April 29, 2025

STATE BUDGET

Late yesterday, Governor Hochul announced a ‘general agreement’ on a SFY 26 state budget deal although lawmakers are said to still be hammering out the specifics on funding (having gotten past the policy issues that largely prevented an on time budget). They will need to close this aspect of the budget making process down before lawmakers begin putting it to a vote later this week.

The Governor claims she got ‘everything she wanted’ although the headlines appear to include some concessions on several key policy issues that worked their way into budget negotiations this year.

According to the NY Times, the budget deal, which will now go to the Legislature for a full vote, includes changes to make it easier ‘to remove people in psychiatric crisis’ from public spaces to be evaluated for treatment.

Here’s what Politico is saying this morning re: the apparent deal on Involuntary Commitment the Governor says will “clarify and strengthen” involuntary commitment regulations, expand Kendra’s Law and allocate $40 million toward mental health initiatives:

Hochul said some aspects of the budget, such as Medicaid spending, are still being worked out with the Legislature. Budget Director Blake Washington said the state is expected to pass a $254 billion state budget by Thursday.

But they struck a deal on certain aspects of the budget, such as involuntary treatment, which will soon apply to a person who is at a “substantial risk of physical harm or unable to meet their basic needs,” Hochul’s general counsel Brian Mahanna said to reporters Monday.

“It has always been a travesty to see people languishing on the streets or subways who clearly cannot make decisions for themselves, who feel abandoned,” Hochul told reporters. “I just think it’s far more compassionate for us to make sure that they get the help they need.”

Discharge requirements for hospitals to ensure that care is coordinated “more holistically,” are also included in the budget deal. Nurse practitioners will also be allowed to make the decision to involuntarily commit an individual, the law currently requires that two doctors evaluate each patient.

The third addition to commitment regulations will require, “when feasible,” that an individual is transported by EMS — rather than a police officer — to a hospital for treatment, Mahanna added.

In addition to involuntary commitment, Hochul announced an expansion of Kendra’s Law — a 1999 measure named for Kendra Webdale, who was killed when a severely mentally ill man pushed her in front of a subway train — which allows courts to order individuals to undergo outpatient mental health treatment. The program is known as assisted outpatient treatment, or AOT, and is implemented by local health departments.

The state is expected to also invest an additional $40 million that will be allocated toward Safe Options Support teams and 24/7 shelters sites throughout the city subway system.

Medicaid spending, and hospital funding are among several leftover items still being discussed with the Legislature.

Note: Yesterday afternoon we sent all NYS Council members information regarding the ‘additional revenue’ (beyond what the state needs to have on hand to pay for its core operating budget) the joint legislative budget subcommittees can ‘spend’ on projects that are important to them. Unfortunately the Mental Hygiene Committee does not have sufficient resources to cover the difference between what the Governor’s executive budget proposal committed to a Targeted Inflationary Increase (2.1%), and our request (7.8%). As such, the leader’s joint budget committee will have to either come up with the remaining funds (while trying to squeeze more resources out of the executive) to get us close to 7.8%, or fail to get us to 7.8 despite the fact that the Assembly and the Senate both made commitments to get to 7.8% in their one-house budget bills (but it was never clear where the funds to get us there would come from). As we have said many times, one house budget bills are in many ways aspirational; however, we won’t give up this fight until the ink is dry on a new budget deal

GOVERNOR HOCHUL ANNOUNCES AGREEMENT ON FY 2026 STATE BUDGET

‘Governor Kathy Hochul today announced an agreement has been reached with legislative leaders on key priorities in the Fiscal Year 2026 New York State Budget.

“I promised New Yorkers to fight like hell to put money back in their pockets and make our streets and subways safer. That’s exactly what this budget will do,” Governor Hochul said. “Working with our partners in the Legislature we’ve reached an agreement to pass a balanced, fiscally responsible budget. Good things take time, and this budget is going to make a real difference for New York families.”

