Senate Republicans Are Strengthening Medicaid and Rural Hospitals

Democrats Sent Medicaid Spiraling Into Financial Ruin. Republicans Are Enacting Commonsense Reforms that Strengthen Both Medicaid and Rural Hospitals.

DEMOCRATS SET MEDICAID ON AN UNSUSTAINABLE PATH AND PRIORITIZED LARGE HOSPITALS OVER SMALLER RURAL ONES

“The Biden administration has enacted several major Medicaid rule changes with giant fiscal costs,” including a rule finalized in 2024 that keeps people on Medicaid “when they are no longer eligible,” while restricting the times “when states may verify changes in eligibility.” (Paragon Health Institute: Biden’s Medicaid Changes: High Costs, Misguided Policy – 11/6/24)

Another rule enacted by the Biden administration expanded “a Medicaid payment mechanism known as state-directed payments… which are a subset of Medicaid supplemental payments. In essence, these are lump sum payments to health care providers in addition to Medicaid payments for specific health care services that have been rendered.” (Paragon Health Institute: Biden’s Medicaid Changes: High Costs, Misguided Policy – 11/6/24)

- “State-Directed Payments (SDPs) are an extra payment, similar to a tip, on top of the base Medicaid payments that providers receive for providing a service to Medicaid enrollees… Spending on SDPs quadrupled under President Biden, increasing from $32 billion to $124 billion per year.” (White House: Memorandum to Senate Republicans – accessed 6/28/25)

- “By allowing states to direct higher payments to specific providers (mostly hospitals), this rule advantages politically-connected providers with increases in payments that will be mostly, if not entirely, covered by the federal government.” (Paragon Health Institute: Biden’s Medicaid Changes: High Costs, Misguided Policy – 11/6/24)

- “Another problem with this rule is that it incentivizes providers to increase their commercial rates.” (Paragon Health Institute: Biden’s Medicaid Changes: High Costs, Misguided Policy – 11/6/24)

- “Because of program integrity concerns, supplemental payments such as SDPs have historically been capped at Medicare rates.” (White House: Memorandum to Senate Republicans – accessed 6/28/25)

“Per the Congressional Budget Office, federal outlays on [Medicaid] have been positively soaring, from $409 billion in 2019 to $615 billion in 2023, and projected to hit $655 billion in 2025. That’s a 50% jump from 2019 to 2023, and 60% to 2025.” (New York Post: Editorial: ‘Deadly’ GOP ‘cuts’ don’t even touch Medicaid’s 50% growth since 2019 – 6/3/25)

“Over the last decade, Medicaid has outpaced the growth of the other two largest federal entitlement programs: Social Security and Medicare.” (Cato Institute: Medicaid Is Driving Deficits: Republicans Are Scarcely Tapping the Brakes – 5/13/25)

REPUBLICANS WILL PUT MEDICAID BACK ON A MORE FISCALLY STABLE TRAJECTORY FOR THOSE WHO NEED IT, SOMETHING DEMOCRATS ONCE SUPPORTED

Republicans’ reconciliation bill “contains the most comprehensive effort to address waste, fraud, and abuse to preserve and protect Medicaid for the most vulnerable that has ever been considered by Congress.” (White House: Memorandum to Senate Republicans – accessed 6/28/25)

“Part of the bill from the Senate Finance Committee aims to make good on the GOP’s promise to root out waste, fraud and abuse within the widely used healthcare program by including work requirements and booting illegal immigrants from benefit rolls, among other measures.” (Fox News: Top Trump health official slams Democrats for 'misleading' claims about Medicaid reform – 6/23/25)

“The SDP [State Directed Payment] policy would simply revert to one maintained by the Administration of President Obama and taken together, these reforms would free up substantial resources for Congress and the Administration to spend more on intended priorities, such as improving care for vulnerable populations or bolstering financially fragile but critical providers.” (White House: Memorandum to Senate Republicans – accessed 6/28/25)

