Senate Republicans are proposing deeper and broader cuts to Medicaid than their counterparts in the House — heightening concerns among hospital leaders who were already warning of significant risks to patient access, insurance coverage and financial stability for providers.
The Senate Finance Committee’s budget reconciliation draft, released June 16, aims to rein in Medicaid spending through tighter eligibility rules, a reduction in provider tax limits and an expansion of work requirements for enrollees, according to Politico. The proposal is part of a broader legislative effort aligned with President Donald Trump’s agenda.
Provider tax phase-down and work requirements
One of the most contentious elements in the Senate draft is a phased reduction of the maximum allowable provider tax rate from 6% to 3.5% in Medicaid expansion states — a significant departure from the House bill, which would only freeze provider tax rates at current levels, according to Politico. The Senate plan would begin phasing in the cap in 2027 and fully implement it by 2031. Nursing and intermediate care facilities would be exempt.
Provider taxes — used by every state except Alaska — allow states to leverage federal Medicaid matching funds. Supporters argue they are essential to funding care for low-income populations, while critics, including CMS, say the tactic is being exploited. In a May 12 statement, CMS compared the practice to “money laundering,” citing instances where states collect taxes from providers, receive enhanced federal matches, and then return the funds to those same providers.
Under Medicaid expansion, the federal government covers up to 90% of costs, compared to about 50% for traditional Medicaid. Reducing states’ ability to use provider taxes could significantly impact how states fund their programs — and how much support hospitals receive.
The Senate bill also expands work requirements beyond those in the House plan. While the House targeted childless adults, the Senate version would require adults with children over age 14 to work or volunteer at least 80 hours per month to remain eligible, according to The New York Times. Analysts predict this could push Medicaid disenrollments well above the 5.2 million projected under the House bill.
Hospital leaders push back
Hospital leaders were quick to denounce the Senate proposal, warning that the deeper cuts would exacerbate chronic underpayment from Medicaid, increase uncompensated care burdens, and threaten service delivery — particularly in rural and safety-net hospitals.
“The Senate just made a bad bill worse. The Senate’s slashes to important state Medicaid programs will further threaten access to care for millions of hardworking Americans,” Chip Kahn, president and CEO of the Federation of American Hospitals, said in a June 16 statement. “Rural communities across the country will be the hardest hit, with struggling hospitals compelled to face difficult decisions about what services to cut.”
Mr. Kahn called on hospitals to urge Senators to reject the Senate proposal and halt the further deepening of Medicaid cuts already advanced by the House.
“Senators cannot let their local hospitals shutter services or close their doors,” he said. “Now is the time to stand up for hardworking patients, push back on these draconian reductions, and protect Americans’ access to 24/7 care.”
Rick Pollack, president and CEO of the American Hospital Association, expressed concern about the cascading effects of the proposed changes:
“It appears that the provisions further undermine the ability for hospitals to provide care to Medicaid patients. This bill moves in the wrong direction,” Mr. Pollack said. “The magnitude of Medicaid reductions and changes to health insurance marketplaces will shift millions of Americans from insured to uninsured status.”
Mr. Pollack added that the erosion of provider tax mechanisms and state-directed payment programs could force hospitals to reconsider services or even shut down, especially in rural areas.
“These cuts will strain emergency departments as they become the family doctor to millions of newly uninsured people,” Mr. Pollack said. “The proposal will force hospitals to reconsider services or potentially close, particularly in rural areas. As the Senate continues its deliberation, we urge consideration of the far-ranging negative consequences to our nation’s patients and hospitals.”
Bruce Siegel, MD, President and CEO of America’s Essential Hospitals, echoed those warnings:
“The draconian Medicaid cuts contained in the Senate bill would devastate healthcare access for millions of Americans and hollow out the vital role essential hospitals play in their communities,” Dr. Siegei said. “This bill would take away health insurance coverage for millions of beneficiaries, including those who rely on Medicaid for essential and mental health services, and jeopardize the health and economic stability of our communities.”
Dr. Siegel said AEH will continue to work with lawmakers to find positive solutions to sustain and strengthen Medicaid as the bill makes its way back to the House.
Further compounding concerns, the Medical Group Management Association also raised alarm over provisions affecting physician practices.
“Legislative language emerging from the Senate abandons America’s physician practices by ignoring current and future cuts to Medicare reimbursement,” Anders Gilberg, MGMA’s senior vice president of government affairs, said. “It largely retains problematic student loan provisions from the House bill, which will exacerbate physician workforce shortages. The Senate’s proposed additional Medicaid cuts will result in skyrocketing uncompensated care, compounding financial problems for physicians treating patients in underserved areas and hospitals subject to EMTALA. In its current form, the bill offers little or nothing positive for medical practices and their patients.”
What’s next?
The Senate’s proposal sets the stage for challenging negotiations with the House, which on May 22 passed its own version of the bill that included nearly $1 trillion in health program cuts across Medicaid and ACA marketplaces. The Congressional Budget Office estimates the combined measures could leave 11 million more Americans uninsured by 2034.
Republican lawmakers acknowledge that the Medicaid language is subject to further negotiation, and hospital associations are expected to ramp up advocacy efforts as the bill moves through Congress.
For hospitals and health systems, the stakes are high. If enacted, the Senate bill could trigger far-reaching changes to state Medicaid financing, accelerate coverage losses and deepen fiscal pressure on providers — particularly those serving vulnerable populations.
