The controversial proposal was introduced in the Republican-controlled Senate by Republican senators. If enacted, it would require unprecedented cuts to Medicaid, impacting around 71 million Americans, the majority of whom are low-income and disabled. This effort is included in the Senate’s “big beautiful bill.” Like much of former President Donald Trump’s legislative agenda, it could radically change the way people access healthcare in red states.
The cuts have been met with fierce opposition from health advocates and state officials who say the fallout would be catastrophic. If these changes are implemented, they’ll kick targeted people off of coverage. This maneuver would risk hurling states into multibillion-dollar budget deficits. According to the Congressional Research Service, reducing the provider tax cap to 2.5% would reduce $241 billion in Medicaid payments to states. This unprecedented cut will test their commitment and creativity in delivering quality healthcare that their patients need.
Medicaid is available to every state, none more so than Alaska. It incentivizes states to charge healthcare providers—namely, hospitals—for uncompensated care to recoup their investments. In 2018, without adequate federal oversight, the Trump administration signaled its approval of the first state-directed payment plan for Medicaid. Through this plan, states can pay providers higher rates for certain populations. Currently, West Virginia has a federally approved Medicaid expansion plan that increases payments to hit different targets. In North Carolina, hospitals can be penalized for charging rates above what they do for commercial insurance, provided they have some sort of medical debt forgiveness policies.
The implications of these cuts are extensive. It will be the hospitals that most often rely on Medicaid payments that will face the biggest revenue hits. To compensate for these deficits, they must price negotiate with commercial payers. Those kinds of negotiations usually lead to higher prices for people who continue to carry their health insurance.
As healthcare advocates, we have long warned that these cuts would have a disastrous effect. As healthcare expert David Machledt pointed out, that misses a very important point. He insisted that the problems with our healthcare system are not caused by Medicaid, but by a plethora of players cashing in on the system. He remarked, “What these cuts are going to do is look at the most cost-efficient program and squeeze it further, and take us backwards, and put us back at a system where the people at the low end are literally dying to fund these tax cuts for rich people and businesses.”
States such as Colorado are already experiencing financial impacts from looming Medicaid cuts. Officials there have had to make some hard budgetary choices to tackle the problems head on. “We took great pains to close a $1.1 billion shortfall caused by rising healthcare costs. To protect healthcare and education, we had to cut transportation projects, maternal health programs, and even $1 million in aid to food banks,” said Dave Young, highlighting the tough choices made to ensure essential services remain funded.
Republican senators—Sen. South Dakota John Thune, for one—are convinced that the legislation they have proposed is designed to “save” Medicaid. They are attempting to do this by purging people that they deem ineligible for enrollment. Thune maintains that “removing these individuals is just basic, good governance.” Advocates argue that this focus is misguided and misses the real world impacts of decreased access to care.
Leslie Frane, a longtime passionate healthcare advocate, blew that whistle. She stressed that regardless of whether or not people lose their health insurance, everyone will experience the impact of these cuts. Those who do not lose their health insurance will face higher expenses. Your out-of-pocket copays will be skyrocketing. Your deductibles and bills will go up, she insisted while pointing out the domino effect of lost dollars, funding cuts.
The opposition has made a loud noise against the changed legislation. As our policy director Anthony Wright put it, the latest Senate text just took the House’s “big, bad budget bill” and made it worse in every respect. He called on lawmakers to think beyond the short-term just cuts to the effects on at-risk communities that rely on Medicaid for their health care needs.
As discussions continue around Medicaid’s future under this proposed bill, the potential for widespread consequences looms large over many states. Given the potential shortfalls, hospitals are already under pressure. Few are able to take the hit and most don’t survive or, as a result, shift those costs directly onto patients.