Senate passes tax bill, to the dismay of hospitals

Hospitals and health systems fell short in their bid to block sweeping changes to Medicaid in the Senate tax bill.

Advocates for hospitals and other healthcare organizations are pressing Congress to avert steep cuts to Medicaid in the tax package.

The Senate passed the tax bill Tuesday, with Vice President Vance casting the tie-breaking vote. Hospitals have said the Senate tax bill is considerably more damaging than the bill the House passed, and health systems had a lot of problems with the House measure.

Hospitals say the Senate legislation would lead to millions of people losing Medicaid coverage, and they say hospitals would lose billions of dollars in funding. Advocacy groups argue that some hospitals would have to cut services or shut down as they have to care for far more people with no ability to pay.

Rob Andrews, CEO of the Health Transformation Alliance, tells Chief Healthcare Executive® that he ultimately expects some degree of compromise between the Senate and House on their respective bills. But he said hospital executives would face hard choices under the tax reform package.

A former Democratic congressman, Andrews says both measures would mean millions would likely lose Medicaid coverage, and many hospitals would face serious financial pressures.

“This will probably accelerate closures of rural hospitals and mergers where rural hospitals will be taken over by larger systems,” Andrews says.

Some hospitals are still struggling to recover from the COVID-19 pandemic, with margins of 3% or less, and some barely breaking even or losing money. Even some hospitals with modest margins would take a big hit under either the Senate or House plan, Andrews says.

“Under either circumstance, you know, the hospital CEO with a 1% to 3% margin is headed into some difficult times because he or she is going to have a lot of bad choices,” he says.

And as he acknowledges, some hospitals aren’t even seeing those margins.

President Trump has said he wants the package finished by July 4. With the Senate approving the bill, it’ll head back to the House before it gets to the president’s desk.

House and Senate leaders must reach a compromise on differences between the two bills, and hospitals will look to have a final chance to limit the damage.

Rick Pollack, president and CEO of the American Hospital Association, said Tuesday that the bill "will drive up uncompensated care for hospitals and health systems, which will affect their ability to serve all patients."

Pollack said it could lead to hospitals cutting services, with some facilities at risk of shutting their doors.

‘Concerns are very real’

The Senate tax bill would lower provider taxes in many states, and that would reduce the amount of federal funding the states could get for their Medicaid programs. Hospital trade groups said provisions placing lower ceilings on provider taxes would end up dealing a body blow to health systems.

Larry Bucshon, MD, a former Republican congressman from Indiana and a former cardiothoracic surgeon, tells Chief Healthcare Executive® that hospitals have reasons to be worried about the tax package. Since retiring from Congress last year, Bucshon now works as a senior policy advisor at Holland & Knight.

“I think their concerns are very real,” Bucshon says.

The Senate Republicans have included a $25 billion fund for rural hospitals to be allocated over five years, but Bucshon says that wouldn’t offset the losses of Medicaid funding and caps to provider taxes.

The tax package doesn’t offer a similar assistance program for urban hospitals that are struggling and need more assistance, he says. “It doesn't necessarily include the large urban hospitals, public hospitals, which it needs to,” Buchson says.

Safety net hospitals in urban areas are seeing high percentages of patients on Medicaid, or no insurance at all. “I don't think they're getting enough attention,” Buchson says.

Nearly 12 million Americans would lose Medicaid coverage under the Senate plan, according to estimates from the Congressional Budget Office. Another five million would lose coverage with the expiration of subsidies supporting the Affordable Care Act, meaning up to 17 million people could lose healthcare coverage if the Senate plan is adopted.

‘Insult to injury’

Senate Republicans introduced a number of amendments Monday, some to the chagrin of hospitals. Sen. Rick Scott, a Florida Republican, introduced an amendment that would apparently end Medicaid expansion in a host of states that have “trigger laws” that end the expansion program if there’s a drop in federal aid.

Chip Kahn, president and CEO of the Federation of American Hospitals, blasted the amendment Monday afternoon. The group pointed to an analysis from Joint Economic Committee Minority, which found the total number of Americans losing coverage with the amendment would rise to 20 million.

“The amendment backed by the Senate leadership adds insult to injury. It would leave 20 million Americans uninsured and frankly does not even pretend to cut waste, fraud, and abuse,” Kahn said in a statement Monday.

Sen. Susan Collins, a Maine Republican, sought to raise the rural hospital assistance fund from $25 billion to $50 billion. Hospitals have warned that rural hospitals would lose billions under the Medicaid cuts, and they’d be especially endangered given their financial woes.

Alex Carter, a policy advocate for Maine Equal Justice, credited Collins for making an effort to help rural hospitals, but she says even doubling the rural hospital assistance fund doesn’t make up for the far bigger hit facing rural hospitals. “That is woefully insufficient," Carter said at a news conference organized by Families USA.

Maine hospitals are facing financial difficulties that would be exacerbated by the tax package, Carter says.

“Our hospitals are already really struggling, and we see that four of our rural hospitals may be at risk of closure, if not more,” she says.

Anthony Wright, executive director of Families USA, said during the Monday news conference that the Senate tax bill would be significantly worse than the House plan in terms of Medicaid cuts and damage to hospitals. “The House Bill was bad, the Senate bill somehow got worse,” he says.

“It is the biggest rollback of coverage in American history,” Wright says.

Both the Senate and House plans would impose work requirements for able-bodied Americans to receive Medicaid, although hospital groups say the Senate plan has more stringent requirements. Some Medicaid beneficiaries would also have a $35 co-pay, under the Senate plan.

The Federation of American Hospitals and American Hospital Association have sent letters to lawmakers in recent days urging them to reject the package and prevent significant cuts to Medicaid. Both groups are also citing the risk of hospital closures and potential harm to many Americans that don’t rely on Medicaid but will have less access to healthcare.

Hospitals are also pointing to the economic fallout if communities lose hospitals, which are often the biggest employers in their region.

Even after Senate passage, the legislation must go back to the House and the two chambers still have to broker a compromise on the two bills.

Some House Republicans have bristled over the Senate plan, saying it goes too far. A group of 16 House Republicans sent a letter last week to Senate Majority Leader John Thune and House Speaker Mike Johnson calling for Congress to stick to the House plan.

“The House’s approach reflects a more pragmatic and compassionate standard, and we urge that it be retained in the final bill,” the House GOP lawmakers wrote.

(Note: This story has been updated to reflect the Senate passage of the tax bill.)