Charley Yan, MPH1, Mary Morales, MD2, and Naileshni Singh, MD3
- University of California, Davis School of Medicine
- Stanford University, School of Medicine, Department of Anesthesiology, Preoperative and Pain Medicine
- University of California, Davis School of Medicine Department of Anesthesiology and Division of Pain Medicine
- Federal Legislation influences Health Financing
Changes in healthcare funding at the federal level will have countless effects in each state, and particularly California. With the passing of the One Big Beautiful Bill (2025), Medicaid (in California, known as Medi-Cal) will have short falls that will affect patient care and hospital or physician reimbursement. In California, about 1 in 3 residents relies on Medicaid for healthcare – from prenatal care in Los Angeles to trauma surgeries in the Central Valley. This foundational funding will recede once the new federal legislation is implemented.1 A series of federal healthcare financial changes is predicted to unravel recent gains made in access and coverage for millions of Americans and Californians. These changes are not one massive cut but a series of small, technical adjustments that reduce funding or cause cost-shifting and will likely result in the largest rollback of health coverage that the state has ever seen and will disproportionately affect rural counties. For California, which recently expanded Medicaid to include all income-eligible adults regardless of immigration status, the stakes are enormous.2
- Understanding the Funding Cuts
The federal budget plan chips away at Medicaid programs through new rules that make it harder for people to keep coverage and afford care.3 It requires more frequent eligibility checks, promotes work requirements, and adds cost-sharing for low-income enrollees. Recent history shows these changes discourage qualified people from getting the care they need. The RAND Health Insurance Experiment demonstrated decades ago that even small co-pays lead people to delay or skip medical care, including essential services.4 In one example from Arkansas, the rollout of work requirements in 2018 resulted in over 18,000 people losing Medicaid within months, mostly because they could not navigate complex reporting systems and other technical burdens for enrollment.5 Similar administrative hurdles in California would create chaos in Medicaid, increasing the number of uninsured patients and shifting costs to hospitals already under pressure.
An additional policy change not included in the new federal health care financing law adds to the problem: letting enhanced premium subsidies for the Affordable Care Act (ACA) marketplace plans expire and the implementation of the other similar ACA changes President Donald Trump proposed in March and finalized in June 2025.6 These subsidies have kept coverage affordable for millions of people who do not qualify for Medicaid. If they end, many families will face premiums they cannot pay and will likely drop their health insurance coverage altogether. KFF estimates this change alone could push millions nationally into the ranks of the uninsured, adding even more pressure to California’s safety-net system and the hospitals that serve it.3
- What are the Policy Tradeoffs?
California has worked hard to expand coverage, most recently by opening Medicaid to all income-eligible adults. This has dropped the percentage of the uninsured from 17% in 2013 to 6% in 2025.7 When federal funding shrinks, the state will have limited options to make up the difference and will be forced to make trade-offs: lawmakers can raise taxes, cut provider payments, or reduce the range of services Medicaid covers. None of those choices are painless for patients or hospital systems. Governor Gavin Newsom has already proposed stopping enrollment of undocumented immigrants and additional premium support, but this is not enough as evidenced by the preemptive loans taken by the state to bolster the program.8 Additional cuts would likely mean limiting access to benefits such as behavioral health or dental care, services that California has only recently achieved.
- Impact on Rural California Hospitals and Anesthesiologists
Rural hospital systems will be disproportionately affected by both state and federal healthcare funding changes. California’s safety-net hospitals, many who operate in rural parts of the state, already function on razor-thin margins because Medicaid patients make up the largest share of their work volume.9 When coverage shrinks, hospitals feel it first and then patients. If the state responds by reducing provider payments, hospitals will absorb more uncompensated care, especially in emergency departments. Otherwise, costs will shift to patients but those who lose coverage do not stop needing care. They simply delay it until conditions become urgent, and hospitals are legally required to treat them, further costing taxpayer money.
The scope of the issue for rural California is coming into focus. California has 26 rural counties that lack an urbanized area, but nearly every other county in the state has rural populations with an urbanized center. This represents 2.3 million residents or 5.8% of the state’s population. Rural Californians are more likely to be older, white, male, native born and are less likely to have graduated from college compared to urban residents.10
Anesthesia providers will become secondary victims of these healthcare financing laws. Coverage losses will lead to delayed or canceled surgical cases and fewer insured patients may lead to more uncompensated care and reductions in service lines, especially those that are considered less lucrative or financially stable (like behavioral health). There were already preexisting disparities in anesthesia care in rural areas, with over 80% of rural counties nationally lacking anesthesiologists and over 50% of rural counties lacking any kind of anesthesia provider.11 Uneven distribution of resources to rural areas is leading to surgical deficiencies in California and other states: 22 out of 58 counties in California are considered anesthesia deserts.12 This will only worsen due to upcoming changes in federal healthcare financing; deserts will turn into arid lands.
