Another 13% of the hospital’s patients use TRICARE, which covers active-duty military members and their dependents, while about 10% use Medicaid, according to the hospital.

On Thursday, May 21, U.S. Rep. Rick Larsen, a Democrat who represents the state’s 2nd Congressional District, joined Republican Rep. Dan Newhouse of Sunnyside, Washington, to introduce the Ensuring Rural Health Care Access for Military and Tribal Families Act.

“As health care costs continue to rise, rural hospitals that provide care for local servicemembers, like Island Health in Anacortes, are struggling to maintain their current operations,” Larsen said in a news release.

“This legislation will help more rural hospitals receive Critical Access Hospital designation,” he said, “creating a cost-saving lifeline that will preserve vital services and ensure quality medical care for servicemembers.”

The bill would amend a section of the Social Security Act to allow Island Health to be designated as a critical access hospital by the U.S. Centers for Medicare and Medicaid Services (CMS).

Critical access hospitals are reimbursed based on the actual cost of providing care rather than a predetermined amount.

CMS requires critical access hospitals to be at least a 35-mile drive from their nearest counterpart, among other requirements. Island Health is about 17 miles from Skagit Valley Hospital via Highway 20.

The bill would allow Island Health to bypass that requirement by meeting at least three of the five proposed new criteria, most of which focus on caring for rural TRICARE patients.

One, for example, requires that a hospital derive at least 8% of its annual gross revenue from TRICARE patients. Another requires that at least 15% of annual gross revenue come from labor and delivery services.

In a news release, Island Health CEO Elise Cutter said the hospital delivered more than 400 babies in 2025, with 40% being born to military families stationed at Naval Air Station Whidbey Island.

“We would like to extend our sincere gratitude to Representatives Dan Newhouse and Rick Larsen for prioritizing this legislation to help ensure our local community and military families continue to have access to essential healthcare services, including labor and delivery care,” Cutter said in the release.

In March, Gov. Bob Ferguson signed a bill that will allow Island Health to be fully reimbursed for caring for the state’s Medicaid, or Apple Health, patients if and when the hospital secures critical access status.

That status would also provide access to the 340B drug pricing program, which allows healthcare systems to buy prescription and non-prescription medications at reduced cost.

Last fall, Newhouse and Larsen pushed to include an amendment in a defense spending bill that would have made Island Health eligible for critical access status regardless of the distance rule.

That legislation ultimately failed, leading the lawmakers to craft this new, standalone bill.

For Newhouse, who represents the state’s 4th Congressional District, the bill would make Astria Toppenish Hospital eligible for critical access status.

The state has had 39 critical access hospitals since 2013, when PeaceHealth Peace Island Medical Center in Friday Harbor received the designation.

If the new bill is successful, Island Health will be able to apply for critical access status in 2027, which is also when about 30% of Medicaid recipients are expected to lose coverage as a result of H.R. 1, also known as the One Big Beautiful Bill Act.