How the Senate’s Proposed Medicaid Cuts Could Hurt Rural Hospitals
“Rural hospitals across the U.S. — many already hanging by a thread — could take a serious hit if a proposed Medicaid cut in the Senate’s domestic spending bill is signed into law.
The provision, outlined in the 549-page bill released by the Senate Finance Committee on Monday, would gradually limit states’ use of Medicaid’s so-called provider tax.
Medicaid is jointly funded by the federal government and states. States cover the upfront cost of care and then are reimbursed by the federal government for at least 50%.
The provider tax is a state-imposed fee on hospitals and other health care providers to help fund a state’s share of the Medicaid program. When states use provider funds to boost their Medicaid spending, the federal government gives them more money because it’s required to match it.
The tax must apply to all providers within a class — so if a state wants to tax hospitals, it must include all licensed hospitals. Most states have multiple provider taxes, including taxes for nursing facilities and ambulance services, said Edwin Park, a research professor at the Georgetown University McCourt School of Public Policy who focuses primarily on Medicaid.
All states, except for Alaska, have at least one provider tax, Park said. A good chunk of the money raised goes toward supporting rural hospitals, which often serve a higher share of low-income and Medicaid patients.
“It’s a key financing source for rural hospitals, which tend to have much thinner operating margins,” Park said. In recent years, he added, rural hospitals have “had a rash of closures, staff cuts and service cuts” due to financial hardship.
A report from the Center for Healthcare Quality and Payment Reform, a think tank, found that one-third of all rural hospitals are at risk of closing.”
Read more at NBC News.