{"id":9756,"date":"2025-06-24T03:57:12","date_gmt":"2025-06-24T03:57:12","guid":{"rendered":"https:\/\/www.europesays.com\/us\/9756\/"},"modified":"2025-06-24T03:57:12","modified_gmt":"2025-06-24T03:57:12","slug":"gop-proposals-for-tax-restrictions-may-defund-states-medicaid-programs","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/us\/9756\/","title":{"rendered":"GOP Proposals for Tax Restrictions May Defund States\u2019 Medicaid Programs"},"content":{"rendered":"

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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 health care for some of the nation\u2019s poorest and most vulnerable people, warn analysts, patient advocates, and Democratic political leaders.<\/p>\n

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\u2019s twice as many<\/a> as New York and three times as many as Texas.<\/p>\n

A proposed rule<\/a> by the Centers for Medicare & Medicaid Services, echoed in the Republican House reconciliation bill<\/a> 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<\/a>. Although it\u2019s 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<\/a> and took in about $5.9 billion last year from hospitals.<\/p>\n

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California Democrats are already facing a $12 billion deficit<\/a>, and they have drawn political fire for scaling back some key health care policies, including full Medi-Cal coverage<\/a> 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.<\/p>\n

\u201cIf Republicans move this extreme MAGA proposal forward, millions will lose coverage, hospitals will close, and safety nets could collapse under the weight,\u201d Gov. Gavin Newsom, a Democrat, said in a statement, referring to President Donald Trump\u2019s \u201cMake America Great Again\u201d movement.<\/p>\n

Related Story<\/p>\n


\n \"House
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\n The bill would gut billions of dollars in health care spending, and redistribute wealth from the poor to the rich.\n <\/p>\n

The proposals are also a threat to Proposition 35<\/a>, 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.<\/p>\n

All states except Alaska have at least one provider tax on managed care plans, hospitals, nursing homes, emergency ground transportation, or other types<\/a> of health care 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.<\/p>\n

New York, Massachusetts, and Michigan would also be among the states hit hard by Republicans\u2019 drive to scale back provider taxes, which allow states to boost their share of Medicaid spending to receive increased federal Medicaid funds.<\/p>\n

In a May 12 statement announcing its proposed rule, CMS described a \u201cloophole\u201d as \u201cmoney laundering<\/a>,\u201d and said California had financed coverage for over 1.6 million \u201cillegal immigrants\u201d with the proceeds from its MCO tax. CMS said its proposal would save more than $30 billion over five years.<\/p>\n

\u201cThis proposed rule stops the shell game and ensures federal Medicaid dollars go where they\u2019re needed most \u2014 to pay for health care for vulnerable Americans who rely on this program, not to plug state budget holes or bankroll benefits for noncitizens,\u201d Mehmet Oz, the CMS administrator, said in the statement.<\/p>\n

Medicaid allows coverage for noncitizens who are legally present and have been in the country for at least five 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.<\/p>\n

California, New York, Michigan, and Massachusetts together account for more than 95% of the \u201cfederal taxpayer losses\u201d 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.<\/p>\n

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.<\/p>\n

A report<\/a> by Michigan\u2019s Department of Health and Human Services, ordered by Democratic Gov. Gretchen Whitmer, found that a reduction of revenue from the state\u2019s hospital tax could \u201cdestabilize hospital finances, particularly in rural and safety-net facilities, and increase the risk of service cuts or closures.\u201d Losing revenue from the state\u2019s MCO tax \u201cwould likely require substantial cuts, tax increases, or reductions in coverage and access to care,\u201d it said.<\/p>\n

CMS declined to respond to questions about its proposed rule.<\/p>\n

The Republicans\u2019 House-passed reconciliation bill, though not the CMS proposal, also prohibits any new provider taxes or increases to existing ones. The Senate version, released June 16, would gradually reduce the allowable amount of many provider taxes.<\/p>\n

The American Hospital Association, which represents nearly 5,000 hospitals and health systems nationwide, said the proposed moratorium on new or increased provider taxes could force states<\/a> \u201cto make significant cuts to Medicaid to balance their budgets, including reducing eligibility, eliminating or limiting benefits, and reducing already low payment rates for providers.\u201d<\/p>\n

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.<\/p>\n

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\u2019s insurers get back almost all the tax they pay.<\/p>\n

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.<\/p>\n

California would likely be unable to raise the commercial rates to the level of the Medi-Cal ones, because state law constrains the legislature\u2019s 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.<\/p>\n

CMS has warned California<\/a> 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 \u2014 and set of proposals \u2014 to cut Medicaid spending<\/a> by $800 billion or more.<\/p>\n

\u201cAll of these proposals move in the same direction: fewer people enrolled, less generous Medicaid programs over time,\u201d said Edwin Park, a research professor at Georgetown University\u2019s McCourt School of Public Policy.<\/p>\n

California\u2019s MCO tax is expected to net California $13.9 billion over the next two fiscal years, according to January estimates<\/a>. The state\u2019s 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.<\/p>\n

Losing a significant slice of that revenue on top of other Medicaid cuts in the House reconciliation bill \u201call adds up to be potentially a super serious impact on Medi-Cal and the California state budget overall,\u201d said Kayla Kitson, a senior policy fellow at the California Budget & Policy Center.<\/p>\n

And it\u2019s not only California that will feel the pain.<\/p>\n

\u201cAll states are going to be hurt by this,\u201d Park said.<\/p>\n

This article was produced by KFF Health News<\/a>, which publishes California Healthline<\/a>, an editorially independent service of the California Health Care Foundation<\/a>. <\/p>\n

KFF Health News<\/a> is a national newsroom that produces in-depth journalism about health issues and is one of the core operating programs at KFF \u2014 an independent source of health policy research, polling, and journalism. Learn more about KFF<\/a>.<\/p>\n

Subscribe<\/a> to KFF Health News\u2019 free Morning Briefing.<\/p>\n

This article<\/a> first appeared on KFF Health News<\/a> and is republished here under a Creative Commons license.<\/p>\n

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