President Donald Trump's landmark tax and spending bill signed last week threatens to cost Michigan hospitals and doctors $15 billion over the next 10 years and hit rural hospitals the hardest, the state's Department of Health and Human Services said.
Many of Michigan's rural counties have higher rates of residents enrolled in Medicaid than most urban areas except for Wayne and Jackson counties, while the vast majority of those counties spent more money per enrollee than the urban counties, according to a Detroit News analysis. Many rural hospitals already operate in the red or close to it due in part to their higher rates of uninsured or low-income folks coming in for medical care they cannot pay for.
President Donald Trump's landmark tax and spending bill signed last week threatens to cost Michigan hospitals and doctors $15 billion over the next 10 years and hit rural hospitals the hardest, the state's Department of Health and Human Services said.
Many of Michigan's rural counties have higher rates of residents enrolled in Medicaid than most urban areas except for Wayne and Jackson counties, while the vast majority of those counties spent more money per enrollee than the urban counties, according to a Detroit News analysis. Many rural hospitals already operate in the red or close to it due in part to their higher rates of uninsured or low-income folks coming in for medical care they cannot pay for.
"When you're operating on a negative margin and suddenly 20% of your budget is drastically shrunk, that is going to be pretty devastating for the continued survival of rural hospitals all across the country,” University of Michigan professor Michael Shepherd said.
Nearly 300,000 Michigan residents will lose their health insurance under Medicaid starting in 2027 because of the bill, according to a Department of Health and Human Services report.
“Someone who is uninsured doesn’t stop getting sick, doesn’t stop needing life-saving care and doesn’t stop needing medications to control chronic conditions,” Michigan Health and Human Services Director Elizabeth Hertel said during a Tuesday press conference.
The Michigan Department of Health and Human Services estimated that revisions to provider tax rates and state-directed payments, which help fund the state's Medicaid programs, will cut $2.5 billion from Michigan health care providers when the changes are fully implemented. The reduction increases to a $15 billion loss over the next decade under this projection.
Some critics of the provider tax, including the Heritage Foundation, said it's a loophole that allows states to game the system and receive higher payments from the federal government while minimizing the state's financial exposure. They championed the changes as reforms.
"Medicaid is a way for states to bill the federal government for more money," Rep. Lisa McClain, the Bruce Township Republican who chairs the House GOP Conference, said about provider taxes. "The hospitals aren’t going to get hurt at all. It’s the states that will be hurt."
Medicaid is the state's largest health insurer, covering a quarter of Michigan residents, or more than 2.6 million people.
About 76.1% of Michigan’s Medicaid spending came from the federal government in fiscal year 2023, according to data from the Kaiser Family Foundation, a nonprofit health policy research organization. Michigan ranked in the top 20 nationwide for having the largest share of federal Medicaid spending.
Michigan Health and Hospital Association CEO Brian Peters called the legislation, passed through the budget reconciliation process, “disastrous for access to care for Michiganders and the health care providers who care for them.”
Though Wayne County — home to Detroit, the state's most populous city and one of the nation's poorest cities — had the highest rate of enrollment in Michigan's Medicaid expansion plan with over 11,400 enrolled per 100,000 people, 15 of the top 20 counties by enrollment rate were rural, according to The News' analysis.
Medicaid spending per enrollee also tends to be highest in rural counties, led by Chippewa County with over $17,000 spent per enrollee in fiscal year 2023, The News' analysis found. On average, rural counties spent $1,529 more per enrollee than urban counties. Wayne County spent $8,930 per enrollee.
What the bill does
The bill that Trump just signed requires states to impose work requirements for Medicaid eligibility by the beginning of 2027, which will result in lost eligibility for those who don't comply.
People 19 to 64 years old who apply to receive Medicaid coverage through Affordable Care Act expansion programs, such as the Healthy Michigan Plan, must prove they spend 80 hours each month working, volunteering, attending school or looking for work.
The legislation requires those covered under Medicaid expansion to produce work documentation at least every six months.
The Medicaid cuts are expected to total $1 trillion nationally over the next 10 years, according to estimates from the U.S. Office of Management and Budget.
Michigan state Sen. Kevin Hertel, D-St. Clair Shores, who chairs the Senate's health policy committee, said the federal work requirement "adds more red tape" to the process for someone getting or maintaining their Medicaid coverage.
But Republican supporters have touted the work mandate as a way for recipients to contribute to their coverage. GOP lawmakers approved work requirements in 2018 under then-Gov. Rick Snyder, mandating that able-bodied adults participating in the state's Medicaid expansion program work 80 hours a month, get job training or pursue formal education to keep their health coverage. A federal court invalidated the requirement until the Democratic-led Legislature and Gov. Gretchen Whitmer eliminated it in a bill signed in January.
The bill also gradually lowers the cap on provider taxes, which states impose on health care providers such as hospitals to raise revenue for their share of Medicaid spending. The state receives matching Medicaid funds from the federal government, Peters said.
Under the previous law, states could impose taxes up to 6% on private health care providers; the new legislation lowers the rate to 3.5% for hospitals, decreasing by half a point each year until 2032.
Who could lose coverage?
