Local Healthcare Providers Plan for Uncertain, Expensive Future

This will affect everyone, whether you have Medicaid or not.”

Jacqueline Barton True, Washington State Hospital Association VP

The two health clinics on the Key Peninsula and Saint Anthony Hospital in Gig Harbor are bracing for the impact of the One Big Beautiful Bill, signed into law July 4.

The BBB permanently extended the individual tax rates passed in 2017, which were due to expire in 2025, while increasing spending for the Departments of Defense and Homeland Security.

To cover the budget impact of those policies, the bill made cuts, mostly from Medicaid (called Apple Health in Washington state) and the federal nutrition assistance program. Those cuts are expected to total $1.2 trillion over the next 10 years.

The effect of the statute on health care funding will be twofold. Many current Medicaid recipients are expected to lose coverage, and the cost of caring for those patients will be shifted to the states. Many of the cuts don’t go into effect until 2027 or 2028, and individual states are responsible for implementation.

The Affordable Care Act of 2010 (also called Obamacare) expanded eligibility for adults to enroll in Medicaid, increasing the income baseline from 100% of the poverty level income to 138%, and providing insurance coverage to the working poor. States participating in the expansion received an enhanced federal match to cover 90% of the cost of the expansion population. Forty states currently participate in the expansion.

The BBB requires a decrease in the federal match rate in 2027 that will ultimately fall to 50% in Washington state. The BBB will require Medicaid recipients who are not frail or caring for dependents under the age of 13 to document that they have worked or participated in approved activities at least 80 hours a month. They will also be required to reconfirm their eligibility every six months.

“Most of these people already work,” said Jacqueline Barton True, Washington State Hospital Association VP for advocacy and rural health. She said the paperwork and reporting will be cumbersome, and many people, especially those who are young and healthy, will likely simply give up and choose to go uninsured. It is estimated that 250,000 will lose coverage in the state. 

Nearly a quarter of the state population is covered by Medicaid, and the state budget impact is predicted to be between $3 billion and $5 billion a year, according to KFF, a nonpartisan health research group (formerly the Kaiser Family Foundation).

On July 18, KFF reported that health insurers asked state regulators to approve the highest premium increases in more than five years because of the end of tax credits for Obamacare patients. Trump’s tariffs are also expected to raise drug prices. According to Reuters, new 15% tariffs levied on the European Union could increase pharmaceutical prices in the U.S. by $13 to $19 billion annually.

Insurers expect overall costs to increase by more than 75% starting in January 2026. 

The loss of Medicaid coverage and federal matching subsidies will have a significant impact on the entire healthcare system, but among the first to be affected will be hospitals and federally qualified healthcare clinics (FQHCs), the traditional safety net providers in both rural and urban communities.

The Peninsula Community Health Services on the Key Peninsula Highway and the Community Health Center Key Center Clinic are both FQHCs and required to treat everyone regardless of their ability to pay.

In 2010, before the ACA was passed, about 40% of the patients in both clinics were uninsured. In 2023, the payor mix shifted significantly. At PCHS, the mix was 43% Medicaid, 30% commercial insurance, 20% Medicare, and 6% uninsured. At CHC, the mix was 56% Medicaid, 24% commercial insurance, 7% Medicare, and 13% uninsured.

Many of the insured patients the clinics see have modest incomes that are too high to qualify for Medicaid. The federal government offered subsidies during the COVID-19 pandemic, based on income. Those subsidies were not extended in the BBB and will end this year. Premiums are expected to double in the region; about 150,000 people are expected to drop their plans.

“It looks like we will be moving backward with fewer covered by Medicaid and shifting to uninsured,” said Corey Hatfield, CHC director of operations. “We don’t turn anyone away, even in hard times.” But it is an uncertain time, he said, and some of the guidance the clinic has received from the state about planning has been inconsistent.

“The main impact is that a lot of people will lose their health insurance,” said Brynn Felix, PCHS chief corporate affairs and legal officer. “It is hard to know the exact impact. It depends how the state crafts the work requirements.”

“Our healthcare system is already fragile and deeply fragmented,” he said. “What has been reliable funding to address basic physical health needs will no longer be available.”

Both clinics have pharmacies and provide primary care, behavioral health, and substance use services. PCHS also has a dental clinic. PCHS has multiple clinics in Kitsap County, and CHC has other clinics in Pierce County. Neither clinic anticipates closing its doors on the Key Peninsula or elsewhere, but may need to adjust hours and cut staffing.

Many hospitals in rural areas are expected to close due to the loss of Medicaid funding, but the local hospital is not in danger of closing. “We do not have a plan to close Saint Anthony Hospital, and it is our intent to continue to serve patients long into the future,” said Nandi Butcher, a media relations manager at Virginia Mason Franciscan Health. “We remain deeply committed to this community and working with both public and private partners to ensure its success.”

Butcher said the recent state budget introduced taxes that directly affect hospitals and reduced reimbursements, and are likely to cost VMFH $30 million statewide this year. The BBB will add to budget woes. The statute will decrease state-directed payments to hospitals, which Barton True, of the Washington State Hospital Association, said will cost $6.2 billion between 2028 and 2035.

Reimbursement for Medicaid services rose to about 85% thanks to the ACA and post-pandemic funding, Barton True said. Now it will likely fall back to the old rate of 50%. The patients who are no longer insured will still get care, and commercial insurance rates will rise to help cover those costs. Although most hospitals in the state will not close, wait times will increase, some services will be eliminated, and others will be consolidated at other sites, leading to longer distances to get care.

“This will affect everyone,” Barton True said, “whether you have Medicaid or not.”