BANGOR, Maine — In a significant shift for American health care, Republicans last year enacted cuts that will reduce expected Medicaid funding by $1 trillion over the next decade and allowed tens of billions in yearly insurance subsidies to lapse.
The full repercussions of these cuts will unfold over time, but the health care sector is already bracing for impact, particularly in rural states where the effects are expected to be most severe. In numerous interviews with providers from Louisiana to Maine and Washington, D.C., many detailed the preparations and tough decisions they are facing.
Maine, with the highest percentage of its population living in rural areas and a higher-than-average number of Medicare and Medicaid beneficiaries, is feeling the pressure. The federal government’s pullback from health care has state officials anxious and prompted them to plan extensive changes in both care delivery and revenue generation.
“We will look different moving forward,” said Lisa Harvey-McPherson, vice president of government relations at Northern Light Health, a major health system in Maine. “Some services that we provide today will either look different or won’t be offered.”
Northern Light’s leadership has developed numerous plans and contingencies. Their strategy includes shifting care from high-cost facilities to smaller ones or utilizing telehealth when feasible. They are preparing to assist patients with the new Medicaid paperwork to retain coverage and are planning savings to address the anticipated rise in uncompensated care and increased demand as other systems reduce services or close. Consolidations and closures are also being considered to meet these goals.
According to Harvey-McPherson, other health systems in the state are also rethinking their operational models.
“You’ll see this pattern of service closures,” she noted about the state’s health providers. “We have a pretty fragile, unstable base upon which all of this negative activity will occur.”
Financial challenges are not new for systems serving rural, low-income, or elderly populations. Health systems like Northern Light have been striving to improve their financial health. (“There are so many headwinds that we’ve had to overcome, it’s hard to distinguish one from the other,” said Randy Clark, senior vice president of Northern Light Health who manages three hospitals in the system.)
Maine is a glimpse into the future for a health system increasingly pressured by costs, revenue issues, and rising demand. With the oldest average population and a significant number of rural and government-covered patients, this presents a particular concern for lawmakers evaluating policy impacts. Trampas Hutches, president of the Mountain Region for MaineHealth, described Maine as a “canary in the coal mine” for the nation: “The things that we’re experiencing today are the things that people will be experiencing soon behind us.”
Across Maine and the U.S., hospitals and health systems are adopting varied strategies. Some are looking to be acquired by larger systems to stabilize their finances. Others are accelerating the use of artificial intelligence, hoping for efficiency gains. Approaches include increasing reliance on philanthropy, extracting more from employer-sponsored insurance or drugmakers, cutting non-billable services, seeking funding from the Rural Health Transformation Fund, or lobbying to reverse the funding cuts.
More drastic measures are under consideration. Service cuts and facility closures are possible for many systems — some have already begun implementing these changes.
“The outlook is not good. We think the outlook is going to get worse if Congress doesn’t reverse cuts to Medicaid,” stated James Jarvis, president of the Maine Medical Association. “How do we take care of a population if we don’t have the resources needed to do that?”
The rapid transformation in the health care landscape, with less funding for insurance and fewer care options, might influence voter behavior in the upcoming November elections. Democrats have linked unaffordable health care to GOP-led cuts, making it a central campaign issue nationwide.
This is also evident in Maine, where a heated U.S. Senate race between Republican Susan Collins and Troy Jackson, a Democrat, is unfolding. Collins has defended her record on health care, claiming she is a “Medicaid Champion,” although she did not vote for the Medicaid cuts.
Democrats see potential opportunities.
“There’s an energy like I’ve never seen of people that are frustrated; they’re fed up. They want a government that works for them. And, cutting Medicaid, we’ve lost birthing centers in Fort Kent, we’ve lost birthing centers in Houlton, out on Mount Desert Island, and right now, Lincoln County,” Jackson said in a statement. “And it’s only getting worse.”
Hospitals face a financial challenge
The Medicaid cuts could result in about a 1% annual revenue decline for Maine hospitals, according to a report from the center-left think tank Third Way, utilizing nonpartisan federal data. This could push several facilities in the state — many operating at margins below 1% — into financial loss or exacerbate existing negative margins. Many states anticipate a larger revenue loss due to the cuts.
Every health care leader in Maine who spoke with STAT anticipates fewer hospital services once the cuts are fully implemented. The reductions are already impacting services, according to Norman Dinerman, the medical director of LifeFlight of Maine. He recounted a case where a newborn died because the mother was too far from necessary medical care. In another instance, a baby was delivered with a prolapsed umbilical cord, and the doctor had to maintain blood flow manually during an ambulance ride. The baby survived.
“These are not all too uncommon situations,” Dinerman commented.
LifeFlight of Maine’s collaboration with the Maine National Guard has been strengthened, the two organizations announced earlier this year. Personnel from both groups train together, sharing techniques for patient care in resource-limited settings.
“We’re going to need to do more of those in rural America,” said Tom Judge, the founding executive director of the organization. “It’s, in some ways, going to be more like a battlefield.”
The underlying causes of this trend are nationwide. Approximately 7.6 million Americans are projected to lose coverage due to Medicaid reforms.
Normally, providers might guide patients who lose Medicaid eligibility to individual marketplace plans. However, lawmakers failed to renew enhanced subsidies for coverage, increasing the cost of insurance for individuals. This has resulted in about 3 million Americans dropping coverage since the subsidies expired.
The repercussions are twofold. Patients delay seeking care due to costs, ultimately ending up in emergency rooms when their conditions worsen. Clinicians then provide intensive care without compensation.
Republicans who enacted the cuts have defended them, suggesting some Medicaid funding methods are “scams,” asserting that the savings are necessary for sustainability, and arguing that these aren’t actual “cuts” but smaller increases in spending than previously planned.