Highlights of the Fiscal Year 2026 Budget include:

• A $1 billion tax cut for middle-class and low-income New Yorkers, bringing tax rates to their lowest levels in nearly 70 years.
• Delivering a sweeping increase to the Child Tax Credit by giving eligible families a $1,000 credit for kids younger than 4 years old and a $500 credit for kids ages 4-16, effectively doubling the credit for the average family.
• Expanding access to child care by investing $2.2 billion statewide, including a $350 million investment to save child care subsidies for tens of thousands of New York City families.
• Sending New York’s first-ever Inflation Refund checks, which will dedicate $2 billion to provide direct cash assistance to more than 8 million New Yorkers with checks of up to $400 per family.
• Reducing the Payroll Mobility Tax for small businesses, and eliminating it for self-employed individuals earning $150,000 or less.
• Providing $340 million to ensure free breakfast and lunch for every K-12 student in New York, saving families an average of $1,600 per child.
• Investing a record $357 million in gun violence prevention programs that have helped drive gun violence down by more than 50% when compared to pandemic-era peaks.
• Fixing the discovery laws to support victims and survivors, and reduce the number of cases being thrown out on technicalities, while investing $120 million in funding for discovery law compliance for prosecutors and defense attorneys.
• Creating a new Class B misdemeanor to crack down on individuals who use a mask to conceal their identity when committing a Class A misdemeanor or higher crime or fleeing the scene immediately after committing such a crime.
• Making our subways safer by investing $77 million for police officers on every overnight subway train, installing platform barriers and LED lighting and allocating $25 million for welcome centers to connect homeless individuals with services and care.
• Strengthening involuntary commitment, improving Kendra’s Law and investing $16.5 million in Assisted Outpatient Treatment and $2 million in OMH staffing to ensure people with severe mental illness get compassionate care.
• Strengthening the continuum of mental health care by investing $160 million to create a 100 new forensic inpatient psychiatric beds in New York City.
• Allocating over $37 billion in total School Aid, while making common-sense formula changes to improve our long-term fiscal outlook.
• Setting a statewide bell-to-bell distraction-free schools policy with a $13.5 million investment to help schools operationalize bans on smart phone and other internet enabled devices usage during the school day, making New York the largest state in the nation with a bell-to-bell ban.
• Investing $47 million to make community college free for adult students pursuing associate degrees in certain high-demand industries.
• Leveling the playing field for homebuyers by banning private equity purchases within the first 90 days a home is on the market and making investments in Pro-Housing Communities and City of Yes.
• Making a record $1 billion investment in climate priorities, including assistance to electrify homes, thermal energy networks, EV charging infrastructure and renewable energy projects.
• Making the biggest capital investment in New York’s transportation history by fully funding the Metropolitan Transportation Authority’s (MTA’s) proposed $68.4 billion 2025-2029 capital plan to build the Interborough Express, crack down on fare evasion and focus on much needed repairs and upgrades.
• Investing an additional $800 million in the Department of Transportation’s 5-year Capital Plan to support core highway and bridge construction projects.
• Modernizing the Hudson Valley Rail System to reduce travel time, increase connectivity and strengthen economic connections across the region.

With a conceptual agreement in place, the legislative houses are expected to pass bills that will enact these priorities in the coming days. Based on a preliminary assessment of the negotiated changes to the Executive proposal, the total Budget for FY 2026 is currently estimated at $254 billion. The FY 2026 Budget does not raise income or statewide business taxes, maintains record State reserves to safeguard state finances and grants the Governor the powers necessary to make future adjustments if actions by the federal government require.

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Elevance Health Sued by State Employees over ‘Ghost Networks’

State employees are suing a subsidiary of insurance giant Elevance Health for failing to update its directory of mental health providers, leaving them scouring for an in-network clinician or paying large sums out-of-pocket to get care.

