Congress Could Force Patients in Rural America To Make Dire Medical Care Choices

Federal plan to cap Medicaid provider taxes puts rural hospitals on life support – threatening care for millions as states like Ohio and Kentucky brace for devastating cuts.

New Medicaid funding rules proposed by Congress this week would halt efforts at the state level to better fund rural hospitals and deliver services to the most vulnerable populations in those areas. You can be certain that the administrators and staff of those hospitals, as well as leaders of the communities they serve, are watching closely to see if the cuts are enacted. 

Lawmakers at the federal level are trying to make deeper cuts to Medicaid spending in an effort to lower the amount of deficit spending that would be created by President Trump’s spending plan. Trump has dubbed the plan his “big beautiful bill.” 

Feds Would Strip Rural Hospitals of Lifeline Funds

Republican members of the Senate Finance Committee this week released their version of the bill that would drain funding for rural hospitals, which rely heavily on Medicaid funds to treat patients. It’s estimated that 25 to 40 percent of services provided by such hospitals are funded by Medicaid.

The federal government and states share the up-front medical costs for Medicaid patients. The federal government then reimburses states up to 50 percent of their Medicaid spending every year.

Many states fund their portion of the cost by taxing entities that provide those services to Medicaid patients.

The latest proposal in Congress would not only restrict how many patients could receive benefits, but it would also stop states from implementing those provider tax programs to help fund Medicaid services provided to residents.

At the federal level, the thinking is that if states keep taxing providers to fund Medicaid services, then the federal government will have to keep reimbursing states a portion of those costs. 

The downside to that is many experts, along with several Republicans in Congress, namely Sens. Susan Collins of Maine, Lisa Murkowski of Alaska and Josh Hawley of Missouri, have predicted it will decimate rural hospitals.

West Virginia Republican Sen. Jim Justice went a step further, saying that the plan to limit states’ use of provider taxes will “really hurt a lot of folks." Despite that statement, Justice said he is OK with the freeze.

State Lawmakers Sound the Alarm

There are 39 states with at least three or more provider taxes used to help fund Medicaid services. Alaska is the only state with no such tax.

Some states, such as Ohio, have set up a new rural hospital fund using provider taxes to help rural hospitals deliver Medicaid services to patients.

Ohio Governor Mike DeWine and the Republican-led state legislature set up a pilot program called the Rural Ohio Hospital Tax Pilot Program. The measure would allow counties to levy a tax on their local hospitals that would then be used to fund Medicaid services.

DeWine said the pilot program would help ease the financial stress rural hospitals face in Ohio. The plan contained in Ohio House Bill 96 has the blessing of the Ohio Hospital Association.

That state fund reportedly would be neutered by the federal proposal. Ohio has at least three different provider taxes.  

A group of Republican state lawmakers recently sent a letter to their federal counterparts pleading with them to remove the bill language because it would “torpedo” plans to keep rural hospitals functioning.

The American Hospital Association, a 130-year-old trade group of more than 5,000 hospitals and health care providers, this month released the impact on rural hospitals if this plan went into effect.

 More than $50 billion would be lost by 2034, and more than 1.8 million rural Americans would lose health benefits.

Kentucky residents would be impacted the most, with 143,000 losing benefits, followed by 135,000 Californians. More than 86,000 Ohioans would lose Medicaid coverage under the plan by 2034, making it the third most impacted state.

To blunt the effects of the cuts, Collins reportedly is proposing the establishment of a $100 billion relief fund that could provide financial support to affected providers, rural hospitals in particular. Whether that or a similar but smaller fund will wind up in the final draft of the legislation apparently will be decided this weekend. Meanwhile, the Senate parliamentarian has ruled against many of the provisions of the Senate version of the bill, including the Finance Committee’s provider tax framework, which puts the whole thing in flux.

Senate leaders say they plan a long series of votes on amendments of the bill on Sunday. The “vote-arama” likely will go on throughout Sunday night and into Monday. If the Senate does pass its version of the bill, it will have to go back to the House. Lawmakers are under a self-imposed deadline to get the legislation to Trump by the July 4 holiday.

Luke Sullivan has been an investigative reporter for 22 years. Part of The Columbus Dispatch Side Effects investigative team that exposed pharmacy benefit managers. Ohio State graduate. Girl Dad.