Medicaid’s Role in Small Towns and Rural Areas

January 15, 2025 Joan Alker, Aubrianna Osorio, Edwin Park

In This Report:

Key Findings

Non-elderly adults and children in small towns and rural areas are more likely than those living in metro areas to rely on Medicaid/CHIP for their health insurance. As a consequence, reductions in federal Medicaid funding being contemplated in Congress are more likely to cause greater harm to rural areas and small towns than metro areas.
- For children this is especially true in Arizona, Florida, North Carolina, Virginia, South Carolina, California, Minnesota, Georgia, South Dakota, and Alaska.
- For adults this is especially true in Arizona, New York, Washington, Texas, Kentucky, Virginia, Louisiana, Oregon, South Carolina and Montana.
- For people over age 65, the rate of Medicaid coverage is slightly lower in rural areas than metro ones.
In six states, at least half of children living in small towns and rural areas are covered by Medicaid/CHIP. These include New Mexico (59.9%), Louisiana (57.7%), Arizona (55.9%), Florida (51.9%), South Carolina (51.1%), and Arkansas (50.5%).
In fifteen states, at least one-fifth of non-elderly adults living in small towns and rural areas are covered by Medicaid. These include Arizona (35.9%), New York (33.9%), New Mexico (31.6%), Louisiana (30.2%), Kentucky (28.5%), West Virginia (25.5%), Oregon (24.9%), Washington (24.4%), Montana (22.2%), Arkansas (22.0%), Maine (21.9%), Vermont (21.7%), Massachusetts (21.5%), Michigan (21.2%), and Alaska (20.4%).
Residents of rural counties with a large share of American Indian or Alaska Native residents and tribal lands are more likely to rely on Medicaid for coverage for all age groups, including seniors.
Large reductions in federal Medicaid funding would put the residents of small towns and rural communities and their health care systems at serious risk.

Background

One-fifth of people in the United States live in areas that are classified as non-urban. Residents of rural areas and small towns face additional challenges accessing needed health services compared to residents of metro areas for a variety of reasons including acute provider shortages, limited connectivity, and long distances to travel to access care, often without reliable public transportation options. Residents of rural areas also have worse health outcomes, including higher maternal and infant mortality rates; higher mortality rates from heart disease, cancer, and stroke; and higher rates of mental illness and overdose deaths. States with the largest number of rural residents include Texas, North Carolina, Ohio, Georgia and Pennsylvania (See Appendix Table 7) and states with the largest share of population in rural areas include Wyoming, Vermont, Mississippi, South Dakota, and Montana (See Appendix Table 8).

In addition, residents of rural areas and small towns have lower incomes on average than people living in metro areas and less access to employer-sponsored health insurance, meaning that public coverage such as Medicaid and the Children’s Health Insurance Program (CHIP) fill an even more critical role in these areas than in other areas of the country. While uninsured rates have come down significantly since passage of the Affordable Care Act (ACA), they remain higher in small towns and rural areas than in metro areas – especially in states that have not expanded Medicaid for adults.

In the past ten years, 120 rural hospitals have either closed or ceased offering inpatient services. Hospitals operating in rural areas have lower operating margins especially in states that have not taken up the Affordable Care Act Medicaid expansion for adults. In a struggle to keep their doors open, many rural hospitals opt to close less lucrative units such as maternity wards. In 2022, a slight majority of rural hospitals (52%) no longer had maternity wards compared to 36% of urban hospitals. Rural hospital closures have adverse economic effects on rural communities and limit access to care.

All of these challenges underscore the heightened risk that rural communities and small towns face as Congress considers large cuts to federal health care funding – especially Medicaid. This report examines the role that Medicaid plays in rural communities across the country.¹

Methods

This report uses data from the Census Bureau’s 2023 American Community Survey (ACS) to model the estimated share of rural and small-town residents that are insured by Medicaid/CHIP by county and by state relative to the share of residents in metro areas. Data from 2022 ACS were used to augment model performance.

Rural areas and small towns are defined as counties with no urban areas of at least 50,000 residents. We looked at children, non-elderly adults, and seniors separately and together. In general, the ACS undercounts the number of people covered by Medicaid/CHIP compared to administrative enrollment data. However the impact of the renewal process of everyone enrolled in Medicaid (commonly known as the unwinding) after the expiration of the COVID-19 public health emergency’s continuous coverage protection has also decreased Medicaid enrollment in general but is not fully reflected in these data.

North Carolina adopted the ACA Medicaid expansion on December 1, 2023 and has successfully enrolled large numbers of adults especially in rural counties largely after the ACS data were collected. The District of Columbia, New Jersey, and Rhode Island do not have any counties classified as non-urban. For more information, please see the Methodology section.