Lawyers representing 1.1 million state employees filed a class-action lawsuit on Monday against Boston, Massachusetts-based Carelon Behavioral Health, alleging that the company published a false network of mental health doctors and therapists that either didn’t accept new patients, didn’t take their insurance or flat out didn’t exist. The complaint, filed in the Southern District of New York, alleged that the inaccurate directory – often called a “ghost network” – forced patients to make dozens of calls before finding a clinician or pay hundreds of dollars out-of-pocket to secure treatment. Employees covered by the lawsuit are covered by the Empire Plan, a health plan for state employees and municipal workers outside of New York City. Carelon provides the mental health benefits within that plan.

A spokesperson from Carelon Behavioral Health did not respond to a request for comment on Monday.

Ghost networks have come under scrutiny in recent years as more patients struggle to find a therapist or psychiatrist covered by their insurance. Only 14% of the providers listed in mental health provider directories of major insurance companies statewide such as Aetna, Cigna, United Healthcare and Anthem were open for new bookings, according to a secret shopper study conducted by Attorney General Letitia James in 2023. Inaccurate directories can lead to delayed care or significant out-of-pocket costs for patients who already pay for insurance that is supposed to cover mental health treatment.

Plaintiffs in the lawsuit said that they made call after call to find a mental health provider, but repeatedly came up short on securing treatment. Steven Marks, an employee of the State University of New York who lives in Rochester, had an appointment with a mental health provider in 2023 who he thought was in-network. But after the appointment, he was notified that his provider was out-of-network and received a nearly $500 surprise bill, according to the lawsuit.

Marks tried to find a new in-network provider on Carelon’s directory, only to call 15 separate clinicians who didn’t have availability or didn’t take his insurance, the complaint alleged.

The lawsuit is requesting that the courts mandate that Carelon update its directory and provide adequate provider lists to state employees.

The lawsuit is the latest to target ghost networks provided by state insurers. Lawyers for patients in New York filed a separate class-action lawsuit against Anthem in October alleging that the company maintained ghost networks that caused patients harm. Anthem is also a subsidiary of Elevance Health.

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Medicaid cuts threaten to leave Hochul with political wounds
The Democratic governor is blaming Republicans for Medicaid strife, as her team grapples with the fallout.
By Katelyn Cordero, Politico
04/28/2025

ALBANY, New York — New York Gov. Kathy Hochul is facing a threat of political backlash if the state is hit hard by looming federal cuts to Medicaid.

With Congressional Republicans on the hook to realize $880 billion in savings by Sept. 30, the Democratic governor is now forced to look for ways to compensate for the anticipated hit to the state’s $124 billion Medicaid budget — one of the largest in the country. Hochul would contend with the fiscal fallout from the potential cuts, forcing her to consider contingencies that come with their own political risks.
Seeming to recognize the tough spot she’s in, Hochul is aiming her frustrations at the state’s seven House Republicans.

“They’re in the majority, they have the power,” Hochul said of Republicans recently. “You have the power, and if you don’t use that power, then you are complicit in this attack on the American people.”
Hochul’s proposed $252 billion budget, which is now more than three weeks late, leans on previously enacted savings initiatives — such as a troubled home care consolidation and a 2023 tweak to Medicaid’s pharmacy benefit.

More would need to be done if Republicans in Washington go through with their proposed Medicaid cuts. State Budget Director Blake Washington said the state Department of Health is looking for ways to restrain costs. Health Commissioner James McDonald said any policy changes, even administrative ones that don’t impact care, are likely to face staunch opposition.

“This is not the type of money that the state of New York can just materialize. We are not in the position to offset cuts to spending,” McDonald told the state Public Health and Planning Council at a meeting on April 10. He said even if the state cuts back on administrative costs that don’t impact care, any change it implements in the program is likely to face opposition.

Much of the savings national Republicans are contemplating would require major changes to Medicaid, and any cuts would force Hochul and the Democratic-controlled state Legislature to pull back on components of their Medicaid budget. The federal government covers roughly 60 percent of New York’s Medicaid spending, leaving the state vulnerable to forced belt-tightening.

