“Access to primary care in rural districts is a challenge across our nation, not just in the Commonwealth,” says 5th District Congressman John McGuire. “Half of America’s rural hospitals are operating in the red or at a loss.” He blames a “deeply broken” health care system, and says that only 7 percent of Medicaid spending goes to rural hospitals.
That number appears to come from a 2025 White House fact sheet, based on numbers from the Centers for Medicare & Medicaid Services. “HHS didn’t respond to our request for more information about the figure,” a FactCheck.org article notes.
Experts and evidence suggest that McGuire is wrong—and that when he voted for Republicans’ HR1 bill in May 2025, he was enacting cuts that will hurt rural hospitals and the communities that depend on them. (We invited the congressman and his staff to respond to apparent factual errors or disputed data in his statements, but they declined.)
Cutbacks for states and providers
Under the Affordable Care Act, the federal government pays 90 percent of the costs for any state that expands Medicaid to able-bodied adults. Virginia uses a provider tax on hospitals to pay for the other 10 percent. According to Julian Walker of the Virginia Hospital & Healthcare Association, hospitals agreed to pay because it would help them partially recoup the expense of “uncompensated care”—people without insurance receiving emergency care they can’t afford.
Medicaid expansion appears to have held up its end of that bargain. Walker pointed to the VHHA’s community benefit surveys, which include the annual costs of uncompensated care. In 2018, the year before Virginia expanded Medicaid, hospitals lost more than $713 million on “charity care,” and a further $341 million on the gap between what it cost to care for patients, and what Medicaid would reimburse. (For every dollar of care, Walker says, Medicaid repays 72 cents.)
By 2024, uncompensated care costs had shrunk to around $457 million—around a 36 percent drop. Yet hospitals’ losses on Medicaid care had also fallen slightly, to roughly $337 million.
HR1 constrains Medicaid spending in two ways that affect hospitals. First, it shrinks what’s called the “hold harmless threshhold”—essentially, the maximum percentage states can charge health care providers as an additional tax to fund Medicaid expansion.
Before HR1, states could charge providers up to a 6 percent tax. HR1 steps that figure down gradually over several years to a final 3.5 percent. That might seem like a nice break for hospitals. But it means Virginia’s state government has to find other ways to make up the shortfall.
Second, HR1 caps what’s known as “state directed payments.” Remember how Medicaid pays providers less than what they say care actually costs? Among other features, state-directed payments let states draw down federal dollars to shrink that gap via “uniform rate increases.” But HR1 says these extra payments can’t exceed the rate Medicare pays. The American Hospital Association estimates that rate for 2026 at roughly 90 cents on the dollar. That’s more than hospitals would get from Medicaid normally, but Walker says it’s still less than many had been getting before.
That change could prove even more painful than it sounds. According to Walker, provider assessments are based on a hospital’s revenue; larger, more prosperous hospitals pay more in dollar terms than smaller facilities. But state-directed payments are based on the number of Medicaid patients a facility serves. When those payments shrink, hospitals that serve more people on Medicaid stand to lose more money.
“Medicaid has an outsized role in rural America, covering a larger share of children and adults in rural communities than in urban ones,” says a 2025 fact sheet from the National Rural Health Association. “Nearly … one in five adults in small towns and rural areas rely on [Medicaid] for their health insurance. Additionally, Medicaid covers nearly one-quarter of women of childbearing age and finances half of all births in these communities.”
Bad medicine
Industry groups predict dire effects for health care in Virginia from HR1. The American Hospital Association modeled the impact of HR1’s cuts through 2034, predicting that in Virginia, 55,500 rural Medicaid patients would lose coverage. That’s the 10th largest coverage loss among all 50 states.
The Commonwealth Fund further estimated in 2025 that HR1 would cost Virginia 13,200 health care jobs by 2029. “Hospitals are some of the largest employers in Virginia,” Walker says. “They directly employ about 138,000 to 140,000 people. For each hospital job in a community, there’s a multiplier effect: Each hospital job supports two local economy jobs.”
Census data from 2023, the most recent year for which it’s available, shows health care and social assistance as the single largest category of jobs in VA-5, at 49,506 people. That’s about one out of every six jobs in the district.
Rural hospitals “are often the economic anchors of those communities,” says Melanie Anne Egorin, a health policy expert at UVA’s Batten School of Leadership and Public Policy. “Right now, hospitals are often the good-paying jobs in those communities. As those close, it furthers the cycle of job loss within our rural areas, in places where people really need health care. It isn’t a place where somebody who goes to college can come back to as a nurse and serve their community if the hospital isn’t there.”
