Island Health remains steadfast in its mission to serve our community by ensuring access to high-quality local healthcare. As hospitals across Washington state grapple with an increasingly difficult financial environment, Island Health is actively assessing the long-term impact of significant changes in both federal and state health care funding.

Recent legislation at the federal level—the One Big Beautiful Bill Act—has introduced substantial cuts to Medicaid. These reductions, combined with additional funding cuts and new taxes at the state level, represent a significant financial challenge for health care providers statewide. Collectively, Washington hospitals have reported ongoing financial losses in recent years, and these new measures are expected to deepen that strain.

Island Health is currently evaluating how these changes will affect our operations. While some financial effects will be felt within the next year, the most significant cuts are scheduled to take effect in 2027, with continued reductions in the years that follow. Though we do not yet have all the answers, we are approaching this challenge with resolve, careful planning, and a commitment to transparency. As decisions are made—especially those that could affect the scope of our services—we will keep our community informed and engaged.

Of particular concern is the impact on patients enrolled in Apple Health (Medicaid). Starting in early 2027, many enrollees will face new eligibility requirements. Island Health served approximately 6,000 Medicaid patients in 2024, and current estimates suggest that 15%—about 900 individuals—could lose coverage. Medicaid remains a vital resource for our patients and a key funding source for Island Health.

“Not only will people in our community lose coverage and access to care, but the negative financial impacts of this bill to Island Health will be in the millions,” said Chief Financial Officer Shannon Fernandez, MHA. “We are facing a significant loss in Medicaid reimbursements, reductions in SNAP-related support, and an increase in uncompensated care.”

Over the next decade, federal cuts are expected to eliminate $6.2 billion in hospital funding across the country. These reductions, along with state-level cuts, will inevitably affect access to health care services across Washington. Potential outcomes include longer wait times, reduced local service offerings, increased travel for care, and fewer options for insurance coverage. For rural hospitals like Island Health, there may be additional strain in transferring patients who require higher levels of care.

Despite these challenges, Island Health is prepared to face this moment with determination and focus.

“Once we fully understand the implications of the state and federal cuts and taxes, the Island Health Board of Commissioners will collaborate closely with our senior leadership team to chart the best path forward for our patients and our community,” said Board President Lynne Lang, PhD. “We are committed to making responsible decisions that protect access to care while preserving the long-term sustainability of our healthcare system.”

Island Health will continue to advocate for fair and adequate funding for rural healthcare and will work to support patients impacted by these changes.

For further information or updates, please visit www.islandhealth.org.