While Hochul has been blaming House Republicans — including one of her chief rivals, Rep. Mike Lawler — health policy experts say she is likely to face repercussions stemming from how the state reacts to cuts.
“It’s like a version of the blame game. If they have a special session where they can say, ‘We were forced to do this by the ogres in Washington,’ the next phase of that will be a bunch or school districts and hospitals making the same complaint about Albany,” Bill Hammond, a senior fellow at Empire Center, told POLITICO.

This comes at a delicate time for the governor. Her popularity has been inching up and is in the positive for the first time in 16 months, according to a Siena poll released Tuesday. At this time next year, she’ll either be in the midst of a Democratic primary or — if unopposed — gearing up for the general election.

New York Republicans like Lawler, who also is up for reelection next year, face their own political risks. Nearly 45 percent of his constituents are Medicaid recipients. Lawler and 12 of his GOP colleagues signed onto a recent letter to House Speaker Mike Johnson saying they “cannot and will not support a final reconciliation bill that includes any reduction in Medicaid coverage for vulnerable populations.”

State and House Republicans — and some state Democrats — say Albany leaders should include contingency funds in the overdue state budget. They’ve also called for Hochul to review ways to drive down health care spending.

“There’s just so much stuff that the federal government is going to do that we just need to be better prepared for, and I don’t think they are prepared,” state Sen. Gustavo Rivera, who chairs the Senate health committee, said in an interview.

Instead, Hochul’s spending plan would grow the state’s Medicaid budget by 7 percent across all funding sources, compared to the past fiscal year. Before the state even learned Medicaid might face significant cuts, Washington told reporters in January that the program is experiencing “unsustainable growth,” particularly in long-term care.

That increase has been driven largely by growing enrollment in pricey long-term care programs, which account for roughly 60 percent of spending under the program’s “global cap.” About 7 million New Yorkers are enrolled in Medicaid, according to state budget documents — 900,000 more than before Covid.
Federal revenue from a new tax on managed care organizations, or MCOs, would offset a small chunk of state Medicaid spending this fiscal year. But much of that money would be used for the executive budget’s new investments in Medicaid rates or canceled out by rapidly growing costs of care for aging baby boomers, expected to comprise 23 percent of the population by 2030.

Hochul proposed Medicaid rate hikes for hospitals, nursing homes, community health centers, assisted living facilities and physician fee schedules — all supported by more than $600 million in federal funds from the new tax on MCOs.

Health care policy experts and officials say the state should save the funding from the MCO tax to backfill potential federal cuts. But Hochul, Assembly Speaker Carl Heastie and Sen. Majority Leader Andrea Stewart-Cousins have said they do not plan to address the cuts in the state budget, as it’s still unclear what’s to come.

Rivera proposed taxing the rich, abandoning Hochul’s plan to hand out inflationary rebate checks and saving the additional tax revenue to close future fiscal gaps.

Aside from the home care consolidation, Washington has not provided examples of how the state is addressing Medicaid growth.

He suggested that a consolidation of the state’s consumer-directed personal assistance program could save the state and federal government more than $500 million each, but the transition has not been smooth. Washington said during a recent press conference those savings might be less than originally anticipated because thousands of people are switching to other, possibly more expensive programs.

“When you start to look long term, there will be some decisions that must be made to make sure that the Medicaid program is delivering what we need it to,” Washington said in response to a question from POLITICO. “We have a whole series of experts at the Department of Health that are monitoring spending and coming up with ideas into the future to help to restrain costs.”

Hochul and legislative leaders’ decision to remain silent on their contingency plans about the federal budget in ongoing state budget negotiations leaves the door open to a special session later this year. Health policy experts say state officials are marching down a dangerous path if they think they can kick the Medicaid can down the road.

Hammond called Hochul’s health care spending proposal “reckless in a good year,” as he believes some of the proposed increases should be put on hold.

