Federal changes to Medicaid, called Medi-Cal in California, could add up to a nine-figure problem for San Diego medical providers. The most significant immediate change arrived Jan. 1 with the expiration of enhanced premium tax credits, which help defray the cost of monthly premiums for Americans en rolled in plans sold by health insurance exchanges such as Covered California. With Congress not renewing these subsidies, which arrived in 2021 and are in addition to the initial income-based credits made available under the Affordable Care Act, enrollees will see their payments increase significantly this year. While the number affected statewide is about 1.7 million, about 120,000 people in San Diego County received subsidies and would see an increase of about 76%, or about $125 per month, on average, according to an estimate published online by Covered California. Dr Mark Hernandez, Chief of Emergency Medicine, with a patient in the Emergency Room area at Scripps Mercy Hospital in Chula Vista on Monday, December 29, 2025. (Sandy Huffaker / For The San Diego Union-Tribune) Thousands across the state, and millions nationwide, were expected to drop their coverage if these supplementary government payments were not renewed, hitting middle-income Americans hardest. But that’s just the beginning. Starting in 2027, the federal budget calls for work requirements and more frequent eligibility checks to changes in the ways that states allocate funding in order to maximize the “matching” funds they receive from the federal government. KFF, a nonprofit health policy research organization, estimates that the changes will reduce overall Medicaid spending nationwide by nearly $1 trillion over 10 years, resulting in about 10 million Americans becoming uninsured. Removing coverage will not stop people from getting sick and injured. They will keep arriving in their local emergency departments, where they are required to be seen under federal law. Scripps Health, one of the region’s largest medical providers, recently estimated that the reduction for all medical providers countywide could reach nine figures, or $999 million per year. That would translate to nearly $100 million for Scripps in 2027, climbing a bit above that mark in subsequent years. And Sharp HealthCare, said to be the largest provider of services to Medi-Cal beneficiaries in San Diego County, estimates that its annual losses will reach $175 million per year once the changes in the budget bill are fully phased in. UC San Diego Health estimated that its annual loss of funding will likely reach $50 million per year, though that figure could double if plans to reduce a “disproportionate share” program are reinstated. Sharp and Scripps both bring in billions of dollars of revenue per year, so these projected losses are not likely to send either organization into bankruptcy. Losses, if they do come to fruition in one year’s time, make it more difficult for providers to justify participating in a program that has never fully covered the costs of the services it provides. Medical personnel in the Emergency Room area at Scripps Mercy Hospital in Chula Vista on Monday, December 29, 2025. Hospitals are at risk of losing significant Medi-Cal reimbursement due to federal budget changes. (Sandy Huffaker / For The San Diego Union-Tribune) Quarterly financial and utilization information that all hospital operators must file with the state shows that some facilities are particularly at risk. Sharp Grossmont Hospital in La Mesa, for example, reported that 39% of its admissions from July 1, 2024 through June 30, 2025, the most recent period for which local data is available, were from Medi-Cal patients. State data puts the percentage of Medi-Cal patients north of 40% at Paradise Valley Hospital in National City and at 36% at Scripps Mercy Hospital in Hillcrest. Chris Van Gorder, Scripps’ chief executive officer, said in a recent interview that projections are very concerning, given that his overall operation already subsidizes hospitals with high percentages of Medi-Cal use. “As it is now, we lose about $40 million a year running Chula Vista,” Van Gorder said. “It starts creating real problems for us in the long run, to even be able to sustain what we have programmatically.” While rural hospitals have long faced an existential threat of closure due to budget difficulties and trouble recruiting adequate staff, a recent project by the T.H. Chan School of Public Health at Harvard University, in collaboration with the New York Times, estimates that 109 hospitals nationwide, including Scripps Chula Vista, are at an “apex of vulnerability” to the coming reductions which are said to reduce federal spending on Medicaid services by $900 billion over 10 years. Cuts make it difficult, Van Gorder said, to make the large investments necessary by 2030 in order to comply with state seismic mandates. But Van Gorder said he believes that the public simply does not understand the existential threat that Medicaid cuts represent to the most vulnerable health care resources. “This is a problem that everybody needs to understand,” Van Gorder said. “The rural hospitals are going to go first, then the safety net hospitals, and then, potentially, if this doesn’t get reversed, everybody down the line at the same time.” Van Gorder said that it is too soon to say exactly how Scripps would handle further erosions of reimbursements that flow to its facilities serving the largest percentages of Medicaid patients. Continuing to shift costs to commercial health insurance plans to make up for losses in Medi-Cal, he said, has reached the end of the road. “Down the road, it means I will have to make, and our board will have to make, very difficult decisions to maintain the strength of the community so we can serve as many people as we possibly can serve,” Van Gorder said. “We may not be able to serve everybody; that’s the decision every health care system is going to have to make.” Like Scripps, Sharp is still studying how it will handle losses if the current budget plans around health care are not reversed. “We are continuing to assess our programs and services to ensure we can provide the care our community needs and deserves, while advocating to minimize the impact of these proposed funding cuts,” said Susan Green, Sharp’s executive vice president and chief financial officer, in an email.” Some are taking the current turmoil around Medicaid funding as an impetus to think big. The California Health Care Foundation, an independent nonprofit organization that focuses on health equity and affordability, is convening a Medi-Cal commission to discuss how the state can restructure its current operations in order to keep people in coverage even as federal support wanes. Christopher Perrone, who directs the foundation’s Improving Access Team, said that his organization asked for blue sky proposals on how Medi-Cal could be changed in innovative ways to help make it more efficient and effective over the coming decade. “We’ve gotten, at last check, we received 40 proposals, and it may be up to 50 now,” Perrone said. “We’ve said we are going to fund five of them and, actually, there are probably 20 things that have bubbled up that look like really good ideas that we can pass along to the commission.” ...read more read less