Republicans' search for Medicaid money sparks fight with providers

Axios

14-03-2025

House Republicans signaled this week that they're looking for hundreds of billions of dollars in Medicaid spending cuts, and most — if not all — roads to getting there go through hospitals' and other providers' wallets.
Why it matters: Health care reform always creates winners and losers. To reduce federal spending and taxpayer obligations, lawmakers will have to choose pain for some combination of Medicaid beneficiaries, states or hospitals and other providers.
The risk is ultimately less access to care, particularly for some of the country's most vulnerable populations.
Reality check: This process is just getting started on the Hill. Everything can and will probably change as Republicans work through what's possible.
The big picture: Some hospitals are making a lot of money (and running Super Bowl ads), while others are struggling and on the brink of failure. Regardless, the hospital industry is a formidable presence in Washington, which could create big headaches for lawmakers seeking to enact reforms that hospitals don't like.
Where it stands: Industry statements started hitting reporters' inboxes shortly after House Republicans released their budget resolution earlier this week, which called for $880 billion in spending reductions within the jurisdiction of the committee that covers Medicaid.
"While some have suggested dramatic reductions in the Medicaid program as part of a reconciliation vehicle, we would urge Congress to reject that approach," the American Hospital Association warned.
"America's Essential Hospitals stoutly opposes and categorically condemns any cuts to Medicaid and Medicare that would result from this blueprint," the group wrote. "We cannot afford the resulting loss of life-saving safety net services that millions of Americans need to stay healthy."
Between the lines: Yes, if people lose Medicaid and become uninsured, hospitals will face higher uncompensated care costs. But it's more than that.
Many cost-saving proposals simply reduce the amount of federal dollars that states get for the program, in one way or another. States would then have to decide whether to make up the costs themselves, cut enrollment, reduce benefits or reduce what they pay providers.
Cutting enrollment and reducing benefits in a way that meaningfully curbs costs is hard, said Matt Salo, the former executive director of the National Association of Medicaid Directors. That leaves provider cuts.
"I think what's different this time around is the hospitals have gotten much more sophisticated about articulating what happens if you crack down," Salo said.
"If you squeeze the money to the states, the states are going to squeeze the money to providers. And if you squeeze the money to providers, they're going to squeeze access to beneficiaries. It's a vicious cycle."
Zoom in: Capping federal Medicaid spending — one of the two most-talked-about reforms on the menu so far, along with work requirements — could reduce federal spending by hundreds of billions of dollars, or even more than a trillion dollars, depending on how it's structured, per the Committee for a Responsible Federal Budget.
Getting moderates to support per capita caps in 2017 was really hard, and ultimately a lot of them wouldn't do it. That ended up being OK given the House GOP's vote margin at the time, but that margin is now much, much smaller.
Yes, but: There are other ways to get to $880 billion in cuts, should Republicans end up needing to hit somewhere in that ballpark and choose to do it primarily via the Medicaid program. For example ...
They could simply reduce the level of federal reimbursement for Medicaid expansion enrollees, which is currently at 90% — much higher than the reimbursement rate for other populations.
They could reduce the minimum federal match rate generally, which would result in wealthier and generally bluer states getting less funding. (The problem: There are still plenty of House Republicans from New York and California.)
Or they could target providers directly through provider taxes and what are called state-directed payments, which have ballooned in recent years. Keep reading for more on that.
And, of course, the Trump administration has been big on cutting waste, fraud and abuse writ large.
The bottom line: "It all comes back to the providers eventually in different ways," said Chip Kahn, CEO of the Federation of American Hospitals.
" All the ways you have to get to 880 [billion dollars] are not in the interest of the Medicaid recipients who depend on hospitals, doctors and nursing homes and other settings for their care," he added.