“This idea that we’re going to pretend everything is normal, and we’re going to come back in the middle of the year, there’s a way in which that makes things worse,” Hammond said in an interview. “You have to cut more deeply when you put off the pain, when you delay the inevitable, you have to cut more painfully.”
He said the state should cut back on investments it’s planning to make with the MCO tax revenue and instead invest that money in areas of the industry being targeted by the federal government.

“It was kind of an unusual budget in that it called for such large increases and didn’t do anything to control costs, even though it said some of those cost increases were unsustainable,” Hammond said. “A lot of the reaction (to the budget) was, ‘Okay, so she’s already running for re-election, right? She’s trying to make her various interest groups happy, to smooth her path to re-election.”

While New York Democrats are blaming House Republicans when it comes to potential health care cuts, House Republicans are pointing right back at Democrats and their spending projections. When asked about Hochul’s call for Republicans to step up, Lawler said the governor should be looking at her own budget.
“For them to sit and point the finger, when they’re talking about increasing state spending by billions of dollars more is laughable,” Lawler told POLITICO. “I’m sure all my colleagues would be happy to hear them explain why they think increasing state spending by tens of billions of dollars makes sense at a time when New York is losing population.”

“It’s entirely political. I’ve been clear on the issue of Medicaid that we will protect those who rely on these benefits,” Lawler noted — and then accused the state of misusing taxpayer money on its immigration policies.

Republican Assemblymember Josh Jensen said he wishes the governor and his colleagues in Congress would work together to find a solution that protects New Yorkers from what’s to come.

“It’s always easier for a politician of any party to blame the other party for when there’s not an easy solution because it’s easy to make somebody else the villain,” Jensen said. “While our Republicans in Congress who represent New York could be fighting to ensure that New York State’s Medicaid dollars are secure, there should be more of an onus — especially from state leaders — to want to work cooperatively with our representatives in Congress from both parties.”

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FEDERAL BUDGET RECONCILIATION

Running the Numbers: The 50-State Impacts of Potential Medicaid Cuts
Manatt Health Solutions, 4/2025

Over the last few months, we have dedicated several 80 Million articles to the $880 billion in Medicaid cuts under consideration in Congress, explaining the threat they pose to the program and the latest twists and turns in the budget reconciliation process. Today, we are all about the numbers. Drawing on Manatt Health’s 50-State Medicaid Financing Model and a new toolkit that we recently prepared for states in partnership with the Robert Wood Johnson Foundation funded State Health Value Strategies program, we explore what several key proposals to cut Medicaid would mean nationally and for each of the 50 states and D.C.

Before we dive into the results, here is what you should know about Manatt’s 50-State Medicaid Financing Model. The model uses publicly available data sources supplemented by Manatt research and Congressional Budget Office (CBO) projections to establish a “baseline” of how we expect Medicaid expenditures and enrollment to change over time under current law (that is, if Congress made no changes to Medicaid). We develop this baseline for each of the 50 states and D.C., and for each of five key Medicaid eligibility groups: seniors, people with disabilities, children, expansion adults and other adults. (For a detailed explanation of methodology, see Section 3, page 2 of the toolkit). We then assess what happens to expenditures and enrollment if any one of several proposals under consideration in Congress is adopted. Since we do not know how states will respond to any given proposal, we model a number of different scenarios for state responses, allowing states and stakeholders to determine what they think is most likely.

For the purposes of running the numbers, we look at four of the major proposals that seem most likely to advance through budget reconciliation, at least based on the latest news articles plus a touch of tea leaf reading.

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Again, (federal) OMB ‘budget draft’ referred to in the article below is a very preliminary and overtly political proposal from the Trump administration. There is still a long way to go before it becomes law, if ever.

Trump budget draft ends Narcan program and other addiction measures.

The opioid overdose reversal medication commercially known as Narcan saves hundreds of thousands of lives a year and is routinely praised by public health experts for contributing to the continuing drop in opioid-related deaths. But the Trump administration plans to terminate a $56 million annual grant program that distributes doses and trains emergency responders in communities across the country to administer them, according to a draft budget proposal.