The bill protects the state-federal partnership at the heart of Medicaid by limiting states’ abilities to game the federal Medicaid match through provider taxes. (U.S. Senate Committee on the Budget: Chairman Graham Releases Full Senate Text Of President's One Big Beautiful Bill – 6/27/25)

“The changes would still incrementally lower the allowable provider tax in Medicaid expansion states from 6 percent down to 3.5 percent. But the drawdown would begin in 2028.” (Politico: Updated megabill includes key compromises on taxes, Medicaid – 6/28/25)

- “States assess taxes on health providers—namely hospitals. They then channel the revenue back into their Medicaid programs to draw more federal money. For every dollar that states spend on Medicaid, they get one to three dollars more from the feds—and nine for able-bodied individuals covered under ObamaCare. Hospitals then receive more in Medicaid payments than they pay in the provider taxes.” (The Wall Street Journal: Editorial: The Great Medicaid Hospital Scam – 6/25/25)

- “In its final year, the last Administration approved four waivers that exploit this tax loophole, submitted by California, Michigan, Massachusetts, and New York. Together, these four states are responsible for more than 95% of projected federal taxpayer losses under the loophole.”
- “A CMS estimate shows that if just two more states adopt these schemes each year, excess federal costs could balloon more than $74 billion over 5 years.” (Center for Medicare and Medicaid Services: CMS Moves to Shut Down Medicaid Loophole—Protects Vulnerable Americans, Saves Billions – 5/12/25)

In previous years, Democrats supported reining in the provider tax:
- “In 1991 George H.W. Bush signed bipartisan legislation to crack down on this scheme, which even Nancy Pelosi and Chuck Schumer voted for. The law forbids Medicaid taxes that have the effect of holding providers harmless—as nearly every state tax today does.” (The Wall Street Journal: Editorial: The Great Medicaid Hospital Scam – 6/25/25)

- President Obama’s FY2013 budget proposed lowering the provider tax threshold to 3.5%: “The Administration proposes to limit these types of State financing practices that increase Federal Medicaid spending by phasing down the Medicaid provider tax threshold from the current law level of 6 percent in 2015, to 4.5 percent in 2015, 4 percent in 2016, and 3.5 percent in 2017 and beyond.” (Obama White House: The President's Budget for Fiscal Year 2013 – 2/13/12)

REPUBLICANS’ BILL ALSO CREATES A FUND TO ENSURE RURAL HOSPITALS CONTINUE TO SERVE AMERICANS WHO RELY ON THEM

The bill invests $25 billion in a rural health transformation program to improve access to care and stabilize critical hospitals and other providers. (U.S. Senate Committee on the Budget: Chairman Graham Releases Full Senate Text Of President's One Big Beautiful Bill – 6/27/25)

“A targeted rural hospital fund is the most efficient and sensible way to assist facilities at risk of closure without perpetuating broad-based abuse. Enacting these changes is essential to preserve Medicaid’s mission and ensure a sustainable, accountable safety net.” (Paragon Health Institute: Championing Senate Reforms and Countering Rural Hospital Hysteria in the Fight Against Medicaid Money Laundering – 6/27/25)

Less than 5% of overall Medicaid spending actually goes to rural hospitals: “According to the Centers for Medicare and Medicaid Services (CMS) Office of the Actuary, just 4.9% of overall Medicaid inpatient hospital spending goes to rural hospitals. This illustrates how financing abuses such as provider taxes and SDPs have not been targeted to the most vulnerable.” (White House: Memorandum to Senate Republicans – accessed 6/28/25)

“We are committed to preserving and improving access to care in rural communities with a transformative approach that bolsters advanced technology, invests in infrastructure, and supports workforce — rather than propping up a system that mostly benefits wealthier urban areas.” – Centers for Medicare and Medicaid Services Administrator Dr. Mehmet Oz

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