Federal Medicaid cuts would put greater financial burden on West Sound hospitals

At Mason General Hospital, about a third of patients are covered by Medicaid, the state-federal insurance program for people with low incomes or disabilities. 

Enrollment has grown steadily over the last decade, said Eric Moll, who oversees the hospital as CEO of Mason Health. Access to the government insurance program expanded due to both the Affordable Care Act, passed under the Obama Administration, and pandemic-era interventions. Those expansions helped the hospital reduce its levels of uncompensated care and remain more stable. 

Now, the Shelton hospital — like many across Washington — is bracing for what could happen if Congress rolls back those gains. Many worry that a budget proposal from Republicans in the U.S House will gut Medicaid, leaving hospitals to deal with the fallout. 

Mason General receives about $37.5 million from Medicaid payments, Moll said. It stands to lose about $8 million based on current proposals. Losses would be driven in part by drastic increases in uncompensated care, as many patients suddenly find themselves without health insurance and no way to pay the hospital.

Apple Health, the state’s version of Medicaid, covers about 1.8 million people in Washington. That includes 24% of people in Washington’s Sixth Congressional District, which includes Gig Harbor, Kitsap County, the Olympic Peninsula and part of Tacoma, according to a snapshot report put out in February by U.S. Sen. Maria Cantwell, D-Wash. 

These patients tend to be disproportionately young, Moll said. Many are just starting families or are early in their careers. They may not get insurance through their employer or have the means to afford commercial insurance. 

Around 75% of deliveries in the obstetrics department at Mason General, for example, are covered by Medicaid.

Uncompensated care likely would increase if Medicaid is cut. That can make it difficult for hospitals to remain profitable and put them at higher risk of discontinuing services. Unfunded care is a particular challenge at rural hospitals where profit margins are thin and patients are more likely to be uninsured. 

“Those people will still exist. It's just they will not have coverage and it becomes uncompensated care,” Moll said. “It means a greater financial burden to hospitals because they’re providing services without reimbursement.” 

Uncertainty stems from federal deficit plans 

Widespread concerns about Medicaid came after Republicans in the U.S. House released a budget proposal, directing the House Energy and Commerce Committee, which oversees Medicaid, to find ways to cut the deficit by at least $880 billion over the next decade. 

Republican leaders have since said reductions to Medicaid are off the table, yet it remains unclear how they would achieve desired cuts. It appears impossible for the Energy and Commerce Committee to find enough cuts without changes to Medicaid, according to reporting by KFF Health News, a health industry news site. 

The situation adds to the uncertainty that has swirled among health care providers on the Kitsap Peninsula since Donald Trump took office and his administration has sought to significantly slash federal spending.

Any cuts would put hospitals in perilous financial positions. U.S. Rep. Emily Randall, D-Bremerton, said hospitals in Forks, Port Angeles and Elma are already “hanging on by a thread,” struggling to keep their doors open and providers paid.

“If this administration and the Republicans in Congress are effective and successful in delivering $880 billion dollars of cuts to people’s health care, those hospitals will have to close their doors, leaving our community without health care,” she said at a press conference in Olympia.

Randall, who grew up in Kitsap County, has long championed Medicaid. The freshman representative says it allowed her family to remain financially stable and care for her younger sister, Olivia, who was born with a congenital disorder. Telling that story on the House floor, Randall said she was worried about the ramifications of Medicaid cuts and the lives that would be put at risk. 

“I’m scared. I’m scared for my constituents. I’m scared for my neighbors. I’m scared for the health care providers who are just trying to do their jobs,” she said. “I’m scared for the impacts we will see for years into the future if this budget resolution becomes law.”

Hospital dependence on Medicaid reimbursements

Hospitals in the West Sound are less reliant on revenue from Medicaid than those in Eastern and Central Washington, where enrollment rates tend to be higher. Yet all hospitals here receive at least one-tenth of their annual revenue from Medicaid reimbursements, according to state Department of Health data. 

Even that is still “material to every hospital,” Moll said. 

St. Michael Medical Center in Silverdale and St. Anthony Hospital in Gig Harbor each get about 13% of their revenue from Medicaid, according to an analysis of state data. A spokesperson for Virginia Mason Franicisian Health, the owner of both hospitals, declined to confirm if those numbers were accurate or comment on the impact of cuts to Medicaid. 

Mike Glenn, CEO of Jefferson Healthcare in Port Townsend, said in the Cantwell report that tossing thousands of low-income residents off Medicaid would threaten his hospitals’ finances and possibly lead to reductions in services in staff. 

In the same report, Darryl Wolfe, CEO of the Olympic Medical Center in Port Angeles and Sequim, said any further cuts would jeopardize the hospital’s financial position. Olympic Medical Center is already struggling financially and announced late last year it was beginning a search for a partnership to sustain services. 

“It’s no secret that hospitals across the state and nation are struggling,” Thom Hightower, Olympic’s board president, said in a press release. “Operating as a rural standalone hospital in today’s health care landscape is particularly challenging.”

State association counseling on how cuts could play out

There is no certainty about what could happen with Medicaid, but there are signs that it is on the mind of hospital officials. 

The Washington State Hospital Association recently hosted a training for hospital board members on what to do if they need to close services. It was the highest attendance they’d ever had at one of their training, said association CEO Cassie Sauer.

“I was really upset by that,” she said. “For them to show up and say ‘we’re really thinking about this’ is tough to see.”

In the next few weeks, Sauer will speak to hospital boards in Forks, Grays Harbor County and Jefferson County about potential reductions. She can’t say for certain what, if anything, will happen, but any changes, including things like work requirements, would add to the burdens already facing state hospitals. 

Five years removed from the pandemic, many hospitals are still in a bad spot. As the cost of nearly everything rises, insurance reimbursement rates have not kept pace, Sauer said, and 70% of hospitals have continued to lose money since the pandemic.

Operating during the pandemic “was very challenging financially,” she said. Hospitals had to stop surgeries and other procedures that make money and subsidize emergency rooms and labor and delivery units. 

Hospitals are also bracing for cuts at the state level. Washington is facing a massive spending shortfall, estimated at around $14 billion over the next four years. Sauer says they expect around $330 million in cuts across the hospital system. 

“These various proposals are all bad, all arriving at the same time,” Sauer said. “We have a lot of hospitals who are trying to figure out what they’re going to do.”

Cuts to Medicaid could add further fuel to that fire. About half of Washington’s births are covered under Medicaid. Without reimbursement, hospitals could struggle to keep that service open, impacting those on both government and commercial issuance. 

Delayed Medicaid payments have already impacted at least one hospital in Washington. Last month, Valley Medical Center in Renton announced it cut more than a 100 nonclinical jobs, due to Medicaid funding being held up. 

Moll said Mason General is not currently planning any reduction in force. It is prepared to operate at a negative profit margin temporarily and slow down capital planning before reducing workforce.

“As a small rural hospital, it's difficult to sustain operating indefinitely, obviously, in a multimillion dollar operating loss. That's where we're then beginning the planning” he said. “There's cost containment that we're beginning to work on and we will likely start to execute on those.”

Conor Wilson is a Murrow News fellow, reporting for the Kitsap Sun and Gig Harbor Now, a nonprofit newsroom based in Gig Harbor, through a program managed by Washington State University.