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| Community engagement requirements for the "able-bodied" |
Republican legislators who wrote the Medicaid provisions of their monstrous megabill are acting on a simple belief: low-income nonelderly adults who lack access to affordable employer-sponsored health insurance should not have access to affordable health coverage.
While their $900 billion* in cuts to federal spending on Medicaid over ten years will hurt all classes of Medicaid enrollees, the cuts are aimed primarily at low-income adults insured through the ACA Medicaid expansion — that is, adults under age 65 who are not recognized as disabled by the federal government (though many have varying degrees of disability**). Some cuts not aimed directly at the ACA expansion population target states that have enacted the expansion.
Provider tax cut aimed at expansion states
The major new spending cut added by the Senate Finance Committee to the House package last week is a case in point. Section 71120 would sharply reduce the revenue that Medicaid expansion states derive from “provider taxes,” a financial maneuver, allowed for decades, that all states except Alaska employ to boost Medicaid revenue and fund services. Under current law, states are allowed to hold taxed healthcare providers “harmless” if the taxes don’t exceed 6% of revenue — that is, they can boost payment to an amount equivalent to the revenue collected. Since the federal government pays its standard Medicaid share of the resulting new spending, varying from 50-77% by state, states can use the federal share to further boost spending. Most such taxes are imposed on nursing homes (46 states) and hospitals (45 states).
That financial maneuver is a classic American “kludge” — a workaround chronic Medicaid underfunding initiated by state governments and accepted by CMS. A responsible legislature looking to end such haphazard, convoluted funding mechanisms might replace the revenue from them, built into state budgets, with a more rational funding source. The House bill put a ban on new provider taxes, leaving current arrangements in place. The Senate Finance Committee takes a deep slice out of the revenue, cutting current taxes — but only for Medicaid expansion states. For those states, the “safe harbor” under which hospitals and other providers can be held harmless is cut by 0.5% per year from the current 6% until it hits a floor of 3.5% (nursing homes are exempted from the lower threshold).
As Georgetown’s Edwin Park notes (citing KFF data), at present 18 expansion states imposes taxes on hospitals above the 3.5% future safe harbor, and some of those states explicitly earmarked that revenue*** to fund the state’s share of the cost of enacting the ACA Medicaid expansion— potentially endangering maintenance of the expansion in those states if this provision is enacted. At the same time, six of the ten nonexpansion states (Alaska, Kansas, Mississippi, South Carolina, Tennessee and Texas) impose taxes on hospitals greater than 3.5% and would be exempt from this cut.
