When Martin Luther King Jr.-Harbor Hospital closed in 2007, neighboring Los Angeles hospitals struggled to keep up with the influx of new patients. They reported emergency department wait times longer than 11 hours, more trauma cases and more uninsured patients.
The people who felt the strain weren’t just King-Harbor’s former patients; they were also the privately insured patients of those neighboring institutions. Researchers later concluded that King-Harbor’s closure worsened patient care throughout the region, increasing mortality rates and decreasing access.
Experts warn ripple effects like these could happen more frequently as hospitals grapple with a coming spike in uninsured patients. Recent federal and state Medicaid cuts are expected to double the state’s uninsured rate, causing 2.2 million people to lose insurance by 2030. Low-income patients who rely on public insurance programs like Medicaid — Medi-Cal in California — will be hit hardest, but people with commercial insurance will feel the effects too.
“The way that everybody feels it is an inability to get access to the care they need when they need it,” said Carmela Coyle, California Hospital Association president and CEO.
The healthcare system is deeply intertwined, and research indicates everyone may see reduced services, lower quality and potentially higher premiums.
What happened?
President Donald Trump’s tax law last year cut nearly $1 trillion from Medicaid, the federal health insurance program for low-income people, over the next decade. California officials estimate Medi-Cal could lose roughly $30 billion annually.
Many low-income adults will now be subject to work requirements and shorter eligibility periods — conditions that kick mostly eligible people off public assistance programs due to bureaucratic errors, research shows. California lawmakers also cut state-funded benefits for undocumented immigrants and refugees.
Bukola Olusanya, a street medicine provider with St. John’s Community Health in South Los Angeles, said most unhoused people will be unable to comply with the work requirement even if they have a qualifying exemption such as a disability, leading to massive coverage losses.
“We’re talking about people that do not have access to a cell phone,” Olusanya said. “They don’t have access to internet. They don’t have access to a printer or paper or anything for them to complete the eligibility process.”
Collectively, the cuts will erase much of the progress California made expanding insurance over the past decade, said Anthony Wright, executive director of Families USA, a healthcare consumer advocacy group.
“From a pure dollars-and-cents point of view, it is the biggest rollback in coverage in history,” Wright said.
Hospitals in the crosshairs
Hospitals are where the ripple starts. By law, they cannot refuse anybody who comes into the emergency room, so when more patients become uninsured, somebody has to absorb the cost. In California, the hospital association expects uncompensated care to jump from $2 billion to $4 billion each year as a result. That’s worrisome, Coyle said, with more than half of the state’s hospitals already operating at a loss.
When hospitals tighten their belts, they reduce services for everyone regardless of insurance status: cutting wages or laying off staff, and reducing or eliminating expensive services like labor and delivery, or shuttering the emergency department rather than taking in more uninsured patients. Quality could decline. Financially fragile hospitals are likely to close altogether.
“If you don’t have as many (paying) patients, your income as an organization goes down,” said Nadereh Pourat, associate director at the UCLA Center for Health Policy Research. “These are nonprofit institutions, so all of that income goes toward delivery of care.”
The Affordable Care Act had previously created a “lifeline” for hospitals, Coyle said, by expanding Medi-Cal to millions of previously uninsured low-income Californians. It also created an insurance marketplace for middle-income residents. In the decade before that expansion, 26 California hospitals closed and an additional 22 shuttered their emergency departments.
In preparation for federal and state cuts, California hospitals have already laid off more than 3,000 workers.
Covered California losses
Nearly 2 million privately insured Californians have already experienced the repercussions of some of these cuts. Congress also refused last year to renew subsidies — about $3 billion in California — for middle-income families who buy insurance through Covered California, the state’s Affordable Care Act marketplace. Without them, prices rose sharply in January, and many people opted for lower-value plans.
About 140,000 people have already dropped out of Covered California since the beginning of the year. UC Berkeley and UCLA project that number will grow by another 176,000. Officials have also announced premiums will rise next year by nearly 10%.
When costs increase dramatically, healthy people start to drop coverage, said Charles Bacchi, president and CEO of the California Association of Health Plans.
“They’re the first ones to drop coverage because they start to question the financial bargain of the whole thing. Why am I buying this? The cost keeps going up and I don’t use it that much, so I drop it,” Bacchi said.
That drives prices up further because only sick people with expensive needs are left behind. Without relatively healthy people subsidizing the cost of care, insurers can’t afford to hold the line on premiums.
Will your premium actually go up?
For everyone who gets insurance through an employer, economists and insurers disagree on how much of this hits premiums directly. Studies show that hospitals absorb about 80% of increased costs when there are high numbers of uninsured patients.
“I don’t know if privately insured patients really get hurt, and I think that’s partly why Americans seem to be comfortable with the fairly inequitable arrangement we have,” said Tal Gross, a health economist at Boston University.
His reasoning: Hospitals should already be charging insurers close to the maximum possible, so there’s little room left to pass costs along. In some cases, more uncompensated care can even push hospitals to lower prices for private insurers to attract more paying customers.
Bacchi, of the health plan association, said “that’s just BS.” In many parts of California, there’s very little competition among hospitals, he said, letting them demand whatever price they want from insurers who are legally required to keep them in-network.
“Any place that does burns, transplants, any of those high-cost services, has absolute control,” Bacchi said.
Split the difference, and the concrete estimates on the table are roughly a 1% to 2% premium increase — about $500 a year for the average family — from the federal cuts alone, said Kenneth Thorpe, a health policy professor at Emory University. Separately, and more directly, state lawmakers also passed a new tax on health plans to help backfill Medi-Cal’s federal losses that commercial insurers say will cost people an additional $100 per person each year.
“That all hurts compared to what’s happening with wages, which is pretty stagnant,” Thorpe said. “It’s a bad time right now.”
The bottom line
Wright with Families USA said coverage loss is painful to the individual and has rolling effects in communities. The same dynamic that turned King-Harbor’s closure into a regional crisis in 2007 — sharp increases in uninsured patients and overwhelmed emergency rooms — may be at play again. Only this time for many more hospitals around the state.
“It means people live sicker, die younger and are one medical emergency away from financial ruin,” he said.
Supported by the California Health Care Foundation (CHCF), which works to ensure that people have access to the care they need, when they need it, at a price they can afford. Visit www.chcf.org to learn more.
