How the Senate megabill could backfire on conservatives

A provision in a key Senate committee's version of the GOP megabill will backfire against Republicans by forcing red states to consider doing exactly what Republicans don't want them to: expand Medicaid, the CEO of the South Carolina Hospital Association told POLITICO.
Republicans have sought to shelter the 10 conservative states that have declined to expand Medicaid to cover more low-income people, as Obamacare encourages with generous federal subsidies. But the Senate bill, in an effort to find the savings needed to extend President Donald Trump's 2017 tax cuts, would still blow a hole in the budgets of Palmetto state hospitals by reducing what insurers who contract with the state to provide Medicaid services can pay them.
States and Washington share the insurance program's costs.
'It affects the viability of the whole system,' said Thornton Kirby, chief executive of the South Carolina Hospital Association, which estimates the Senate proposal will cost the state over $2.3 billion annually.
'If you take away this alternative way to balance the budget, you leave us with only one path…Medicaid expansion,' Kirby said.
The Senate is rushing to complete its version of a bill that would enact Trump's agenda using a procedure that requires only a simple majority vote. Trump wants it done by July 4, but with the slim margins in both houses of Congress, the industries affected by the bill are hoping to peel off votes to save themselves from cuts. Republicans can lose no more than three votes in either chamber as long as Democrats remain united in opposition.
To make the case that the restrictions on so-called state-directed payments need to go, the hospital association is leaning on three home state Republicans with clout: Sen. Tim Scott, who has a seat on the Finance Committee that has proposed the restrictions; Rep. Russell Fry, who's on the Energy and Commerce Committee that drafted the Medicaid provisions of the megabill the House passed last month; and Henry McMaster, the governor of South Carolina and, Kirby said, a personal friend.
'I don't want to put him in the hot seat,' Kirby said of McMaster. 'He doesn't want to see [Medicaid] upended.'
Of Scott, Kirby said he's in touch at least every other day and that the senator and Trump ally 'has been a champion.'
'He understands…he doesn't want to go down that path' of Medicaid expansion, Kirby added.
The three Republicans did not immediately respond to requests for comment.
Expanding Medicaid could help replace the revenue the Senate provision would take away because it would make many more people — South Carolina now has one of the nation's higher uninsured rates at 9 percent — eligible for the program. Under Obamacare, the federal government picks up 90 percent of the cost for the new enrollees.
Under the Finance Committee proposal, state-directed payments to hospitals serving Medicaid patients would fall by 10 percent each year until the total payment rate is only 100-110 percent of the Medicare payment rate. In South Carolina, the current payment rate is more than twice the rate paid by Medicare, the federal health insurance program for elderly people.
Hospitals in states that have expanded Medicaid would take an additional hit under the Senate proposal. The Finance Committee would lower the provider tax rate that the 40 states that have expanded Medicaid can levy on hospitals from 6 percent to 3.5 percent. States have used the taxes to boost their federal matching funds, which they have then sent back to hospitals in higher reimbursements.
The Senate would freeze the tax rates in states like South Carolina that haven't expanded Medicaid, but would not require them to lower them.
The version of the megabill the House passed would freeze the rates for all states, a plan Kirby was willing to accept.
On Friday, Sen. Josh Hawley (R-Mo.) urged GOP leaders to strike the Finance Committee language on Medicaid, warning the crackdown won't clear the House.
Republican senators hope to pass their version of the bill next week after which the House would need to pass it before Trump could sign it into law.

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