Hawaii hospitals brace for cuts to Medicaid

Hawaii hospitals are bracing for a financial hit from Medicaid cuts approved by Congress.

Due to changes written into the "big, beautiful bill" — or H.R.1 — signed by President Donald Trump on the Fourth of July, hospitals across the U.S., including Hawaii, are expecting a significant reduction in reimbursements after patients lose their health insurance.

"The Medicaid cuts will harm rural hospitals, especially, where a predominant number of our people are either on Medicare or Medicaid combined," said Gov. Josh Green. "That's a big deal. Now these cuts won't kick in until early 2027, so we have time to adjust and to fortify ourselves against losing any people from coverage."

An estimated 400,000 Hawaii residents, or nearly 30% of the state's population, are currently enrolled in Med-QUEST, the state's Medicaid program, which covers low-income children and adults and the disabled, among others. It is the single largest payer for long-term care in Hawaii.

The recently approved budget bill cuts federal spending on Medicaid as well as Children's Health Insurance Program benefits by $1 trillion after eliminating some 10.5 million people from the programs by 2034, according to the nonpartisan Congressional Budget Office.

These people are expected to be cut from Medicaid due to new requirements and restrictions and the end of federal subsidies in upcoming years.

Starting in 2027, adults will be required to show that they are employed, are in a work program or do community service at least 80 hours per month to remain on Medicaid. The disabled, pregnant women and parents of young children would be exempt.

In addition, Medicaid eligibility checks to keep people enrolled will be required every six months instead of annually. Historically, experts say, this results in greater administrative burdens and losses in coverage.

Francoise Culley-Trotman, CEO of AlohaCare, a nonprofit health plan that covers QUEST beneficiaries, said the upcoming cuts will be devastating, as Medicaid is a lifeline for so many families in Hawaii.

"Medicaid today allows working families to stay housed, for Mom to focus on the child so they can succeed in school, so they can have meals," she said. "It really allows communities to thrive economically. If Mom, another parent or provider in the household is affected, there's a ripple effect."

It could mean someone having to quit their job to become a caregiver, or choosing between paying for health care or putting food on the table.

"The people who are covered includes everyone from newborns to keiki, teens, kupuna and hard-working adults who form the backbone of our community," she said.

Many adults enrolled in Medicaid do work, she said, but some may juggle several part-time jobs with inconsistent hours, rendering them ineligible for employer-provided health plans.

All hospitals affected

The loss of health care coverage impacts not only patients but ripples out to their households, communities and hospitals, ultimately impacting the state's economic stability, officials said.

"We anticipate that every hospital will be impacted," said Hilton Raethel, president of the Healthcare Association of Hawaii.

This includes major hospitals such as The Queen's Medical Center in Honolulu, home to the state's only Level 1 trauma emergency room, as well as smaller rural hospitals in Maui County and on Hawaii island that are subsidized by the state.

Many Queen's patients are on Medicaid, while hospitals in rural areas on Hawaii island have a higher percentage of Medicaid patients. Additionally, many hospitals are already financially challenged and grappling with labor shortages and the higher costs of operations in the state.

"For hospitals, in general, whether Queen's, Straub, Kapiolani, Maui or Hilo — they already operate on very, very thin margins in Hawaii," Raethel said. "This will definitely increase the uninsured rate."

The Healthcare Association of Hawaii estimates the number of individuals bound to lose their health coverage from H.R.1 at around 40,000. This includes roughly 30,000 poised to lose Medicaid coverage, along with about 10,000 losing coverage under the Affordable Care Act, also known as Obamacare.

It's an initial assessment, according to Raethel, since no specific directives have yet been issued by the Centers for Medicare &Medicaid Services.

Financially, the losses are expected to be staggering, according to the Urban Institute, a Washington, D.C.-based nonprofit that conducted a state-by-state analysis of impacts.

The institute estimates Hawaii will lose $2.6 billion in health care spending overall, with $1 billion of that amount from hospitals over 10 years. That is comparable to losses in other smaller states, according to lead researcher Fred Blavin. The largest cuts will occur in states such as California, Florida, Texas and New York.

Nationally, hospitals face an overall cut of $321 billion in spending over 10 years, the institute said. Of that total, an estimated $63 billion would be due to uncompensated care — or services sought by the uninsured that hospitals must deliver.

