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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.