Findings

As shown in Figure 1, in 2023 40.6% of children living in small towns and rural areas were enrolled in Medicaid/CHIP as compared to 38.2% in metro areas. This is the largest differential in the examined populations. The vast majority of states (38 of 48) have similar or larger shares of children in small towns/rural areas covered by Medicaid/CHIP than in Metro areas. See Appendix Table 1 for state-by-state analysis.

Similarly, non-elderly adults are covered by Medicaid at higher rates in rural areas as compared to metro areas (18.3% v. 16.3%), with 40 states out of 48 showing similar or higher rates of Medicaid enrollment in rural areas/small towns. See Appendix Table 2.

Seniors in rural areas and small towns do not disproportionately rely on Medicaid (15.8% v. 17.0%).² It is unclear why seniors would have a different pattern overall. However, looking at state-specific patterns, in the majority of states — 29 states — larger shares of seniors in small towns and rural areas were enrolled in Medicaid than in metro counties, including in Arizona where 46.1% of seniors in small towns and rural areas were enrolled in Medicaid as compared to 13.1% in metro counties. See Appendix Table 3.

A Closer Look at Where Children’s Medicaid Coverage in Rural Areas and Small Towns is Especially High

As Table 1 shows, in six states (NM, LA, AZ, FL, SC, AR) half or more of the children living in small towns and rural areas are covered by Medicaid/CHIP. A closer look at the counties nationwide with the highest share of children covered by Medicaid/CHIP finds that the top 20 rural counties in the country have between 62 and 73 percent of children enrolled. These counties are primarily found in the six states listed above along with Humphreys County in Mississippi and Wolfe County, Kentucky. See Appendix Table 4.

View Your State's Data Here

Table 2 depicts the states with the largest differential in coverage rates for children in rural areas as opposed to metro counties with Arizona and Florida leading the way. For states in Table 2, cuts in Medicaid funding will likely have an outsized impact on families living in rural communities and small towns.

Finally, Table 3 shows the states with the largest number of children in small towns and rural areas enrolled in Medicaid/CHIP, with Texas, North Carolina, Georgia, Kentucky, and Mississippi leading the way.

A Closer Look at Where Adult Medicaid Coverage in Rural Areas and Small Towns is Especially High

As Table 4 shows, there are 15 states where at least one fifth or more of non-elderly adults in small towns/rural areas are covered by Medicaid. Arizona and New York have more than one-third of rural adults covered by Medicaid. A look at the top 20 rural counties nationwide for adult enrollment in Medicaid is available in Appendix Table 5; all of these counties are in the 15 states shown in Table 3.

Table 5 illustrates the states where the importance of Medicaid/CHIP to adults in small towns/rural areas is even more pronounced as compared to metro areas and includes states that have expanded Medicaid coverage for adults under the Affordable Care Act as well as some that have not (TX, SC). Arizona again leads the way with New York, Washington, Texas, and Kentucky following. For states in Table 5, cuts to federal Medicaid funding will likely have an outsized impact on rural communities.

Impact on Native People

American Indian and Alaska Native (AI/AN) people are much more likely to live in non-metro areas (40%). Native peoples face significant challenges to accessing health care and have higher rates of chronic conditions, such as diabetes, as well as higher mortality rates. The Indian Health Service has been historically underfunded and importantly is not a health insurer but rather a provider of health care services in accordance with the federal trust responsibility.

. Medicaid plays a very important role as an insurer for Native peoples – protecting them from high out-of-pocket costs. American Indian/Alaska Native children have historically had much higher rates of Medicaid enrollment than other children. Three quarters of AI/AN people live in the Southern and Western regions.

Our analysis finds that Medicaid continues to play an outsize role as a coverage source for American Indian and Alaska Natives – especially in rural areas and small towns. As Figure 3 shows, half of children living in rural AI/AN areas (including tribal lands) are covered by Medicaid/CHIP. Non-elderly adults and seniors in rural areas are also more likely to be covered by Medicaid in AI/AN areas.

A closer look at the top twenty rural counties where seniors have the highest Medicaid coverage rates underscores the critical role that Medicaid plays for indigenous elders, with two-thirds of seniors covered by Medicaid in Oglala Lakota County in South Dakota, which consists entirely of the Pine Ridge Reservation, and Apache County in Arizona (which includes primarily tribal lands) – far exceeding the national rate of under one in five. Seven of the top 20 rural counties for seniors enrolled in Medicaid are in South Dakota and all of these counties are in Indian Country, seniors in these counties have Medicaid enrollment rates ranging from 39 to 66 percent. See Appendix 6 for the full list of counties with high shares of seniors covered by Medicaid.

