The Big Beautiful Act, Medicaid and the Upper Peninsula

On July 4, President Trump signed into law the “Big Beautiful Act.” This law has many ramifications for Upper Peninsula residents, one of particular significance being changes to Medicaid.

According to the nonpartisan Congressional Budget Office, the Act will cut federal spending on Medicaid and Children’s Health Insurance Program benefits by $1 trillion, due in large part by eliminating at least 10.5 million people from the programs by 2034.

In opposing the legislation, the American Hospital Association stated that the cuts will cause “irreparable harm” to the healthcare system and increase uncompensated care for hospitals and healthcare systems.

The cuts were similarly opposed by the nonpartisan National Rural Health Association. It issued a report on the Estimated Impact of Medicaid Enrollment and Hospital Expenditures in Rural Communities that highlighted the importance of Medicaid funding for rural residents (Table 1).

Medicaid “provides a financial lifeline for rural healthcare providers- including hospitals, community health centers, rural health clinics and nursing homes.”

These providers already confront significant financial challenges, with nearly half of all rural hospitals having negative margins. Under the Act, rural hospitals are slated to lose 21 cents out of every dollar they receive in Medicaid funding. The loss in funding, makes hospital and clinic closures inevitable.

This article considers the broad implications of the program cuts for the Upper Peninsula. First, some background information is provided on the origins of Medicaid, its growth, and the eligibility guidelines for recipients.

Medicaid 101

Medicaid was established in 1965 as part of the Social Security Amendments of 1965, with the goal of providing healthcare coverage to low-income individuals and families including children, pregnant women, the elderly, and people with disabilities.

The enabling legislation obligates the federal government to fund a portion of medically necessary healthcare expenses for eligible individuals. Financing the program is a joint responsibility of the federal government and states. The federal government establishes minimum requirements for states to operate a Medicaid program, specifying who qualifies and which services must be covered.

Beyond that, states can extend eligibility to additional groups and cover optional healthcare services. For example, under the 2010 Affordable Care Act, states can expand eligibility to adults with household incomes up to 138 percent of the federal poverty level.

Forty states including Michigan and the District of Columbia have expanded their Medicaid programs in this way. The flexibility inherent in the program means there is no single Medicaid program, there are instead 56 programs, one for each state, the District of Columbia, and five permanently inhabited US territories. 

The state of Michigan operates several Medicaid programs targeted at children, pregnant women, disabled persons and persons without health insurance. According to the state’s Health and Human Services website, the goal is to provide “essential healthcare services… to those who otherwise do not have the financial resources to purchase them.”

All programs have an “income test.” For its Healthy Michigan plan which provides healthcare coverage for individuals 19-64, enrollees must have an income at or below 133% of the Federal Poverty Level. In 2025 that figure is $20,815 for a single individual and $42,760 for a family of four.

Medicaid’s Growth

In January 2025, there were approximately 71.4 million people enrolled in Medicaid, with children accounting for 41 percent of this total, according to the Pew Research Center. The number of people enrolled in the program has increased since its inception due not only to population growth but also macro-economic conditions.

When people lose their jobs and income, many become eligible for the program. In the COVID-19 pandemic, when unemployment suddenly shot up, Congress gave states extra money for Medicaid and enrollment increased. These funds ended in December 2023 and enrollment has subsequently declined.

In Michigan, prior to the onset of the pandemic in January 2020, enrollment in Medicaid and Healthy Michigan (a state administered plan for low-income adults 19-64) was 1.75 million. By January 2023, the figure had increased by over half a million to 2.3 million, but falling unemployment and the withdrawal of extra funds from the federal government, enrollment dropped to 1.76 million in January 2025.

Medicaid in the Upper Peninsula

Over 40,000 people in the U.P. (or 13.5 percent of the population) were covered by Medicaid and Healthy Michigan in January 2025 (Table 2). Gogebic and Iron County have the highest coverage rate at over twenty percent of the population. Medicaid services for the entire Upper Peninsula are provided by the Upper Peninsula Health Plan (UPHP), a managed care organization based in Marquette.

In 2024, according to UPHP’s website, it paid $232 million (excluding pharmacy payments) to 4,666 providers in the region. The organization’s number of full and part-time employees was 191 in 2024, with a payroll of $17.2 million. UPHP’s role in providing Medicaid related services highlights one of the indirect effects of funding cuts beyond potential hospital and/or clinic closures, as fewer clients could mean layoffs for the managed care provider. 

Rural hospitals have unique challenges since they serve a population that tends to be older, poorer and sicker than metropolitan area residents. Yet, they have the same fixed costs (e.g. salaries and capital expenditures) but smaller patient volumes to cover those costs. Balancing these competing demands can be difficult.

The Center for Healthcare Quality and Payment Reform using data from the federal Centers for Medicare and Medicaid has compiled a database on the financial status of rural hospitals. According to these data, four U.P. hospitals had negative operating margins in 2024 (Table 3).

The majority of hospitals have a positive total margin despite incurring losses on patient services because they receive local tax revenues or state grants that offset the losses. But moving forward, fewer patients with health insurance will likely increase the number of hospitals with negative operating margins.

Healthcare is a major employer in the U.P., accounting for about 20 percent of total private sector employment (Table 4). Hospitals are often the major employer in a rural community; when they close or services are withdrawn to save money, it makes a community less attractive for outside investors. When Aspirus closed its Ontonagon Hospital in 2024, its Emergency Room was eliminated; it now operates a clinic at the site. Persons needing E.R. care now have to travel 47 miles to the nearest facility in Ironwood. 

Conclusions

Cutting Medicaid funding is now enshrined into law. Accessing healthcare is already a challenge for U.P. residents given its sparse population and the necessity of traveling to larger centers where providers are located. Hospital officials are in general agreement that with less income they will have to cut services or shut down completely.

This paired with reductions in coverage, increased travel time and loss of employment for healthcare workers highlight the many challenges UP residents will confront in the light of this Big Beautiful Act; serving only to widen the existing gap in health outcomes between urban and rural Michigan.