Under the Big Beautiful Bill, the federal government is making steep cuts to Medicaid funding. Many people, including some prominent Republicans, find these cuts morally disturbing, believing that basic healthcare coverage should be treated as a right in a country as wealthy as ours.

But suppose you are not disturbed by Medicaid cuts. Here’s another thing to consider. Those cuts could increase the price you pay for medical care. Here’s why.

Medicaid funding cuts lead to hospital closures. Many rural hospitals, for example, care for lots of people enrolled in Medicaid. When those patients lose coverage, the hospitals – many of which are already living on the financial edge – lose paying customers.

And once those hospitals close, the remaining hospitals face less competition for customers. As a result, those remaining hospitals are able to leverage their new market power to raise prices.

How do hospital closures lead to price hikes?

Imagine Blue Cross Blue Shield of [pick your favorite state] is negotiating prices with local hospitals. Hospital A asks for a 10% price hike. BCBS refuses to accept the higher price and, instead threatens to remove Hospital A from the network and direct patients to Hospital B. Now imagine that Hospital B goes out of business. How can Blue Cross pressure Hospital A to lower its demands? If it wants customers to have access to hospital care, it can’t credibly threaten to walk away from the negotiating table.

Think I’m making this up? Here is a picture showing price hikes after rural hospital closures, from a study out of the University of Minnesota. It shows a steady increase in prices at surviving hospitals, an increase that outpaces other hospitals. Even eight years later, hospital closures help remaining hospitals secure higher prices:

Hospital Closures Lead To Price Increases

Health Affairs

Medicaid cuts are going to be devastating for many people who will lose access to critical medical care. It will also lead to financial ruin for many small hospitals, especially in rural communities. And then, it will lead all of us to pay higher prices when we receive hospital care.

When the government cuts Medicaid funding, we all pay the price.