States Ramp Up Support for Struggling Hospitals as Federal Medicaid Cuts Loom

LOS ANGELES — At Martin Luther King, Jr. Community Hospital, patients on gurneys line the hallways of the emergency department waiting for care, and overflow mental health patients are consigned to outdoor tents. The 152-bed hospital, located on a sprawling medical campus near the predominantly Latino and Black neighborhood of Watts, is struggling for financial stability.

Its patients are poorer and sicker than average, many of them uninsured, and three-quarters of MLK’s patient care revenue comes from Medi-Cal, California’s version of the Medicaid program, which pays low rates. For hospitals statewide, less than one-third of patient revenue comes from Medi-Cal. MLK Community Healthcare, which includes the hospital and two nearby clinics, is independent, leaving it without the financial cushion of a larger health system.

Similar financial pressures plague hundreds of vulnerable hospitals across the U.S., in both rural and urban areas. Their challenges are set to worsen under the One Big Beautiful Bill Act, a Republican-backed budget measure signed into law by President Donald Trump in July 2023. The law is expected to cut federal Medicaid spending by $911 billion over 10 years and could increase the number of uninsured Americans by more than 14 million. Many of these individuals will turn to already overcrowded emergency rooms for care they cannot afford.

The law does include a $50 billion rural healthcare fund over five years, but this falls far short of the $137 billion in projected cuts to rural health spending over the next decade. Moreover, the fund offers little to no relief for urban hospitals like MLK, which also face dire financial straits.

MLK, like many other hospitals, is racing to secure outside financing to prevent severe disruptions to medical services when the law’s policies take full effect early next year. Hospital leadership projects an annual revenue shortfall of $80 million to $100 million for the foreseeable future—the largest budget gap since the hospital opened in 2015.

“Even if we cut services that our community needs — maternity care, behavioral healthcare, diabetes management — it wouldn’t make a significant dent in the gap we’re facing. Many of those same people would still come to us through our emergency department, only they’d be in worse shape and might need more expensive care.”

Elaine Batchlor, CEO of MLK Community Healthcare, stands outside the emergency department’s check-in area, a long tent outside the main building in Los Angeles.

Across the U.S., hospitals and patient advocates are turning to state lawmakers and local officials for support. In California, Assembly member Esmeralda Soria, a Democrat representing Fresno, is advancing legislation to expand a 2023 “distressed hospital loan fund.”