A report from Public Citizen listed three rural hospitals in McGuire’s district that it said were at risk of closure from HR1: Southside in Farmville, Halifax Regional Hospital in South Boston, and Community Memorial Hospital in South Hill. To make this determination, the report looked for hospitals that get 20 percent or more of their revenue from Medicaid and similar programs, and posted net financial losses on average between 2022 and 2024. Medicare classifies all three at-risk facilities as Sole Community Hospitals, “the only source of short-term, acute inpatient care in a region,” per the report.
A June 2026 draft report from Virginia’s Joint Commission on Health Care further listed five rural hospitals in Virginia at immediate risk of closure, including Halifax Regional Hospital. These facilities represent 16 percent of the state’s rural hospitals. Eight more facilities, including Community Memorial Hospital, were deemed at risk of closure. The study measured whether the hospitals made enough money treating patients to cover the costs of that care, and the net assets each hospital had—essentially, their “savings in the bank.”
A second risk-measuring model cited in the draft report, analyzing a number of different factors, put Community Memorial at the highest risk of financial distress, with Southside and Halifax at the “mid-highest risk.”
At-risk hospitals “may continue operating,” the draft report says, “but the range of services available to the community is becoming progressively narrower.” These facilities are increasingly focusing on outpatient and emergency care, while inpatient care like surgeries and obstetrics withers.
“Proposed Medicaid reductions under H.R. 1 would significantly decrease the flow of federal dollars into Virginia’s health care system,” the report says, “disproportionately affecting rural hospitals that rely more heavily on Medicaid revenue and have limited commercial payer mix to offset losses.”
At $50 billion, McGuire says HR1 “provides the biggest investment in rural hospitals in history, end of story.”
“That is about 3 percent of all the cuts that they’re making,” says Sebastian Tello Trillo, a Medicaid policy expert and associate professor of economics at UVA’s Batten School. “So in some ways, they’re saying, I’m going to take away $100, but I’m going to give you three back. Yes, three’s something, great, but $3 once you took $100 out of me, that doesn’t really solve all my problems.”
The $50 billion nationwide fund, paying out $10 billion annually for five years, seems unlikely to fix Virginia’s losses. Before HR1, Medicaid funded 6 percent of the state’s rural hospital expenditures, according to data from the National Rural Healthcare Association. Without the fund, Virginia rural hospitals would lose nearly $2.1 billion between 2025 and 2034. Yet the fund only covers around 61 percent of that shortfall, leaving Virginia rural hospitals still $800 million poorer.
A shortage of care
Those cuts could hit the 5th District harder than other areas of Virginia. VA-5 is the state’s worst region for primary care shortage areas. In 2025, just over half of the district’s population lived in a place where there was either one primary care doctor within a 30-minute drive for every 3,500 or more people, or where the primary-care-doctor-to-people ratio was between 3,000 and 3,500, and the need was greater. The national average was 9.5 percent, while Virginia as a whole averaged 14.5 percent.
The next highest rate of primary care shortage areas was 31.3 percent in VA-9. Every other district fell between zero and 21 percent.
Only three districts in Virginia have fewer hospitals than the 12 in VA-5: Virginia’s second, seventh, and 10th districts. All have much smaller geographic areas. VA-5 has the state’s fewest hospitals per square mile—one hospital for every 787 square miles, more than twice the state average.
If HR1 puts a financial crunch on 5th District hospitals, care for expectant mothers and newborn babies could particularly suffer. Within VA-5, Nelson, Amherst, Buckingham, Cumberland, Powhatan, Fluvanna, Louisa, Goochland, Appomattox, Charlotte, Amelia, Nottoway, Campbell, Pittsylvania, and Lunenburg counties were classified as maternal care deserts as of 2022 by the March of Dimes. No hospitals in those counties provide OB-GYN care.
Only between five and seven hospitals treated expectant mothers in the entire 5th District as of 2022—and at least one of those facilities has since stopped doing so. Centra Southside Hospital in Farmville closed its obstetrics and gynecology department in December 2025, forcing patients seeking checkups or needing to give birth to drive for an hour to the nearest suitable facility. Centra cited declining patient volumes as the main reason for the closure, but also mentioned “significant financial and operational challenges, including recently enacted reductions in federal healthcare funding.”
When asked about this care shortage, and why HR1 cuts benefits and taxes but doesn’t help build new hospitals, McGuire replied in part by blaming “the rampant waste, fraud, and abuse that’s killed competition and weakened Medicaid,” saying that “throwing more money at the problem is not a lasting solution.” He did not provide examples of waste, fraud, or abuse.
“If people lose Medicaid, they’re still going to show up in the ER, and uncompensated care in hospitals is going to increase a lot,” says Tello Trillo. “And the hospitals, some of them, especially in rural areas, are working on very thin margins. That could make it such that some hospitals reduce their services and just do a couple of things, or that they just close, essentially.”
Next week: McGuire touts HR1’s tax cuts for working Virginians—but most of the 5th District’s residents don’t seem poised to reap the benefits.
