Policy & oversight
Extra Medicare Payments for Small Rural Hospitals Are Set to Lapse December 31, With Congress Yet to Act on an Extension
The Medicare-Dependent Hospital program and the low-volume hospital payment adjustment, which have propped up the finances of hundreds of small rural hospitals for decades, expire at year-end under current law unless Congress passes a renewal.
By the Goodsurance editorial teamAugust 3, 2026
Two Medicare payment programs that provide additional federal dollars to small rural hospitals are scheduled to expire on December 31, 2026, and Congress has not yet passed legislation to extend them.
The Medicare-Dependent Hospital, or MDH, program gives higher payment rates to hospitals with fewer than 100 beds where at least 60 percent of inpatient days are attributable to Medicare patients. The low-volume hospital payment adjustment provides a sliding-scale bonus to hospitals with fewer than 3,800 total annual discharges that are located more than 15 road miles from another hospital.
Two rural hospital Medicare payment programs expire December 31 and Congress has not moved to extend them. Here is what is at stake.
Both programs were flagged as set to lapse in the Centers for Medicare and Medicaid Services' fiscal year 2027 Inpatient Prospective Payment System final rule, published in late July 2026. The rule states that absent a change in law, hospitals currently qualifying for these designations will revert to standard federal payment rates beginning January 1, 2027.
Neither program is permanent. Both have required periodic congressional reauthorization since the 1990s and have frequently been extended in end-of-year spending packages, sometimes retroactively after a brief lapse. Hospital advocates have called for permanent status to avoid the recurring uncertainty, which can complicate multi-year financial planning at facilities that often have thin operating margins and few alternatives to Medicare revenue.
A separate analysis found that hospitals qualifying for MDH or low-volume status typically serve communities with limited access to other hospitals and have a high share of patients on government insurance programs, making additional payment support particularly consequential for their continued operation.
In plain words
Two Medicare payment programs that give extra money to small rural hospitals are set to end on December 31, 2026. One program helps hospitals with fewer than 100 beds where most patients are on Medicare. The other helps very small hospitals located far from any other hospital. CMS mentioned this deadline in a major payment rule it published last month. Congress has not voted yet to extend these programs. Lawmakers have renewed them many times in the past, sometimes after they briefly expired. Without an extension, these hospitals will go back to lower standard payment rates in 2027, which could strain their budgets.
Understand the basics first
Source: CMS
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