For hospitals, Senate version of tax bill ‘moves in the wrong direction’

After the House of Representatives passed a tax package that is projected to lead to cuts in Medicaid programs, hospitals and health systems were banking on the Senate delivering some relief.

Now that Senate Republicans have released their plan, hospitals and advocates for other healthcare organizations say the plan isn’t an improvement over the House version. The Senate bill would lead to even bigger Medicaid cuts and more hardships for hospitals, trade groups say.

Rick Pollack, president and CEO of the American Hospital Association, said, “This bill moves in the wrong direction.”

Trade groups representing hospitals and other healthcare organizations say the Senate version of the tax bill would lead to fewer people covered by Medicaid, and hospitals would end up providing more uncompensated care.

Hospitals decried provisions that would put more restrictions on how states finance Medicaid programs, and said the plan released by the Senate Finance Committee Monday contains more onerous work requirements than the House plan. They also expressed disappointment that the Senate package would likely lead to fewer being covered by the Affordable Care Act.

Pollack said the Senate proposal would “force hospitals to reconsider services or potentially close, particularly in rural areas.”

“The magnitude of Medicaid reductions and changes to health insurance marketplaces will shift millions of Americans from insured to uninsured status,” Pollack said in a statement. “Additionally, the proposal further erodes the legitimate use of provider taxes and state directed payment programs that help bridge the gap of chronic and historic Medicaid underpayments.”

The Senate bill would lower the provider tax that states levy to hospitals to help finance Medicaid programs. The provider tax, which is currently up to 6%, would be gradually lowered to 3.5% in 2031, The Washington Post reports. (Nursing homes and care facilities for those with disabilities would be exempt.)

Hospital leaders say that with more people having no coverage, they will turn to emergency departments for basic services.

“These cuts will strain emergency departments as they become the family doctor to millions of newly uninsured people,” Pollack said.

‘Perfect storm of negative impacts’

The Catholic Health Association of the United States and the leaders of several Catholic hospital systems also expressed their dismay with the Senate package during a news conference Tuesday afternoon.

Sister Mary Haddad, president & CEO of the Catholic Health Association, criticized the Senate measure for imposing more restrictions on provider taxes and greater work requirements for Medicaid eligibility.

“The bill unconscionably creates Medicaid cuts even further, which will only result in more people losing coverage, more facilities struggling to stay open, and more people not able to get the life saving care that they so desperately need,” Haddad said.

Wright Lassiter III, CEO of CommonSpirit Health, said the Senate plan would add to more financial pressures to hospitals that are struggling

“We're striving to turn around the losses created by the COVID pandemic,” Lassiter said. “The proposed cuts that are on the table today will impact that progress, and will create a perfect storm of negative impacts, fragile financial status, more aggressive commercial insurers denying reimbursement for care, and now massive Medicaid funding cuts.”

Lassiter said the Senate plan would deliver a serious blow to rural hospitals, and he suggested some may not recover. Lassiter projected the Medicaid changes would lead to an $85 million annual reduction for CommonSpirit’s seven Kentucky hospitals, which include four rural hospitals.

“I would tell you that this is not sustainable for us and for those communities for critical access hospitals,” Lassiter says.

Shantel Krebs, president & CEO of Avera St. Mary’s in South Dakota, also warned of the impact of Medicaid cuts to rural hospitals.

“It could impact communities by closing emergency rooms, maternity care, behavioral health services, or even having access at all,” Krebs said.

The House tax bill included work requirements for Medicaid, but allowed exemptions for parents with dependents. The Senate legislation includes a work requirement for parents of kids over the age of 14, the Associated Press reports. Under both plans, healthy adults would be required to work 80 hours per month to get benefits.

Catholic hospitals have come out against the work requirements.

“The Catholic Health Association strongly opposes provisions like work reporting requirements that hurt access to coverage and do absolutely nothing to help people find work,” Haddad said.

Laura Kaiser, president and CEO of SSM Health, pointed out that one in five residents in Oklahoma is covered by Medicaid or the Children’s Health Insurance Program, and half of all Medicaid recipients are in rural areas.

Both the House and Senate proposals would require Medicaid recipients to pay co-pays if their incomes are over 100% of the federal poverty level. Kaiser said even modest co-pays may discourage some people from getting medical care.

“Even proposals like a $35 copay sounds reasonable for non-emergency ER visits … but can feel like obstacles for patients and low-income families who may depend on Medicaid for their insurance coverage,” Kaiser said. “We are fearful that this will deter people who need care from seeking it, and in turn, leading to more serious and more costly care when their care progresses into something that is more urgent.”

Cuts ‘jeopardize’ communities

Like the House bill, the Senate proposal would not extend tax credits that support the Affordable Care Act. Enhanced subsidies put in place by President Biden are slated to expire at the end of 2025. If the tax credits aren’t extended, five million Americans, including two million living with chronic conditions, would lose coverage, Haddad said.

Even under the House package, as many as 1.8 million Americans living in rural communities would lose coverage by 2034, according to an analysis released by the American Hospital Association Monday. Rural hospitals could lose more than $50 billion in federal Medicaid funding over the next decade, the hospital association said. Several of the states seeing the biggest reductions in aid to rural hospitals are states that voted for President Trump in the 2024 election.

Bruce Siegel, MD, president and CEO of America’s Essential Hospitals, said in a statement that the Senate bill would “jeopardize the health and economic stability of our communities.”

“The draconian Medicaid cuts contained in the Senate bill would devastate health care access for millions of Americans and hollow out the vital role essential hospitals play in their communities,” Siegel said in a statement.

The Medical Group Management Association said the Senate proposal falls short by failing to address cuts in Medicare reimbursement for doctors and bringing more significant cuts to Medicaid.

“The Senate's proposed additional Medicaid cuts will result in skyrocketing uncompensated care,” Anders Gilberg, senior vice president of government affairs for the Medical Group Management Association, said in a statement Tuesday. The package will add to financial pressures on hospitals, he said.

Criticism in the Senate

The Congressional Budget Office, a nonpartisan research arm of Congress, estimated that 10.9 million Americans would lose coverage under the House legislation, the Associated Press reports.

The plan still must clear the full Senate, which is hardly a given, and then the Senate and House would have to come together to negotiate some sort of compromise on the competing plans.

Democratic senators denounced the Senate GOP plan. Sen. Ron Wyden, D-Oregon, blasted the plan for “making even deeper cuts to Medicaid, slashing funding for rural hospitals and other essential health care providers and throwing cash-strapped states off a funding cliff.”

Sen. Ruben Gallego, D-Arizona, said on X, “The House plan was a disaster. The Senate’s draft takes Medicaid cuts even further.”

Some Republican senators have also pushed back on plans to cut Medicaid, warning that they don’t want to see cuts that would lead to the closure of rural hospitals.

Sen. Josh Hawley, a Missouri Republican who has been among the most vocal critics of cuts to Medicaid, told The Washington Post that the plan needs work. “Rural hospitals are going to be in bad shape,” Hawley told the Post.