Rural Health Centers at a Critical Crossroads: Can They Survive Medicare Advantage’s Financial Pressures?
Across rural America, healthcare leaders in small-town hospitals are facing a tough dilemma: Can they continue their partnerships with Medicare Advantage plans without risking their financial stability—and the well-being of their patients?
Medicare offers two paths for seniors: the traditional, government-run program, and Medicare Advantage— a privatized alternative managed by insurance companies. These private plans often attract enrollees with low premiums, reduced out-of-pocket costs, and added perks like vision, dental, and hearing care, gym memberships, nutrition services, and even discounts on over-the-counter products.
However, the glossy appeal of these extras hides a troubling reality, especially for rural hospitals. According to a recent American Hospital Association report, Medicare Advantage reimburses rural hospitals only about 90% of what traditional Medicare pays. This gap is concerning, given that traditional Medicare already offers hospitals significantly lower payments compared to private insurers, as revealed in research by the RAND Corporation.
“The vast majority of our rural hospitals are in no position to absorb more cuts in reimbursement,” said Carrie Cochran-McClain, Chief Policy Officer at the National Rural Health Association. “Many are already walking an economic tightrope.”
In fact, that tightrope has snapped for nearly 200 rural hospitals since 2005, forcing them to close their doors or cut inpatient services.
Jason Merkley, CEO of Brookings Health System in rural South Dakota, saw the writing on the wall. Faced with increasing payment shortfalls, he anticipated inevitable consequences: layoffs, reduced services, and compromised patient care. In response, Brookings made a bold move in 2015—cancelling all four of its contracts with major Medicare Advantage insurers.
Other rural facilities followed suit. Great Plains Health, serving communities across Nebraska, Kansas, and Colorado, cut ties with all Medicare Advantage plans. Similarly, Kimball Health Services, operating in small towns across Nebraska and Wyoming, made the same decision.
Beyond financial challenges, rural providers also report significant delays in payment and frequent rejections of treatment authorizations by Medicare Advantage insurers—delays that jeopardize patient outcomes in areas where time and resources are already stretched thin.
On the other side, proponents of Medicare Advantage argue that these plans are more affordable for rural residents. Susan Reilly, a spokesperson for the Better Medicare Partnership, pointed to a study by an independent firm, based on federal data, which suggests rural beneficiaries pay less with Medicare Advantage compared to traditional Medicare.
Despite this, many rural hospital administrators remain skeptical. For them, the financial math just doesn’t add up, and the mission of providing care is increasingly at odds with staying afloat. As these healthcare providers weigh their options, they’re realizing that in order to keep essential services running, protect their staff, and put patients first, they may need to part ways with the very plans intended to support them.
The debate continues, but one thing is clear: rural America’s healthcare lifelines are fraying, and for many communities, the decision to cut ties with Medicare Advantage may not just be a choice—it may be a matter of survival.