Debunking the Myths of the One Big Beautiful Bill
Myth: Rural hospitals will close because of the OBBB.
Key Facts
- The OBBB’s reforms to limit waste, fraud, abuse, and corporate welfare in Medicaid—projected to save nearly $900 billion over the next decade—enabled new funding to support rural health care providers and ensure access to core medical services in rural areas.
- The OBBB provides $10 billion in annual funding over the next five years to improve and transform rural health care access, including support for existing rural facilities.
- States increasingly use financial schemes resembling money-laundering, which disproportionately benefit large, urban, and well-connected hospital systems.
- A recent Paragon study found no evidence that provider taxes—the most common Medicaid money laundering scheme—help boost employment in rural hospitals. Our findings suggest provider taxes may harm rural hospitals. In 2023, states with hospital provider taxes had markedly lower population-adjusted employment among rural hospitals than states without these taxes.
- Rural hospitals already benefit from at least nine federal subsidy programs. For example, many of these facilities qualify as Critical Access Hospitals (CAHs), allowing them to garner additional payments through Medicare.
Background
In 2024, only $10 billion, about 5 percent, of $214 billion in total inpatient Medicaid spending went to rural hospitals, with most of the remainder supporting urban facilities. There are numerous government programs aimed at shoring up rural providers, including Critical Access Hospitals (CAHs), Medicare-Dependent Hospitals, and Low-Volume Hospitals.
The OBBB takes critical steps to limit financing schemes that direct government funding toward large, corporate hospital systems. These reforms, plus community engagement requirements, more frequent eligibility reviews for Obamacare expansion enrollees, and rolling back costly Biden regulatory actions, are projected to save nearly $900 billion over the next decade. As a result of enacting needed Medicaid reforms and reversing Biden’s spending binge, Congress created $10 billion in annual grants for states to target funding to support rural health care providers, ensure access to core medical services in rural areas, and transform rural health care delivery.
The widespread use of Medicaid money laundering tactics to lavish higher government payments on big hospitals and insurers has simply not benefitted rural providers. For example, provider taxes—mechanisms used by states to draw down federal tax dollars—have disproportionately benefitted large, well-connected hospital systems. Universal Health Services, for example, netted $1 billion from these schemes last year. Additionally, linking Medicaid payment rates to average commercial rates contributes to rising commercial hospital prices.
A recent empirical analysis from Paragon found no evidence that provider taxes are supporting employment in rural hospital systems—and may even harm them. Employment levels help gauge whether facilities are offering new or expanded services, growing their capacity, and contributing to the local economy. Rural hospital employment in states implementing a hospital provider tax dramatically declines compared to states that never imposed such financing schemes and worsens with time.
