Hospitals, used to getting their way in Washington, stunned by Senate Medicaid plan
One of the most powerful lobbies in Washington is redoubling its efforts to avoid a cut to Medicaid payments in the GOP's megabill.
Hospital executives weren't happy last month when the House included a provision in its version of the bill freezing a loophole states have used to boost payments to hospitals serving the low-income patients enrolled in Medicaid. Hospitals have long enjoyed deference from lawmakers — since they both care for and employ their constituents.
But they were infuriated when Senate Republicans on the Finance Committee released their version of the bill on Monday. Their proposal went even further than the House measure in curtailing the ability of states to impose taxes on providers. States have used those taxes to gain a larger federal Medicaid contribution, which they have then directed back to hospitals with higher reimbursements.
The Senate's proposal would lower the amount the 40 states that have expanded Medicaid under Obamacare can levy in provider taxes from 6 percent to 3.5 percent. It has hospital lobbyists painting a bleak picture of their financial prospects in a last-ditch effort to change senators' minds.
'No senator wants to be the reason their local hospital shutters its doors, and now is their opportunity to stop that from happening,' said a source familiar with hospital industry thinking granted anonymity to speak freely on strategy.
Hospitals have long gotten their way on Capitol Hill, as they don't just offer health care to a community but are sometimes its biggest employer. There are signs of encouragement this time around, too, as several influential GOP senators lodged objections to their colleagues' proposal after its release Monday.
'We've got all kinds of concerns,' Sen. Jim Justice (R-W.Va.), who had accepted the House's language, said on Tuesday.
But for now, at least, anxiety is running high.
The industry was able to get House Republicans to steer away from cuts to provider taxes. Instead, Republicans there installed a moratorium on any new taxes but allowed current ones to continue.
Thirteen state hospital groups said they were okay with that.
But the Senate went in another direction, and it has sent hospitals and their allies scrambling.
'The further the cuts that are made, the more devastating it is,' said Shantel Krebs, president and CEO of Avera St. Mary's, a hospital in South Dakota, in a call with reporters Tuesday.
The Senate Finance Committee's version of the megabill keeps the moratorium in place, but only if the state is one of 10 that hasn't taken advantage of an Obamacare provision offering federal funds to expand Medicaid to cover lower-middle income people. States that have expanded Medicaid must lower their taxes to 3.5 percent.
This would imperil more than 30 states and the District of Columbia that have taxes above 3.5 percent, according to data from the health care think tank KFF.
The House version was palatable partly because red-state governors intervened to mitigate the impact, one hospital lobbyist said.
'I would assume there will be just a massive amount of pushback from states, and we'll see whether it moves the needle,' the person said.
Hospitals are not used to losing on Capitol Hill. In recent years they have successfully fought off efforts to lower Medicare payments for their outpatient clinics so they're in line with doctors' offices. Lawmakers on both sides of the aisle have criticized hospitals for getting paid more for performing the same service.
Hospital groups have also successfully fought off a payment cut to safety net hospitals, which serve low-income patients, that lawmakers included in Obamacare. The cut aimed to help pay for the bill. And the Democrats who passed Obamacare in 2010 expected the Medicaid expansion would make the hospitals whole. But Congress has repeatedly passed legislation to block the cuts from taking effect at hospitals' request.
Now, the industry is working against a Senate hungry for savings to pay for the megabill, the primary purpose of which is to extend the tax cuts President Donald Trump and a Republican Congress enacted in 2017. It's also up against conservatives' philosophical opposition to the state taxes.
Some conservatives close to Trump have argued that states and hospitals are essentially engaged in 'money laundering' when they use provider taxes to boost federal Medicaid contributions and then send the money back to the hospitals.
Brian Blase of the conservative Paragon Health Institute posted on X Monday that even Joe Biden wanted to tackle provider taxes.
'The [Senate Finance] proposal is just a commonsense good government step to restore accountability in Medicaid and focus states on getting value from their programs,' he said.
Senate Republicans can lose only three members and still pass the megabill if Democrats remain united in opposition. GOP leaders want to meet Trump's demand that they pass it by July 4.
Hospitals listening to the tepid reaction from some in the GOP caucus to the provider tax restrictions see reason for hope.
'From the standpoint of West Virginia, I think the president outlined where he stood, and what's coming out right now could be much different and so we've got concerns,' Justice said, referencing Trump's repeated pledge to protect Medicaid.
Sen. Susan Collins (R-Maine) has largely declined to delve into specifics since the Finance Committee released its plan, but she reiterated her concerns about the provider tax language and said she's still 'asking for many changes.'
The most outspoken pushback has come from Sen. Josh Hawley (R-Mo.), who spoke with Trump on Tuesday. Hawley told reporters that the Senate language is 'alarming' and 'surprising' and that Trump had told him he was also surprised by the language in the bill.
Finance Committee Chair Mike Crapo's decision to go further in curtailing the taxes than the House bill caught GOP senators off guard, after several indicated last week that they expected the Senate's plan would largely match the House's.
But the language Crapo settled on nets the Idaho Republican and Senate Majority Leader John Thune something they are desperately hunting: More savings.
Crapo predicted that making changes to the Medicaid language would help give Republicans several hundred billion dollars to work with. Republicans can pass the bill with a simple majority if they adhere to special budget rules that require the bill not increase the deficit within a 10-year window.
'Every spending reduction that we were able to achieve was helpful in achieving the permanence,' Crapo said, referencing GOP plans to make the 2017 tax cuts permanent. The 2017 law, in order to reduce the cost of the measure, set the tax cuts to expire at the end of this year.
Crapo added that he was 'not surprised' that there was pushback from his colleagues and that the Medicaid language might not be fully locked in: 'Right now, we're vetting it,' he said.
One lobbyist pointed out hospitals would be happy to make a deal.
'Right now, the Senate bill is so bad for hospitals,' the person argued, 'that if it's softened a little bit, you could … almost neutralize them.'
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