In 2014, Michigan started implementing the Healthy Michigan Plan, the state’s Medicaid expansion. The plan covered about 722,000 people as of May. The Michigan Department of Health and Human Services estimated in an April report that about 290,000 people would lose their coverage after work requirements were imposed.
The state health and welfare department also feared the requirements would cost about $75 million to implement, based on the state’s experience with similar mandates.
"Quite bluntly, most states, including Michigan, are going to really struggle to implement it, especially on the timeline we’re talking about, which is a year with little to no additional resources," said Pamela Herd, the Carol Kohn professor of public policy at the University of Michigan. "It’s probably going to be a mess."
A little over half of Medicaid recipients in Michigan worked part-time or full-time as of 2023, according to data from the U.S. Census Bureau's American Community Survey.
Michigan's Republican lawmakers have argued the requirements benefit those on Medicaid and help make the program financially sustainable.
A 'major problem' in rural Michigan
In Michigan, nearly a quarter of all rural residents are enrolled in Medicaid.
Jackson County leads the state with nearly 41% of its population enrolled in Medicaid as of December 2024. Fourteen of the 20 counties with the highest Medicaid enrollment rates were rural, according to The News' analysis.
Even prior to the new Medicaid changes, many hospitals that served rural areas were operating at a loss, according to Shepherd, an assistant professor of health management and policy at UM's School of Public Health.
"When we’re talking about such seismic cuts to Medicaid, there are massive cuts to budgets that are already running in the red," Shepherd said. "Rural hospitals struggle to make money in general."
A study by the Center for Healthcare Quality and Payment Reform found that 13 rural hospitals in Michigan were at risk of closing, and that one in five rural hospitals in the state reported negative margins on the services they provided.
"We're very concerned about the reduction in Michigan's budget for Medicaid overall," said Gabe Schneider, director of government relations for Munson Healthcare, the state's largest rural health care provider.
Close to 40% of Munson's patients are on Medicaid. For some services, that figure is higher: 60% of patients receiving obstetrics care at its Cadillac hospital are covered by the program.
J.J. Hodshire, president and CEO of Hillsdale Hospital, predicted the Republican bill would lead to the closure of certain programs, service lines and the shuttering of hospitals across the country.
He said about 70% of the patients served by his hospital are on Medicaid, and he feared the loss to his hospital annually will be about $6 million.
Hodshire said hospitals would have to reconsider offering services like obstetrics and psychiatric care, which have high rates of patients on Medicaid, but are not covered by the program.
“If Medicaid isn’t going to cover the cost of delivering the service, you can no longer deliver the service at a loss — even at a break-even," he said.
Monique Stanton, president and CEO of the Michigan Public Policy League, said Tuesday that hospitals and health care clinics, particularly in rural Michigan, are at risk of staffing shortages, longer emergency room wait times and closures.
Experts said the cuts also pose economic repercussions for rural communities, where hospitals are often some of the largest employers. Hospitals in the state employ about 222,000 Michiganians, according to the Michigan Health & Hospital Association.
Families or medical providers may decide not to come to certain rural areas if they are concerned they might not have a job because a hospital might not exist in the coming years, Hertel said at the Tuesday press conference.
U.S. Rep. John Moolenaar, a Caledonia Republican whose district includes rural hospitals, stressed the legislation includes the addition of a rural hospital fund — $50 billion to help Medicaid-dependent health centers and clinics over five years. He said the goal “has always been to preserve health care programs for those who are in need.”
Asked about the limits placed on Medicaid provider taxes in expansion states like Michigan, Moolenaar, a former state lawmaker, noted that the change doesn’t take effect until 2028, giving states time to adjust.
“I think that that gives states time to plan and to be flexible and figure out ways to support health care within the state,” Moolenaar said.
U.S. Rep. Kristen McDonald Rivet, a Bay City Democrat, said she’s talked to hospitals and the staff who run the long-term care facilities in her district, and the warnings of reduced care and hospital closures aren’t exaggerated.
“Especially our rural hospitals, they sat in a precarious place before all of this started. It's not like we have small hospitals across the country flush with resources,” said McDonald Rivet, who previously sat on the board of McLaren Bay Region Hospital and examined hospital budgets as vice chair of the Health and Human Services subcommittee in the state Senate. “This is a major, major problem for them.”
The problem will also affect those outside of rural counties, Hodshire warned.
As rural hospitals close, sick people will drive to the larger hospital systems for care, and they’re going to be “overrun," he said.
“People are going to be waiting days, if not weeks, for care because your local hospitals will have closed or shuttered services,” Hodshire said.
Addressing the cuts
Rural hospitals in financial trouble have several options, none of them ideal, according to Shepherd, the UM health policy expert.
Communities can raise taxes to support their local hospitals, the hospitals can look to be acquired by a larger health system or they can raise money from private equity firms.
"I think what you’re looking at is a series of not great options and uncertain paths," Shepherd said. "There’s no foolproof plan to weather these cuts."
State Sen. Kevin Hertel said the state Legislature would need to pull money and resources from other departments to "fill the hole" of the billions of dollars lost in cuts.
Hertel said, "When people don't have health care coverage, it's life and death. We need to make sure folks here have access to the health care they need."
Correction: This story has been updated to correct the name of the Michigan Public Policy League CEO.