Closures and layoffs across Iowa signal a worsening health care crisis in rural communities. The closures of Traer Family Medicine Clinic and MercyOne’s primary care clinic in Ottumwa, along with layoffs at Mason City Clinic, MercyOne North Iowa and Pella Regional Medical Clinic in Ottumwa, totaling more than 200 staff members and physicians, have intensified the shortage of rural physicians and health care workers.

Much of the rural health crisis stems from inadequate payment policies under Medicare and Iowa Medicaid, although private payors exacerbate workforce challenges as well.

The consequences are serious for the 1 million rural Iowans who rely on local access to care. Studies show 40% higher avoidable hospitalization rates and a 23% higher mortality rate for rural Americans compared with urban populations.

Researchers largely attribute these disparities to physician shortages in rural areas, where there are about half as many physicians per capita as in urban communities. This raises an important question: Why are there so few physicians in rural America, and why are shortages of health care workers growing in rural Iowa?

Medicare and Medicaid payment policies play a major role. Medicare has historically paid rural physicians 25% to 50% less based on geographic adjustments. With similar practice expenses but lower reimbursement, many rural practices struggle to remain financially viable. Research by Probst et al. attributes this disparity to what the authors call “structural urbanism,” a systemic bias in policymaking that disadvantages rural communities.

Since 1992, Medicare has determined physician reimbursement through formulas that continue to penalize many rural providers, although Congress has occasionally made small adjustments. According to the American Medical Association, Medicare physician payments have increased only 10% since 2001, while the cost of operating a medical practice has risen 63%.

Iowa physicians also face low reimbursement from Iowa Medicaid, which is set by the state Legislature. Medicaid physician office visit payments in Iowa have increased only 2% in total since 2001.

For example, Iowa Medicaid pays $43.33 for a 20-29 minute office visit (code 99213), only about 2% more than 25 years ago. A 30-39 minute office visit (code 99214) is reimbursed at $66.80, also only about 2% higher than in 2001.

Clinics across Iowa must accept these Medicare and Medicaid rates, but rural communities feel the impact more acutely because a larger share of patients rely on those programs. Urban practices typically see more patients with employer-sponsored commercial insurance, which often pays three times what Medicaid pays for evaluation and management services and 50% to 100% more than Medicare.

This difference explains why physician recruitment is easier in suburban areas such as Des Moines than in rural Iowa. Urban practices have a higher proportion of commercially insured patients, while rural practices serve larger Medicare and Medicaid populations.

Federal policy changes could make the situation worse. Iowa hospitals are projected to lose $2.666 billion in Medicaid funding by 2034, according to the American Hospital Association. Even if Iowa receives $209 million annually for five years through the Rural Health Transformation program, the state would still lose more than $1.621 billion, and the program does not increase Medicaid physician reimbursement.

Rural Iowans need better access to physicians and health care services to reduce preventable hospitalizations and deaths. Without meaningful payment reform, rural physicians will continue to leave underserved communities, further widening the health care gap between rural and urban America. Iowa lawmakers should increase Medicaid physician payments so rural clinics can remain financially viable and retain health care workers. Federal lawmakers should also address Medicare payment policies that disadvantage rural physicians.