Gov. Katie Hobbs is applying to get $1 billion in newly available federal aid to help shore up rural health care — especially in the face of impending Medicaid funding cuts.
The money is part of $50 billion Congress set aside for the next five years in its “Big Beautiful Bill’’ to support delivery of health care in rural Arizona. The funding was pushed by lawmakers who said they wanted to address the particular financial challenges facing rural hospitals.
But it also comes as another provision of the massive package is designed to reduce Medicaid spending by $911 billion nationally over the next decade. KFF, which analyzes health measures, says that figure includes an estimated $137 billion in rural areas, endangering rural hospitals, many of which are considered to already be in financially risky situations.
A study done by the University of North Carolina says five Arizona hospitals are at most risk of closure because of Medicaid cuts:
- Carondelet Holy Cross Hospital in Nogales;
- Copper Queen Community Hospital in Bisbee;
- Cobre Valley Regional Medical Center in Globe;
- Page Hospital;
- Winslow Memorial Hospital.
The Governor’s Office noted there are rural hospitals in all 15 counties.
Wednesday was the deadline for states to submit applications.
The chances of Arizona getting at least some of the money are good.
By law, half of the $50 billion must be divided equally among all states with qualifying applications.
But the other $25 billion is going to be parceled out by the Centers for Medicare and Medicaid Studies based on its analysis of how each state’s plan complies with the law’s broad requirements.
Four Arizona priorities
The plan being submitted by Hobbs includes four priorities.
One is to spend $57 million a year to increase medical residencies at rural hospitals.
It also would subsidize health education for future medical professionals who commit to working in rural Arizona. That includes financial incentives to retain or relocate existing health professionals but also training grants.
There’s another $51 million annually to subsidize fixed costs of rural health care providers, things like electronic health-care records, health-care technology and equipment.
Gov. Katie Hobbs
Hobbs also wants $45 million each year to approve access to rural health care, including things like mobile clinics and telehealth services.
And then there are some smaller asks, including $12 million for chronic illness prevention and treatment, $10 million for dealing with behavioral health and substance abuse disorders, and $5 million to improve obstetrician care and access to maternal mental health resources.
Hobbs, in a written statement, said Arizonans already are finding health care can be unaffordable and inaccessible.
“And rural Arizonans face challenges like potential service reductions and hospital closures, a lack of health care professionals, long wait times, insufficient access to specialty care, and outdated technology that is holding our communities back,’’ she said.
Medicaid cuts
The reason Medicaid payments to hospitals are going to be cut comes down to several factors.
One involves expanded work requirements in the federal legislation, including for adults without children and for non-disabled individuals.
The new law says that effective in 2027, states must deny coverage for some who are not already working at least 80 hours per month or participating in some other acceptable activity, such as education or community service. There are exceptions based on age and health or whether the person is a caregiver for someone younger than 14.
But that’s just part of the issue.
The federal law says applicants must reverify that eligibility every six months — it’s currently annually — and must provide specific documentation.
All that has implications for the Arizona Health Care Cost Containment System, the state’s Medicaid program, which now provides care for about 2.1 million residents, about a quarter of the state’s population.
One estimate by the Joint Economic Committee of Congress figures that more than 190,000 Arizonans will lose their coverage because they can’t provide the required documentation. KFF says that figure could be as high as 360,000.
Having fewer people getting Medicaid benefits is a problem for hospitals because the recipients now get routine and preventative care from their doctors. Without such coverage, they are more likely to end up using hospital emergency rooms and showing up there with more expensive and complicated issues.
And federal law precludes hospitals from turning away patients with emergencies, even if they cannot pay.
But there’s also something else.
Beginning in 2028, the federal legislation scales back a system that allows hospitals to essentially tax themselves, but in a way that draws down even more federal dollars that can be used to make up for uncompensated care they provide. A lower cap on that tax means fewer Medicaid dollars coming in — perhaps by $6 billion over a five-year period.
Rural vs. urban health outcomes
In submitting the application, Hobbs cited some data to show the specific needs of rural areas.
For example, she said the median 2023 income in urban areas was $79,142, versus $55,766 in rural areas. The unemployment rate was 4.9% in urban areas against 7.5% in rural areas.
There are also key health differences.
In rural areas in 2024, the mortality rate per 100,000 from cancer was 228, versus 163.8 in urban areas. The rates of death were also higher from cardiovascular disease, diabetes, and Alzheimer’s and dementia. And babies born in rural areas were more likely to die, with women having a higher rate of not getting prenatal care.
The governor is hoping that having a plan developed with broad input will help its chances. She said that includes not just rural health-care clinics, hospitals and health-care providers but also Medicaid health plans, tribes, universities and elected officials “from across the political spectrum.’’
Her application included a letter of support from three of the state’s nine members of the U.S. House: Democrats Greg Stanton and Yassamin Ansari and Republican Juan Ciscomani.
She also submitted a letter for what’s being dubbed the Rural Health Transformation Program from a variety of organizations that provide health care, as well as other public interest groups, including the Southern Arizona Leadership Council and the Arizona Chamber of Commerce and Industry.