Some experts say uncompensated care costs are ultimately passed on to insured patients through higher health care prices.

Under federal law, hospitals participating in Medicaid and Medicare must stabilize and treat all visitors to their emergency departments, regardless of insurance status or ability to pay. All Hawaii hospitals participate in both programs, according to Raethel, and all are subject to the Emergency Medical Treatment and Labor Act.

Advocates for Medicaid, which turned 60 in July, say that ultimately, the loss of routine and preventative care will result in higher costs when patients put off seeing a doctor and end up even sicker in emergency departments as a last resort.

Shoring up

Green said Hawaii will do all it can to stave off the Medicaid cuts as much as possible.

Hawaii, with one of the lowest uninsured rates in the nation, is better positioned than most states. The state has a prepaid health care act, plus unified support for keeping residents in the state insured.

Hawaii, together with all stakeholders, Green said, will work together to prevent losses and keep as many residents enrolled in Medicaid as possible, even if it requires more administrative resources.

"Honestly, the Medicaid cuts were a mistake from my perspective," Green said. "The Republicans in the Senate and House should never have pushed for that to help pay for their tax cuts. It should never have happened. But the opportunity is there for us to fix some of the challenges they have."

Green said he worked with Dr. Mehmet Oz, CMS administrator, in advance of the H.R.1's passage to add a $50 billion rural health fund to the final bill.

The "rural health transformation program" will offer a total of $25 billion a year to all states equally, regardless of size. For Hawaii, that includes $100,000 for five years.

States can apply for a share of the remaining $25 billion, and Green is hoping to secure another $100 million a year over five years, adding up to about $200 million a year over five years for Hawaii.

"So if things play out well, we will get somewhere near $200 million a year times five years, which is a billion dollars to fortify the transition," he said.

Those funds, he said, could be used to fortify Hawaii's rural health care workforce or the state's loan forgiveness program for health care workers.

"Our hope is to fend off as much of the Medicaid cuts as possible," he said. "So in the short term, in 2026 and early 2027, we hope to actually be preparing for what will ultimately be a shortfall. That's one thing. Two, we're going to hope that very few of our people get knocked off the rolls, or at least are still insured through other means because we have time, and we've been more efficient than most other states."

Another provision would allow states to petition for a longer amnesty period if needed, through 2029, to comply with the new Medicaid requirements.

The state Department of Human Services on its Med-QUEST website said it is analyzing H.R.1 and its impacts, along with timelines of new rules and requirements.

"We do want to emphasize that the Department of Human Services and its Med-QUEST division remains true to our dedication to the health and well-being of Hawaii," said Med-QUEST Administrator Judy Mohr Peterson in a statement. "We encourage all of our members to continue to access healthcare by making and keeping appointments with your health care professional and picking up any medications that are prescribed."

Most changes will not happen until the end of 2026 or January 2027, she said, and Med-QUEST will notify members of changes well in advance.

Green is hopeful, noting that Hawaii is a state that strongly supports Medicaid.

"I don't believe ultimately the cuts will be as deep as the billion dollars that's been suggested because states know what they have to do," he said, "and states like us will definitely fight to get people enrolled … . We'll do everything we can to fully insure our people."

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MEDICAID IN HAWAII

Medicaid is administered as Med-QUEST in Hawaii as a joint federal-state program that helps cover medical costs for some people with limited income and resources.

Nearly 400,000 Hawaii residents, close to 30% of the state's population, were on Med-QUEST as of July.

Med-QUEST covers 1 in 6 adults ages 19-64 and 1 in 3 keiki.

The program also covers 1 in 3 births in Hawaii, and 4 in 7 nursing home residents.

Hawaii is among 41 states that expanded Medicaid coverage under the Affordable Care Act.

The Children's Health Insurance Program is part of the Medicaid program.

Med-QUEST health plans are offered by managed-care organizations AlohaCare, HMSA, Kaiser Permanente, Ohana Health Plan and UnitedHealthcare Community Plan.

Due to federal cuts, Hawaii hospitals expect to lose $1 billion in health care spending over 10 years, according to an analysis by the Urban Institute.

Source: Healthcare Association of Hawaii, AlohaCare