Rural Hospitals Warn of Dire Consequences from Proposed Federal Medicaid Cuts

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As Congress weighs a budget proposal that could slash the federal Medicaid program, health officials and local leaders are raising alarm about what the cuts would mean for rural communities. At a press conference on Friday, June 26, hosted by Wayne Memorial Hospital in Honesdale, Pennsylvania Department of Health Secretary Dr. Deborah Hogan joined other members of the Shapiro administration to call attention to the far-reaching impacts of the proposed changes.

Liam Mayo of The River Reporter was at the press conference, which focused on both the human and systemic consequences of the federal budget bill, which health leaders say threatens to dismantle crucial supports in areas already struggling to meet demand.

Hundreds of Thousands Could Lose Coverage
According to estimates shared by state officials, approximately 300,000 Pennsylvanians could lose Medicaid coverage if the cuts go through. Pennsylvania Insurance Commissioner Michael Humphreys added that another 270,000 residents with individual insurance purchased through the state marketplace, Pennie, could also lose coverage if tax credits included in the American Rescue Plan are allowed to expire.

New York is projected to see even greater losses, with 1.5 million residents statewide potentially impacted. In the 19th Congressional District—which includes Sullivan County—an estimated 37,500 people could lose insurance, according to the Fiscal Policy Institute.

Rural Hospitals on the Brink
James Pettinoto, CEO of Wayne Memorial Hospital, described the rural healthcare system as already under duress. While the hospital has made strides to expand services with help from local and state government support, Petinotto warned that any federal cuts would reverse that progress.

“The proposed budget cuts would likely force us over time to reduce services and continue to leave the most vulnerable population of patients at greater risk for disastrous health outcomes,” Pettinoto said.

As Mayo reports, the hospital’s maternity unit delivers approximately 475 babies a year, many to Medicaid-covered and high-risk patients. Without adequate funding, such essential services could face reductions or even elimination, following a pattern seen in other rural counties. For instance, Susquehanna County lost its obstetric program more than a decade ago.

Ripple Effects for All Patients
While Medicaid recipients would be the most directly affected, officials emphasized that the impact would not stop there.

Mayo reported that rural hospitals serve a disproportionately high number of Medicaid patients, according to health officials at the event. “When funding is pulled, these hospitals lose revenue—but the patients still come. They just come through the emergency room, often uninsured, and the hospitals are forced to absorb the cost,” he said.

That uncompensated care further stresses already thin operating margins. To make up the difference, hospitals may raise prices on privately insured patients or cut additional services, creating a cycle that affects everyone, not just those on Medicaid.

Garnet Health: Another Example of Strain
The looming budget cuts come amid broader financial troubles for regional healthcare providers. Garnet Health, which serves patients across New York and Pennsylvania, recently announced layoffs of 42 employees and the elimination of outpatient pulmonary rehabilitation and diabetes services. Officials there cited both shrinking federal reimbursements and anticipated Medicaid cuts as contributing factors.

Unlike Wayne Memorial, which has been trying to expand its footprint, Garnet has been contracting in recent years—part of what its leadership calls a long-term effort to “right-size” the hospital to match shifting regional demographics and medical needs.

Interconnected Consequences
Officials stressed that the changes being debated in Washington are not just budget line items, but seismic policy shifts that could ripple through the entire healthcare system.

“This is not just about Medicaid,” said Commissioner Humphreys. “When one piece of the system breaks, others have to compensate. That raises premiums, reduces access, and increases strain on care providers.”

For continued updates and reporting, visit riverreporter.com.

Correction: A previous version of this article incorrectly stated that Garnet Health laid off 2,042 employees. The correct number is 42 employees.

Image Credit: Wayne Memorial Hospital