks since the bill was passed some clinics and hospital systems, having carefully analyzed their finances, are already announcing closures and attributing them to this legislation. This includes The Curtis Medical Center in Nebraska, which has been in operation for more than 30 years:

“Unfortunately, the current financial environment, driven by anticipated federal budget cuts to Medicaid, has made it impossible for us to continue operating all of our services, many of which have faced significant financial challenges for years”

The “Big, Beautiful Bill” may be directly responsible for some of the closures that take place in the coming months, but the health systems and clinics most likely to be impacted were already deeply stressed.  As of 2023 39% of all hospitals had negative operating margins, and rural hospitals which are more likely to be non-profit or state owned, and less likely to have patients who bring the more generous reimbursement rates that come with private insurance, are especially vulnerable now. This “slow burning crisis” has led to the closure of 110 rural hospitals since 2015, so there is a sense in which the coming changes to Medicaid represent the final straw for systems that we know have been under-resourced and overburdened for quite some time. The most dramatic and unexpected changes are likely to occur in urban areas where accessing care is easier, but distribution of care is often gated or tiered. 

Though Medicaid is often framed as a small program that serves as a critical source of healthcare funds for rural communities, more than 71 million Americans (about 21% of the US population) rely on Medicaid for their health coverage needs. And, while the percentage of people who live in rural communities and rely on Medicaid is significant (19%),  82% of all Medicaid recipients live in urban, not rural areas. 

To better understand the impact changes to the Medicaid program will have in urban areas, and how that will be different from the closures many anticipate, let’s examine the specific bill more closely.

BACKGROUND

On 04 July President Donald Trump signed the “One, Big, Beautiful Bill” into law. While the bill did not contain direct cuts to Medicaid (“we gave you $100 last year, you get $80 this year”), it included new rules and definitions whose overall impact will be to reduce Medicaid spending by about 1 trillion dollars over the next 10 years by:

1. Curbing enrollments by establishing new eligibility requirements

2. Creating new administrative tasks that will require states more closely monitor eligibility and renewal

The KFF, an organization dedicated to independent health policy research, has done an easy to read analysis that compares both versions of the bill to the structure of the current program which you can find here, but the following specific changes are worth highlighting:

Individual Medicaid Recipients

The combined effect of these changes will be a decline in enrollments and reimbursements as both states and 

individuals face new severe penalties: 

1. Individuals risk being barred from other coverage options if their applications are denied

2. States face the loss of federal funds for administrative errors while having to contend with new administrative requirements 

Similar work requirements implemented in Arkansas resulted in 18,000 people losing coverage in just six months.

BEYOND RURAL AMERICA

While rural communities are currently experiencing hospital closures and often struggle to maintain access to basic services, the story in urban areas is much more complex. Most people who rely on Medicaid live in urban areas, but there are also a significant number of people who have access to private insurance, and who can afford to pay cash for premium care. This makes urban centers “mixed markets” where the quality, quantity and variety of services is high. In order to understand how changes to Medicaid will impact these areas, we should look at them through the lens of the different health care consumers in these markets, the resources they have access to, and their specific needs. 

Based on health insurance patterns, we can sort most people into one of three groups:

1. Subsidized / Community Based Healthcare Consumers - People who rely on Medicaid or other community assistance programs. Most vulnerable, and most likely to ration care

2. Commercial Healthcare Consumers - People who purchase market based health insurance or receive coverage through their employer. Access to care is determined by health system capacity and insurance approval

3. Concierge Healthcare Consumer - May receive coverage through an employer, but access to health services  is determined by their wants and preferences. 

Because what’s most notable about concierge health consumers is their insensitivity to price and market changes, we'll focus on what the future looks like for those who rely on subsidized or commercial care. 

SUBSIDIZED/COMMUNITY BASED CARE

In order to better understand how cuts to Medicaid are likely to impact people who rely on the program for coverage, and the health system as a whole, I spoke with a community health ambassador who works for one of the largest health systems on the west coast.  We connected not long after a meeting she attended about the recent legislative changes, and her feelings were clear: “It was just depressing”. The future she anticipates is bleak, one in which both individuals and health systems need to ration care. 

All of the families she serves are on some type of state insurance, many require help meeting their most basic needs, “even just hygiene products”. She worries that the changes to Medicaid eligibility will lead to worse health outcomes as people who can no longer afford care choose to prioritize other needs: “These people won’t want to go to the doctor. They may decide, ‘Maybe I can afford medicine, or I can afford food, so I’ll just get my food.’”. 

