Guthrie. Photo: Caroline Brehman/CQ Roll Call
House Energy and Commerce Chair Brett Guthrie is turning his attention to potential changes to Medicaid provider taxes and state-directed payments as a way to generate savings in reconciliation.
Why it matters: Lawmakers are starting to look at less controversial options to overhaul the safety net program. But although these steps might not trigger coverage losses, they could antagonize hospitals and other providers.
- Supplemental state payments to providers that bump reimbursements above standard Medicaid rates have ballooned in recent years. GAO projected the payments reached at least $38.5 billion in 2022 and would continue to grow.
- States often tax providers, instead of using general funds, to pay for their share of state-directed payments, most of which go to hospitals.
What they're saying: "We definitely have to look at the continuing expansion of state-directed payments. I'm not sure where we're going to go with it, but it's something we have to talk about," Guthrie told Axios on Tuesday.
- "We're still looking at everything. I've been talking to hospitals in my area.… They've been able to do it by doing the provider tax."
- "Medicaid has always been premised on, states have skin in the game, federal government has a bigger skin in the game.… When states just put a provider tax on and use that for their state dollars, it almost becomes an open-ended checkbook in some ways."
- "That's one of the things that we want to fix. We're not talking about taking anybody's benefits away."
Guthrie acknowledged that it's possible the $880 billion number that Energy and Commerce was instructed to generate in reconciliation savings could change as the House and Senate negotiate parameters of the package.
- "The Senate could go higher, they could go lower. Until we get a Senate number, I couldn't give you an answer [on whether it will change]. The Senate has got to decide and then we've got to sit down and negotiate."
State of play: Calls for more oversight of state-directed payments are intensifying, including from the Trump-aligned Paragon Health Institute, which published a paper Wednesday that characterized the system as "legalized Medicaid money-laundering."
- Paragon president Brian Blase says that the practice could be deemed "waste and abuse" within Medicaid — the only categories that President Trump has said he is OK with touching in the program.
- MacPac estimated that directed payments approved as of August totaled more than $110 billion in 2024, which was almost a 60% increase from 2023 cost projections.
The other side: Hospital systems and providers would likely push back against any overhaul of state-directed payments, which they say help close gaps in reimbursements between Medicaid and other payers.
