The Senate Wants Billions More in Medicaid Cuts, Pinching States and Infuriating Hospitals
It does this by limiting Medicaid provider taxes, a loophole that states use to collect more federal matching funds for Medicaid, an insurance program for the poor that covers roughly 70 million Americans.
For decades, taxing providers like hospitals has been a major part of how states pay Medicaid bills, but this tactic has come under scrutiny in Congress this year as Republicans look for ways to help pay for President Trump's tax cuts.
Cutting provider taxes would probably mean funding shortfalls of hundreds of billions of dollars for states over the next decade, leaving them with budget holes to fill. To offset the losses, states would most likely need to explore cutting other services or raising other taxes.
In scaling back Medicaid provider taxes, Senate Republicans are pursuing cuts that their House colleagues were hesitant to propose. House members had landed on freezing provider tax rates at current levels instead of reducing them. If the Senate passes its plan for provider taxes, the House and the Senate will have to reconcile their differences.
The basic way Medicaid payments work
A state pays a hospital $1,000 for a patient's medical expenses.
The federal government reimburses the state a share of the amount, in this case 60 percent.
$1,000
payment
$600
reimbursement
State
government
$400
paid on net
Federal
government
Local
hospital
How states use provider taxes
A state pays a hospital a higher amount, but charges some of it back in taxes, in this case $30.
The federal government calculates its share based on the original payment. The state can keep the extra money.
$1,030
payment
$618
reimbursement
$30
tax
State
government
$382
paid on net
The tax generates an additional $18 for the state.
Federal
government
Local
hospital
The basic way Medicaid payments work
How states use provider taxes
A state pays a hospital $1,000 for a patient's medical expenses.
The federal government reimburses the state a share of the amount, in this case 60 percent.
A state pays a hospital a higher amount, but charges some of it back in taxes, in this case $30.
The federal government calculates its share based on the original payment. The state can keep the extra money.
$1,030
payment
$1,000
payment
$600
reimbursement
$618
reimbursement
$30
tax
State
government
State
government
$400
paid on net
$382
paid on net
The tax generates an additional $18 for the state.
Federal
government
Local
hospital
Federal
government
Local
hospital
The basic way Medicaid payments work
A state pays a hospital $1,000 for a patient's medical expenses.
The federal government reimburses the state a share of the amount, in this case 60 percent.
$1,000
payment
$600
reimbursement
State
government
$400
paid on net
Federal
government
Local
hospital
How states use provider taxes
A state pays a hospital a higher amount, but charges some of it back in taxes, in this case $30.
The federal government calculates its share based on the original payment. The state can keep the extra money.
$1,030
payment
$618
reimbursement
$30
tax
State
government
$382
paid on net
The tax generates an additional $18 for the state.
Federal
government
Local
hospital
Note: States pay different shares of Medicaid costs. This example illustrates when a state pays 40 percent, a common scenario.
The New York Times
Estimated share of federal Medicaid
funding from hospital and nursing
home taxes
0%
10%
20%
30%
Wash.
Maine
Mont.
N.D.
Minn.
Vt.
Ore.
N.H.
Idaho
Wis.
N.Y.
S.D.
Mich.
Wyo.
Conn.
Pa.
Iowa
N.J.
Neb.
Nev.
Ohio
Md.
Ill.
Ind.
Utah
W.Va.
Colo.
Calif.
Va.
Kan.
Mo.
Ky.
N.C.
Tenn.
Okla.
Ariz.
Ark.
S.C.
N.M.
Ala.
Ga.
Miss.
La.
Texas
Alaska
Fla.
Hawaii
Estimated share of federal Medicaid funding
from hospital and nursing home taxes
0%
10%
20%
30%
Wash.
Maine
Mont.
N.D.
Minn.
Vt.
Ore.
N.H.
Idaho
Wis.
S.D.
N.Y.
Mass.
R.I.
Conn.
Mich.
Wyo.
Pa.
N.J.
Iowa
Neb.
Nev.
Ohio
Del.
Md.
Ill.
Ind.
Utah
W.Va.
Colo.
Va.
Calif.
Mo.
Kan.
Ky.
N.C.
Tenn.
Okla.
Ariz.
Ark.
N.M.
S.C.
Ga.
Ala.
Miss.
La.
Texas
Alaska
Fla.
Hawaii
Source: The Hilltop Institute
This map underestimates the effect of provider taxes in the Dakotas, which tax other health care providers, and North Carolina, which recently made major policy changes.
The New York Times
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