One strategy to help stressed families free up funds for health services is to connect them with programs that can cover other expenses, but many of those programs are also struggling. SNAP, a food assistance program, was also modified by the  “Big, Beautiful Bill” and new restrictions on eligibility and cost sharing requirements mean fewer families will be able to obtain SNAP benefits.

Health systems will face their own unique challenges as reserves they used to support services like free clinics  or offset uncompensated care decline.

“I worry that health systems will shut down…”

She also worries, more broadly, about access to care if that happens.

“How far do we have to travel to find healthcare, and are we able to obtain the services we need?...rural areas…do we start to look like them?”

COMMERCIAL CARE

Unlike people who rely on subsidized care, people who have access to “commercial care” through employer-sponsored insurance or marketplace coverage are less likely to struggle with the cost of basic health services. The primary challenge they face in the coming months and years may have more to do with the privatization of access.

……………………..

On July 3rd, a day before the “Big, Beautiful Bill” was signed into law, the medical director of a pain center in the southeastern US sent an email to his patients: “I am writing to share an update regarding an important change to my medical practice.”

The email, which was explicit in its critique of the insurance dependent health system including “non-transparent patient costs” and lack of support for preventative treatment, heralded a major change: 

“While I myself am unable to reform the US healthcare insurance system, I can elect to implement a practice model that is designed to avoid many of these systemic misalignments…After careful consideration, I have decided to adopt a direct care subscription model, similar to a direct membership program or executive health programs.”

The cost of access to that direct care? $3000 per year for up to 300 patients (a fee not covered by insurance). “After that, I will maintain a waitlist.” 

Once relatively rare, direct pay or concierge medical practices are becoming more common as both patients and doctors struggle with lack of support in traditional healthcare systems. In a normal primary care practice it is estimated that a single doctor has a patient panel of between 1200 -1900 patients while most doctors in concierge practices stop accepting new patients once they reach 300 patients. 

The much smaller patient panel allows for longer appointments and more personalized care. Where a doctor in a normal primary care practice sees an average of 20-24 patients a day, concierge doctors see between 6-8. In 2022 it was estimated that between 10-25,000 doctors worked in a concierge practice and the industry was projected to grow by 10% a year until at least 2030. However, the recent changes to Medicaid eligibility and administration may accelerate that growth as hundreds of billions in dollars are removed from traditional health care systems. 

 What’s concerning about that, from a systemic perspective, is that while concierge practices are sustainable for the doctors and patients who benefit from them, they shrink the pool of qualified physicians available to the general public. Per Erin Sullivan, an affiliated faculty member at Harvard Medical School’s Center for Primary Care “We know that we do not have enough primary care providers in the U.S., so having more physicians seeing fewer patients is not ideal”. Physician wait times across many major cities have been growing, and the Average New Patient Appointment Wait rose from an average of 18.5 days in 2013 to 31 days in 2025. That average doesn’t reflect the extreme outliers reported in the AMN healthcare survey where the longest wait to see an OBGYN was 231 days in Boston, and someone waited 291 days to see a dermatologist in Portland. These are obvious signs of stress in health systems that can’t afford to lose more providers.

WHAT THIS MEANS

The American healthcare system will not collapse overnight, but the outsized impact of relatively few administrative and eligibility changes to Medicaid will impact the quality and quantity of care people receive. The specific challenges you face as a consumer of healthcare will depend on where you live, and how you’re insured, and how much you are willing and able to pay for the healthcare you need.

WHAT YOU CAN DO

It should go without saying that there are no easy solutions to the complex problem of how to manage your own care, but there are a few things you can do to better understand your position and create more options for yourself:

• Visit KFF’s Medicaid Fact Sheet page to understand how many people in your state rely on Medicaid, and whether they live in rural or urban areas to get a better sense of how your community will be impacted

• If you live in a rural area, review the at-risk rural hospital list in this letter sent to President Trump to determine if your local hospital is at risk of closure due to Medicaid cuts

• If you rely on Medicaid or other state insurance, connect with your local community health advocate to see if there are other services you can apply for that will free up dollars for your healthcare expenses

• If you have lost or worry about losing the ability to pay for essential medications, look into trusted online pharmacies. They are based in the countries where your medications are manufactured, and can ship you several months’ worth of medicine with a valid prescription. They often charge much less than you would pay with insurance, but delivery times can be as long as 4-6 weeks. 

• If you have established a good relationship with your physician, ask them how they feel about the changes to Medicaid, and find out whether or not they intended to leave their current practice or retire.

• Research concierge practices in your area so that you know where they are and how much they charge, especially if you have complex health issues and might one day  need a higher standard of care.