Senate Majority Leader John Thune (R-S.D.) and Finance Committee Chair Mike Crapo (R-Idaho) are in talks with Sens. Susan Collins (R-Maine) and Josh Hawley (R-Mo.), among others, to create some kind of direct financial assistance for rural hospitals that would be in danger of closing if the Senate bill passes in its current form.
The senators have expressed concerns that scaling back the provider tax would negatively impact rural hospitals. Details are still being worked out on how much money would be put into the fund and how the money would be distributed.
But leadership wants to have the bill on President Trump’s desk by July 4, so the ambitious timeline means they need to win over the holdouts quickly.
States impose taxes on providers to boost their federal Medicaid contributions, which they then direct back to hospitals in the form of higher reimbursements.
Critics argue it’s a scheme for states to get more federal funding without spending any of their own money. But provider taxes have become ingrained into states’ Medicaid financing systems. States and provider groups say the taxes provide a steady source of financing for hospitals that operate on thin margins and would otherwise face closure.
The Senate legislation would effectively cap provider taxes at 3.5 percent by 2031, down from the current 6 percent, but only for the states that expanded Medicaid under the Affordable Care Act. The cap would be phased in by lowering it 0.5 percent annually, starting in 2027.
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