Conclusion

Rural communities face greater challenges than metro areas in keeping their health care infrastructure strong enough to support rural residents’ health needs. American Indian and Alaska Native people are also at grave risk; Medicaid is a key insurer protecting these families from medical debt.

Large cuts to Medicaid currently being contemplated by Congress pose very severe threats to rural communities. Hospitals and other providers in rural communities are already operating on tighter margins and disproportionately rely on Medicaid for their patient revenues. Families and non-elderly adults in rural areas rely on Medicaid for their health insurance at higher rates than those living in metro areas, underscoring that large cuts will have dire consequences for communities that are already struggling.

Appendix Tables

State Maps

View Your State's Rural Health Data Here

Methodology

Data Sources and Model

This report from the Georgetown University Center for Children and Families (CCF) uses 2023 American Community Survey (ACS) Public Use Microdata Sample (PUMS) data to model the estimated share of children (under age 19), non-elderly adults (ages 19-64), and seniors (age 65 and over) covered by Medicaid/CHIP in counties classified as either “Metro” or “Small Town/Rural Area.” County estimates were developed with the assistance of Mark Holmes, PhD at the Rural Health Research Center, University of North Carolina-Chapel Hill and follow the general approach used previously in J. Hoadley, J. Alker, and M. Holmes, "Health Insurance Coverage in Small Towns and Rural America: The Role of Medicaid Expansion" (Georgetown University Center for Children and Families, September 2018).

In the first step of the estimation, a predictive model is developed that relates social, demographic, and economic factors to individual Medicaid coverage (the 2023 model has been updated to include Supplemental Security Income (SSI) and poverty flags specific to seniors). ACS PUMS data are used to identify demographic characteristics associated with the likelihood that an individual is covered by Medicaid. In the second step, these individual-level relationships are applied to area-level values from corresponding county-level ACS summary data. These are used to estimate the number and share of individuals with Medicaid coverage in each county; county estimates are further adjusted to match state-level targets.

CCF suppresses estimates in counties with fewer than 50 individuals overall or 50 individuals covered by Medicaid/CHIP, including for children, adults, and seniors.

Geography

Counties are classified as either “Metro” or “Small Town/Rural Area” using the Missouri Census Data Center’s Master Area Block Level Equivalency (MABLE) Geocorr 2022 data engine. “Small Town/Rural Area” combines the “micropolitan” and “noncore” designations into a single category representing counties with central urban areas of fewer than 50,000 people. Three states (DC, NJ, RI) have no counties classified as a “Small Town/Rural Area.”

Health Insurance Coverage and Medicaid Undercount

ACS data represent a “point-in-time” estimate of an individual’s insurance coverage, meaning that the survey collects information on the respondent’s coverage only at the moment they complete the form, not at another point during the year. (The ACS is conducted over the course of the year.)

The ACS reports Medicaid and Children’s Health Insurance Program (CHIP) coverage as a single category of health insurance. CCF uses “Medicaid/CHIP” when describing children’s coverage, although it is important to note that the majority (67%) of children enrolled in CHIP are covered through CHIP-funded Medicaid coverage. CCF uses “Medicaid” when describing non-elderly adults’ and seniors’ coverage as very few adults are covered through CHIP.

Please note that ACS estimates are not adjusted by the Census Bureau (or by CCF) to address the “Medicaid undercount” often observed when comparing surveys to the reported numbers of individuals enrolled in Medicaid and CHIP using federal and state administrative data. This undercount occurs in the majority of surveys and is not unique to the ACS, though the extent of the undercount varies among federal surveys. Additionally, recent research on the decennial Census shows that young children are consistently and significantly undercounted, likely worsening the Medicaid undercount among children. In 2023, the Medicaid unwinding may have affected individuals’ reported coverage sources as states began recertification processes at different times and individuals may have transitioned between coverage sources.

North Carolina adopted the ACA Medicaid expansion on December 1, 2023. State administrative data indicate that Medicaid enrollment rose considerably in 2024 but is not reflected in this report.

Endnotes

¹ Three states (DC, NJ, RI) have no counties classified as “small towns/rural areas”; they are not examined in the report.

² Medicaid serves seniors in two primary ways: the lowest income seniors (i.e. “dual eligibles”) can also be enrolled in Medicare (20%) and have their cost-sharing paid by Medicaid; and seniors and others requiring long term care services and supports may be enrolled in Medicaid which pays for nursing home care for 5 of 8 residents. See KFF, “Medicaid in United States” (KFF: August 2024), available at here.