President Donald Trump pushed to have a budget reconciliation bill completed by the Fourth of July. But like all things in politics, the deadline and the goal posts are moving back to a more likely beginning of August deadline.
As the Senate continues to move the bill forward, the health care industry is gathering more clarity, and concerns, about how final Medicaid cuts and changes could transform Medicaid services, reimbursements and the health care landscape.
Senate Shocker
One of the biggest changes coming out of the Senate this week is reducing federal reimbursements for states using a provider tax. The provider tax is a federal matching funds program where states collect a tax from providers, receive matching funds from the government and then use those funds to pay for Medicaid patients.
Senators Josh Hawley (R-MO) and Jim Justice (R-WV) have been critical of this provision as it could pose serious problems for health systems and hospitals to get paid for Medicaid patients as it cuts the tax in half. All states except Alaska use at least one provider tax and 39 use 3 or more provider taxes.
The provider taxes are very much a state level issue. Each state has developed and set-up their provider tax system differently and the impact from the final budget bill could bring a variety of changes to health system operations in different regions. What is clear is any reduction in the provider tax means fewer federal dollars for Medicaid.
Impact to Rural Health Care
Challenges to rural health care are nothing new. Lower rates of insurance, fewer primary care and specialty care options and transportation issues create literal health care deserts across the country for roughly 46 million Americans. Insights from the American Medical Association published last year found that “rural residents often live sicker and die younger than do their urban counterparts.”
Research groups like the Sheps Center at University of North Carolina have long tracked the fine line between maintaining rural health care operations and limited access to services in rural communities. The Sheps Center is now sounding the alarm about the pending budget bill, saying it could cause rural hospitals to “collectively lose $1.8 billion” and impact more than 300 financially troubled hospitals.
Sheps Center data was also featured in a June 12 letter from Senate Democrats to Trump and Congressional Republican leadership about the budget reconciliation bill impacts to rural health care. States like California, Kentucky, Louisiana and Oklahoma have the highest number of at-risk rural hospitals.
Separately, but maybe not completely disconnected. the big picture impacts of federal health care policy can be narrowed down to individual hospitals. Glenn Medical Center, a small 25-bed hospital north of Sacramento in Willows, California, could lose it’s “critical access” designation after an April 2025 letter from CMS. The designation allows for fewer federal requirements for smaller rural hospitals and a larger share of reimbursement. Apparently, the designation canceling is related to which freeway or road qualify for patient travel and could lead to patients having to travel further for care.
Catholics vs. Congress
The Catholic Health Association and leaders from some of the largest Catholic health systems are calling the Senate proposal on health care “unconscionable.” Sister Mary Haddad, president and CEO of the Catholic Health Association called out issues with the provider taxes, state payments, retroactive coverage and expanded work requirements. Catholic health system leaders have called this a “pivotal moment in rural healthcare,” “a perfect storm of negative impacts,” and the “wrong discussion for us to be having.”
What’s Next for Health Systems
Health system and health care associations are pushing back hard publicly and at in-person meetings with U.S. Senators and congressional staff. Expect health system leaders and staff to join the chorus with letters, calls and emails to Senate Republicans to limit or reduce budget bill impacts on Medicaid.
Health system leaders should also be aware of any new changes coming from CMS, HHS and the U.S. Supreme Court. Business as usual health care regulations and policy coming out of Washington D.C. could spell big changes for the health care industry, too.
