Medicaid cuts and tax extensions: Looming crisis for providers and patients?
The House of Representatives has advanced H.R.1 – the One Big Beautiful Bill Act, which includes a reduction of $625 billion from Medicaid, aimed to fund a tax extension package. This move could result in 8.6 million people to potentially lose coverage through 2034 and impact provider revenues. Key measures include Medicaid work requirements, restrictions on provider taxes, and stricter eligibility and enrollment requirements, including changes to Affordable Care Act enrollment periods. The bill’s advancement to the Senate has been temporarily stalled due to concerns about Medicaid, tax cut provisions and fiscal responsibility.
Medicaid work requirements may adversely affect providers by reducing Medicaid revenues and operating margins, possibly leading to higher uncompensated care costs and lost opportunities for those avoiding necessary care. The Congressional Budget Office previously projected that these requirements would reduce enrollment by approximately 2.2 million adults. A study conducted by Health Affairs.org indicated that those losing coverage could face increased medical debt, with 49.8% experiencing serious repayment difficulties and delaying essential care and medications due to cost.
The provider tax proposal presents a different revenue challenge for providers. The proposal freezes provider taxes at current rates and prohibits states from imposing new or increased provider taxes.
The Government Accountability Office reported that reliance on provider taxes grew significantly over the past decade, rising from 7% in 2008 to 17% in 2018. Provider taxes, which are not technically taxes, enable states to recoup more federal reimbursement dollars. State supplemental payments help offset some losses from Medicaid patients, which providers need. All states, except Alaska, use provider taxes to finance their share of Medicaid spending. The proposal would limit states’ ability to finance their share of Medicaid costs, potentially leading to cuts to Medicaid programs or alternative funding sources. This is seen as a win for providers, as maintaining current rates was preferred over expected program cuts.
The takeaway
As the bill progresses through Congress, providers should plan for a surge in uninsured patients and higher uncompensated care costs because of the moratorium on provider taxes and Medicaid reforms. Integrating these factors into annual financial forecasts is essential for maintaining fiscal stability. Providers should ensure eligible individuals receive financial assistance according to policy guidelines and develop robust plans for charity care and community benefits. Implementing strategies to identify and support patients in need of financial assistance is crucial, including expanding outreach efforts, leveraging technology and advocating for policy changes to support sustainable health care funding.
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