Federal Proposals Threaten Provider Taxes, Key Source of Medicaid Funding for States
Republican efforts to restrict taxes on hospitals, health plans and other suppliers that states use to help finance their Medicaid programs could eliminate them from tens of billions of dollars. This decision could reduce access to health care for some of the poorest and most vulnerable people in the country, warn analysts, patient defenders and democratic political leaders.
No state has to lose that California, including the Medicaid program, called Medi-Cal, covers nearly 15 million residents with low incomes and disabilities. It’s twice as much as New York and three times more than Texas.
A rule proposed by the centers for Medicare & Medicaid Services, resolved in the Bill of reconciliation of the Republican Chamber as well as a more drastic bill of the Senate, would considerably restore federal dollars than many states attracting funds of counterpart of what is called tax on providers. Although it is not clear how much states may lose, the income to be won are important. For example, California reported about $ 8.8 billion this exercise compared to its tax on managed care plans and collected around $ 5.9 billion last year from hospitals.
California Democrats are already faced with a deficit of $ 12 billion, and they have attracted political fire to reduce certain key health care policies, including full medical coverage for immigrants without permanent legal status. And loss of providers’ tax revenue could add billions to the current deficit, forcing state legislators to make even more unpopular reductions in Medi-Cal advantages.
“If the Republicans advance this Maga Extreme proposal, millions of people will lose coverage, hospitals will close and safety nets could collapse under the weight,” said Governor Gavin Newsom, a democrat, in a statement, referring to the movement “Make America Great Again” of President Donald Trump.
Proposals are also a threat to proposal 35, a voting initiative for California voters approved last November to make the tax on managed care organizations, or MCOS, and devote part of its product permanent to increase the salary of doctors and other suppliers who treat medical and custom patients.
All states, with the exception of Alaska, have at least one tax of providers on managed care plans, hospitals, nursing homes, emergency transport or other types of health care companies. The federal government spends billions of dollars a year, corresponding to these taxes, which generally leads to more money for providers, helping them to balance Medicaid reimbursement rates, while allowing states to protect themselves against economic slowdowns and budgetary constraints.
New York, Massachusetts and Michigan would also be part of the states hard affected by the will of the Republicans to change the taxes on providers, which allow states to strengthen their share of Medicaid expenditure to receive federal funds from increased medicaid.
In a press release of May 12 announcing its proposed rule, CMS described a “escape” as “money laundering” and said that California had funded coverage for more than 1.6 million “illegal immigrants” with the product of its MCO tax. CMS said its proposal would save more than $ 30 billion over five years.
“This proposed rule prevents the Shell game and guarantees that the federal dollars of Medicaid go where they are most necessary – to pay health care for vulnerable Americans who count on this program, so as not to connect the budgetary holes or the social benefits for non -citizens,” said Mehmet Oz, the CMS administrator.
Medicaid allows the coverage of non-citizens who have been legally present and have been in the country for at least five years. And California uses state money to pay almost all of media-cal coverage for immigrants who are not legally in the country.
California, New York, Michigan and Massachusetts represent more than 95% of the “federal losses of taxpayers” of the provider of service providers, said CMS. But almost all states would feel a certain impact, in particular under the provisions of the bill of reconciliation, which are more restrictive than the CMS proposal.
None of this is done. The CMS proposal, published on May 15, has not yet been adopted, while the bills of the Chamber and the Senate must be negotiated in one and adopted by the two chambers of the Congress. But the restrictions envisaged would be a great significance.
A report by the Ministry of Health and Social Services of Michigan, ordered by Democratic Governor Gretchen Whitmer, found that a reduction in state hospital tax could “destabilize the finances of the hospital, in particular in rural and safety network, and increase the risk of reductions in services or closings”. The loss of income from the MCO tax of the State “would probably require substantial reductions, tax increases or reductions in coverage and access to care,” he said.
CMS refused to answer questions about his proposed rule.
The bill on the reconciliation of the Maison des Républicains, although not the proposal of the CMS, also prohibits new providers’ taxes or increases from those existing. The version of the Senate, published on June 16, would gradually reduce the eligible amount of numerous service providers.
The American Hospital Association, which represents nearly 5,000 hospitals and health systems nationwide, said that the moratorium proposed on new or increased providers’ taxes could force states “to make significant reductions in Medicaid to balance their budgets, in particular by reducing eligibility, eliminating or limiting the advantages and reducing already low payment rates.”
Because suppliers’ taxes attract corresponding federal dollars, Washington has his say on how they are implemented. And the Republicans who direct the federal government seek to spend much less of these dollars.
In California, insurers who pay the MCO tax are reimbursed for the part taken from their registration Medi-Cal. This helps to explain why the tax rate on Medi-Cal registration is strongly higher than on commercial registration. More than 99% of the tax money that insurers pay come from their medi-calt activity, which means that most insurers of the state are retreating almost all the taxes they pay.
This imbalance, which CMS describes as an escape, is one of the main things that Republicans are trying to change. If the CMS rule or the corresponding provisions of the House reconciliation bill were promulgated, states would be required to take supplier taxes also on Medicaid and commercial affairs to draw federal dollars.
California would probably not be able to increase trade rates at the Medi-Cal level, because the law of the State limits the capacity of the Legislative Assembly to do so. The only way to comply with the rule would be to reduce the tax rate on Medi-Cal registration, which would greatly reduce income.
CMS has warned California and other states for years, notably in the context of the Biden administration, which it envisaged significant modifications of MCOs and other service providers. These warnings have never been made. But the risk can be higher this time, some observers say, because the tax reduction effort on suppliers is integrated both into republican reconciliation bills and intertwined with a wider republican strategy – and a set of proposals – to reduce Medicaid expenditure by 800 billion dollars or more.
“All these proposals are evolving in the same direction: fewer people registered and less generous of Medicaid programs over time,” said Edwin Park, research professor at the McCourt School of Public Policy at Georgetown University.
The MCO tax in California is expected to bring California to $ 13.9 billion over the next two years, the January estimates. The state hospital tax should bring in about $ 9 billion this year, up last year, according to the Ministry of Health Services, which manages Medi-Cal.
Losing a large branch of this income in addition to other Medicaid reductions in the Reconciliation Bill of the Chamber “” All this can potentially be a very serious impact on Medi-Cal and the California State budget as a whole, “said Kayla Kitson, a principal researcher at California Budget & Policy Center.
And it is not only California that will feel the pain.
“All states will be injured by this,” said Park.
This article was produced by Kff Health Newspublishing California Healthlinean editorially independent service of California Health Care Foundation.