Nonetheless, uncompensated care is rising, health system leaders told STAT, and in some cases, Medicaid payments have decreased.
Hospitals look for a lifeline
Facing the inability to withstand the cuts alone, many health systems are seeking to be acquired by larger entities for financial stability.
Some have already succeeded. In Bogalusa, La., the local hospital, supported by its larger system, will persist: “Regardless of the uncertainty, we’re going to be here,” stated Brian Galofaro, the chief medical officer at Our Lady of the Angels Hospital.
His hospital is part of the Catholic system FMOL Health, which helps the remote hospital maintain robust service lines and pays millions for services offered to the larger system, according to tax filings.
Yet, even larger, stable systems will feel the effects of the cuts. “We’re going to get very creative,” Galofaro remarked.
These creative strategies include complex pharmaceutical reimbursement calculations and new efforts to keep patients insured.
The 340B drug discount program, which mandates drug manufacturers to provide discounts to providers, is a crucial revenue source for some health systems. (“Thank God for 340B,” Galofaro said.)
The program can be lucrative for some systems. A recent analysis found that in one case, the cancer drug Keytruda was marked up by 340B hospitals by an average of 173%.
However, some health systems argue the program is essential.
Lori Dwyer, president and CEO of the Bangor-based Penobscot Community Health Center, said her system also relies on 340B, which constitutes about 10% of its revenue.
Even this income might be at risk, with lawmakers in Washington pushing for reforms and pharmaceutical companies complaining that discounts benefit hospitals, not patients.
Dwyer, like other providers, is adopting new strategies to prepare for the cuts. She said the work requirements and other Medicaid changes have compelled her system to “completely revamp” how they encourage patients, including the uninsured, to get preventive care, and how they assist people in obtaining health coverage or affording care. Many health systems nationwide are doing the same.
The system has also established a related foundation to boost charitable giving. “That’s one way to take charge of your destiny,” she said.
MDI Health, based near Acadia National Park, has achieved notable success with this model. In recent years, the system has transformed what would have been a negative operating margin into a margin well above the sector average: sometimes 10% or more in the black due to gifts and grants, which exceed $10 million annually, according to tax filings.
This funding has allowed the system to invest in revenue-generating opportunities, such as new imaging equipment purchases. Oka Hutchins, previously in communications, now focuses full-time on philanthropy efforts. The system’s initiatives to increase charitable income have doubled annual fundraising, she said.
“We would be smoked without it,” Philip Pizzola, the system’s director of medical imaging, commented. “We would not have a chance without the donors.”
These donors include affluent seasonal residents of the tourist area, which form a robust philanthropy pool.
The shift to philanthropy, however, might leave behind providers in lower-income areas — already more reliant on Medicaid.
System leaders have found other ways to bypass traditional reimbursement models that appear increasingly unstable. Cuts to SNAP and Affordable Care Act subsidies, along with growing financial pressures on patients, have led MDI Health to expand its food pantry program.
Late in 2025, providers raised concerns that their patients without insurance were unable to afford a mammogram — which costs over $1,000 for self-pay patients. The system secured a Maine Cancer Foundation grant to cover cancer screenings for these patients for two years.
Hutchins previously went to restaurants and bars to help people sign up for ACA marketplace coverage. Now, as costs rise, she worries about those she helped enroll.
“What are they doing now?” she wondered. “Because that coverage isn’t there for them as much as it was.”
Emergency services left to fill the gaps
Maine has at least one advantage over other states in the changing Medicaid landscape: its provider tax was already below a new limit, which will cost some other states hundreds of millions of dollars.
Despite the possibility that other states will fare worse, Maine providers — even those with relatively positive financial outlooks — are apprehensive about the future.
“I’ve never seen us more concerned about sustainability,” said Chrissi Maguire, MDI Health’s president and CEO. “It’s the most fragile I’ve ever seen it.”
While MDI Health has raised funds from donors to improve its finances, it has also cut back. The system closed its inpatient labor and delivery services in July. Providing such care is costly and often financially unviable for health systems, though MDI’s leaders cited low utilization as the reason for closure.
This places the system among nearly half of emergency service hospitals in Maine that lack inpatient obstetric services.
Instead, MDI offers OB care up until delivery, which is now often performed at Northern Light Eastern Maine Medical Center, over an hour west.
The withdrawal of hospital systems — even those in relatively good condition — has increased pressure on emergency services to fill the gaps.
In a state with many remote areas, many patients are likely to end up in the care of LifeFlight of Maine, a nonprofit critical care transport organization with helicopters, a plane, and ambulances.
“The capabilities in the little hospitals just keep declining,” Judge, the founding executive director, noted. “Demand is going to keep going up.”
The group will be responsible for offering more care — and more types of care — as hospitals close, Judge said. Sepsis, cardiac, obstetrics, and stroke care, for instance, will increasingly be up to them.
However, they too are feeling the effects — and sooner than anticipated, said Joe Kellner, CEO of LifeFlight of Maine. Medicaid reimbursement has begun to decrease, and self-pay patients are rising. This is compounded by rising fuel costs and tariffs on Italian helicopter parts, making aircraft more costly to operate, as well as rising labor costs.
“It’s really hurt our cash position this year,” Kellner said, though affirming the organization’s commitment to serving patients despite the challenges.
But this will necessitate changes at every level of the health system, from helicopter to hospital, he added: “We’re not going to be able to do things the way they’re done today.”
STAT’s coverage of health inequities is supported by a grant from the Commonwealth Fund. Our financial supporters are not involved in any decisions about our journalism.