Nationally, rural hospital systems are already closing or restructuring secondary to anticipated changes in federal funding. News reports from Virginia, Washington, Kansas, Pennsylvania, Oklahoma, and others are reporting that multiple state-wide hospital systems are at risk of closure.Even if individuals have employer-based health care, are self-pay, or have Medicare, when hospital systems nearby close, everyone is affected.Analysis shows that rural hospitals will lose approximately $0.21 per dollar in Medicaid funding once the One Bill Beautiful Bill is implemented, totaling $70 billion in losses over a decade.13 The American Hospital Association’s report, “Rural Hospitals at Risk: Cuts to Medicaid Would Further Threaten Access”, outlines which states have the highest dependence on Medicaid financing and the losses that might occur state by state until 2034. Rural California is projected to lose $2.1 billion dollars with 135,000 non-urban residents losing health coverage.14
- What will the future hold for rural California?
Rural counties already experience injustices in resource allocation and health care services, but they will face a reckoning when federal and state medical funding is cut. These aren’t abstract policy tweaks; they determine whether hospitals stay open, whether patients can get surgical services, and whether anesthesiologists have the resources to provide safe care. Unfortunately, medical funding cuts are a policy strategy where losers and winners are predetermined. Rural America will lose and unless California’s stakeholders and policymakers rethink funding measures, the health care access that people depend on will fray beyond repair.
References
1. Katherine Wilson. “How Many in Your Congressional District Get Medi-Cal or a Premium Subsidy through Covered California? – California Health Care Foundation.” California Health Care Foundation, 23 Jan. 2025, www.chcf.org/resource/how-many-congressional-district-get-medi-cal-premium-subsidy-through-covered-california/.
2. Lucia, Laurel , and Alexis Manzanilla. “Expanding Covered California for All by Ending Immigration Status-Based Exclusions.” UC Berkeley Labor Center, 3 Apr. 2024,laborcenter.berkeley.edu/expanding-covered-california-for-all-by-ending-immigration-status-based-exclusions/.
3. Ortaliza, Jared, et al. “How Will the 2025 Budget Reconciliation Affect the ACA, Medicaid, and the Uninsured Rate? | KFF.” KFF, 15 May 2025, www.kff.org/policy-watch/how-will-the-2025-budget-reconciliation-affect-the-aca-medicaid-and-the-uninsured-rate/.
4. Brook, Robert H., et al. “The Health Insurance Experiment: A Classic RAND Study Speaks to the Current Health Care Reform Debate.” Www.rand.org, 6 Dec. 2006, www.rand.org/pubs/research_briefs/RB9174.html.
5. Sommers BD, Chen L, Blendon RJ, Orav EJ, Epstein AM. Medicaid Work Requirements In Arkansas: Two-Year Impacts On Coverage, Employment, And Affordability Of Care. Health Aff (Millwood). 2020 Sep;39(9):1522-1530. doi: 10.1377/hlthaff.2020.00538. PMID: 32897784; PMCID: PMC7497731.
6. CMS. “2025 Marketplace Integrity and Affordability Proposed Rule | CMS.” Cms.gov, 10 Mar. 2025, www.cms.gov/newsroom/fact-sheets/2025-marketplace-integrity-and-affordability-proposed-rule.
7. Goldstein, Avram. “How California Made Almost Everyone Eligible for Health Care Coverage – California Health Care Foundation.” California Health Care Foundation, 6 Sept. 2024, www.chcf.org/resource/how-california-made-almost-everyone-eligible-health-care-coverage/.
8. Zavala, Ashley. “California Needs $3.4B Loan to Cover Health Care Costs as State Provides Insurance to Undocumented Residents.” KCRA, 13 Mar. 2025, www.kcra.com/article/california-undocumented-resident-healthcare-fund/64168502. Accessed 2 Aug. 2025.
9. “How Vital Are Medi-Cal Payments to Hospitals in ca Congressional Districts 22, 40 & 41? – California Health Care Foundation.” California Health Care Foundation, 25 Apr. 2025, www.chcf.org/resource/how-vital-are-medi-cal-payments-to-hospitals-in-ca-congressional-districts-22-40-41/. Accessed 2 Aug. 2025.
10. Johnson, Hans, and Marisol Cuellar Mejia. “Rural California.” Public Policy Institute of California, Mar. 2024, www.ppic.org/publication/rural-california/.
11. Cohen C, Baird M, Koirola N, Kandrack R, Martsolf G. The Surgical and Anesthesia Workforce and Provision of Surgical Services in Rural Communities: A Mixed-Methods Examination. J Rural Health. 2021 Jan;37(1):45-54. doi: 10.1111/jrh.12417. Epub 2020 Feb 5. PMID: 32022951.
12. Uribe-Leitz T, Esquivel MM, Garland NY, Staudenmayer KL, Spain DA, Weiser TG. Surgical deserts in California: an analysis of access to surgical care. J Surg Res. 2018
Mar;223:102-108. doi: 10.1016/j.jss.2017.10.014. Epub 2017 Nov 15. PMID: 29433860.
13. Cochran-McClain, Carrie. “NRHA’s Rural Health Voices Blog | National Rural Health Association – NRHA | NRHA.” National Rural Health, 2019, www.ruralhealth.us/blogs/2025/06/federal-medicaid-cuts-imperil-rural-hospitals-and-residents-new-report-finds.
14. American Hospital Association. “Rural Hospitals at Risk: Cuts to Medicaid Would Further Threaten Access | AHA.” American Hospital Association, 16 June 2025, www.aha.org/fact-sheets/2025-06-13-rural-hospitals-risk-cuts-medicaid-would-further-threaten-access.