MADISON, Wis. (AP) -

Forty-two of Wisconsin's rural hospitals could lose special Medicare payments under a proposal by a federal fiscal watchdog agency.

The Wisconsin State Journal reports the proposal from the inspector general at the Department of Health and Human Services would strip special payment status from two-thirds of the nation's 1,328 critical access hospitals -- those not considered to be in sufficiently remote areas -- including 42 in Wisconsin.

The move could save Medicare and its beneficiaries $1.1 billion a year. But rural hospital leaders say losing the payments would threaten their ability to provide health care and hurt their local economies.

A more limited budget proposal by the Obama administration would affect eight of Wisconsin's 58 designated rural hospitals -- those that are within 10 miles of another hospital.