Latest news with #providerTaxes
Medscape
24-06-2025
- Health
- Medscape
Federal Proposals Threaten Provider Taxes
Republican efforts to restrict taxes on hospitals, health plans, and other providers that states use to help fund their Medicaid programs could strip them of tens of billions of dollars. The move could shrink access to healthcare for some of the nation's poorest and most vulnerable people, warn analysts, patient advocates, and democratic political leaders. No state has more to lose than California, whose Medicaid program, called Medi-Cal, covers nearly 15 million residents with low incomes and disabilities. That's twice as many as New York and three times as many as Texas. A proposed rule by the Centers for Medicare & Medicaid Services, echoed in the Republican House reconciliation bill as well as a more drastic Senate bill, would significantly curtail the federal dollars many states draw in matching funds from what are known as provider taxes. Although it's unclear how much states could lose, the revenue up for grabs is big. For instance, California has netted an estimated $8.8 billion this fiscal year from its tax on managed care plans and took in about $5.9 billion last year from hospitals. California Democrats are already facing a $12 billion deficit, and they have drawn political fire for scaling back some key healthcare policies, including full Medi-Cal coverage for immigrants without permanent legal status. And a loss of provider tax revenue could add billions to the current deficit, forcing state lawmakers to make even more unpopular cuts to Medi-Cal benefits. 'If Republicans move this extreme MAGA proposal forward, millions will lose coverage, hospitals will close, and safety nets could collapse under the weight,' Gov. Gavin Newsom, a Democrat, said in a statement, referring to President Donald Trump's 'Make America Great Again' movement. The proposals are also a threat to Proposition 35, a ballot initiative California voters approved last November to make permanent the tax on managed care organizations, or MCOs, and dedicate some of its proceeds to raise the pay of doctors and other providers who treat Medi-Cal patients. All states except Alaska have at least one provider tax on managed care plans, hospitals, nursing homes, emergency ground transportation, or other types of healthcare businesses. The federal government spends billions of dollars a year matching these taxes, which generally lead to more money for providers, helping them balance lower Medicaid reimbursement rates while allowing states to protect against economic downturns and budget constraints. New York, Massachusetts, and Michigan would also be among the states hit hard by Republicans' drive to scale back provider taxes, which allow states to boost their share of Medicaid spending to receive increased federal Medicaid funds. In a May 12 statement announcing its proposed rule, CMS described a 'loophole' as 'money laundering,' and said California had financed coverage for over 1.6 million 'illegal immigrants' with the proceeds from its MCO tax. CMS said its proposal would save more than $30 billion over 5 years. 'This proposed rule stops the shell game and ensures federal Medicaid dollars go where they're needed most — to pay for healthcare for vulnerable Americans who rely on this program, not to plug state budget holes or bankroll benefits for noncitizens,' Mehmet Oz, the CMS administrator, said in the statement. Medicaid allows coverage for noncitizens who are legally present and have been in the country for at least 5 years. And California uses state money to pay for almost all of the Medi-Cal coverage for immigrants who are not in the country legally. California, New York, Michigan, and Massachusetts together account for more than 95% of the 'federal taxpayer losses' from the loophole in provider taxes, CMS said. But nearly every state would feel some impact, especially under the provisions in the reconciliation bill, which are more restrictive than the CMS proposal. None of it is a done deal. The CMS proposal, published May 15, has not been adopted yet, while the House and Senate bills must be negotiated into one and passed by both chambers of Congress. But the restrictions being contemplated would be far-reaching. A report by Michigan's Department of Health and Human Services, ordered by Democratic Gov. Gretchen Whitmer, found that a reduction of revenue from the state's hospital tax could 'destabilize hospital finances, particularly in rural and safety-net facilities, and increase the risk of service cuts or closures.' Losing revenue from the state's MCO tax 'would likely require substantial cuts, tax increases, or reductions in coverage and access to care,' it said. CMS declined to respond to questions about its proposed rule. The Republicans' House-passed reconciliation bill, though not the CMS proposal, also prohibits any new provider taxes or increases to existing ones. The Senate version, released on June 16, would gradually reduce the allowable amount of many provider taxes. The American Hospital Association, which represents nearly 5000 hospitals and health systems nationwide, said the proposed moratorium on new or increased provider taxes could force states 'to make significant cuts to Medicaid to balance their budgets, including reducing eligibility, eliminating or limiting benefits, and reducing already low payment rates for providers.' Because provider taxes draw matching federal dollars, Washington has a say in how they are implemented. And the Republicans who run the federal government are looking to spend far fewer of those dollars. In California, the insurers that pay the MCO tax are reimbursed for the portion levied on their Medi-Cal enrollment. That helps explain why the tax rate on Medi-Cal enrollment is sharply higher than on commercial enrollment. Over 99% of the tax money the insurers pay comes from their Medi-Cal business, which means most of the state's insurers get back almost all the tax they pay. That imbalance, which CMS describes as a loophole, is one of the main things Republicans are trying to change. If either the CMS rule or the corresponding provisions in the House reconciliation bill were enacted, states would be required to levy provider taxes equally on Medicaid and commercial business to draw federal dollars. California would likely be unable to raise the commercial rates to the level of the Medi-Cal ones because state law constrains the legislature's ability to do so. The only way to comply with the rule would be to lower the tax rate on Medi-Cal enrollment, which would sharply reduce revenue. CMS has warned California and other states for years, including under the Biden administration, that it was considering significant changes to MCO and other provider taxes. Those warnings were never realized. But the risk may be greater this time, some observers say, because the effort to shrink provider taxes is embedded in both Republican reconciliation bills and intertwined with a broader Republican strategy — and set of proposals — to cut Medicaid spending by $800 billion or more. 'All of these proposals move in the same direction: Fewer people enrolled, less generous Medicaid programs over time,' said Edwin Park, a research professor at Georgetown University's McCourt School of Public Policy. California's MCO tax is expected to net California $13.9 billion over the next two fiscal years, according to January estimates. The state's hospital tax is expected to bring in an estimated $9 billion this year, up sharply from last year, according to the Department of Health Care Services, which runs Medi-Cal. Losing a significant slice of that revenue on top of other Medicaid cuts in the House reconciliation bill 'all adds up to be potentially a super serious impact on Medi-Cal and the California state budget overall,' said Kayla Kitson, a senior policy fellow at the California Budget & Policy Center. And it's not only California that will feel the pain. 'All states are going to be hurt by this,' Park said.
New York Times
17-06-2025
- Health
- New York Times
The Senate Wants Billions More in Medicaid Cuts, Pinching States and Infuriating Hospitals
The Senate policy bill released Monday would cut billions of dollars more from Medicaid than the earlier, House-passed legislation — in large part by cracking down on a budgeting maneuver used by 49 states that congressional Republicans have called a scam or gimmick. 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 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 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 Want all of The Times? Subscribe.