In the document, which outlines details of the drastic reorganization and shrinking planned for the Department of Health and Human Services, the grant is among many addiction prevention and treatment programs to be zeroed out.

States and local governments have other resources for obtaining doses of Narcan, which is also known by its generic name, naloxone. One of the main sources, a program of block grants for states to use to pay for various measures to combat opioid addiction, does not appear to have been cut.

But addiction specialists are worried about the symbolic as well as practical implications of shutting down a federal grant designated specifically for naloxone training and distribution.

“Reducing the funding for naloxone and overdose prevention sends the message that we would rather people who use drugs die than get the support they need and deserve,” said Dr. Melody Glenn, an addiction medicine physician and assistant professor at the University of Arizona, who monitors such programs along the state’s southern border.

Neither the Department of Health and Human Services nor the White House’s drug policy office responded to requests for comment.

Although budget decisions are not finalized and could be adjusted, Dr. Glenn and others see the fact that the Trump administration has not even opened applications for new grants as another indication that the programs may be eliminated.

Other addiction-related grants on the chopping block include those offering treatment for pregnant and postpartum women; peer support programs typically run by people who are in recovery; a program called the “youth prevention and recovery initiative”; and programs that develop pain management protocols for emergency departments in lieu of opioids.

The federal health secretary, Robert F. Kennedy Jr., has long shown a passionate interest in addressing the drug crisis and has been outspoken about his own recovery from heroin addiction. The proposed elimination of addiction programs seems at odds with that goal. Last year, Mr. Kennedy’s presidential campaign produced a documentary that outlined federally supported pathways out of addiction.

The grants were awarded through the Substance Abuse and Mental Health Services Administration, an agency within the federal health department that would itself be eliminated under the draft budget proposal, though some of its programs would continue under a new entity, the Administration for a Healthy America.

In 2024, recipients of the naloxone grants, including cities, tribes and nonprofit groups, trained 66,000 police officers, fire fighters and emergency medical responders, and distributed over 282,500 naloxone kits, according to a spokesman for the substance abuse agency.

“Narcan has been kind of a godsend as far as opioid epidemics are concerned, and we certainly are in the middle of one now with fentanyl,” said Donald McNamara, who oversees naloxone procurement and training for the Los Angeles County Sheriff’s Department. “We need this funding source because it’s saving lives every day.”

Matthew Cushman, a fire department paramedic in Raytown, Mo., said that through the naloxone grant program, he had trained thousands of police officers, firefighters and emergency medical responders throughout Kansas City and western rural areas. The program provides trainees with pouches of naloxone to administer in the field plus “leave behind” kits with information about detox and treatment clinics.

In 2023, federal figures started to show that national opioid deaths were finally declining, progress that many public health experts attribute in some measure to wider availability of the drug, which the Food and Drug Administration approved for over-the-counter sales that year.

Tennessee reports that between 2017 and 2024, 103,000 lives saved were directly attributable to naloxone. In Kentucky, which trains and supplies emergency medical workers in 68 rural communities, a health department spokeswoman noted that in 2023, overdose fatalities dropped by nearly 10 percent.

And though the focus of the Trump administration’s Office of National Drug Control Policy is weighted toward border policing and drug prosecutions, its priorities, released in an official statement this month, include the goal of expanding access to “lifesaving opioid overdose reversal medications like naloxone.”

“They immediately reference how much they want to support first responders and naloxone distribution,” said Rachel Winograd, director of the addiction science team at the University of Missouri-St. Louis, who oversees the state’s federally funded naloxone program. “Juxtaposing those statements of support with the proposed eliminations is extremely confusing.”

Mr. Cushman, the paramedic in Missouri, said that ending the naloxone grant program would not only cut off a source of the medication to emergency responders but would also stop classes that do significantly more than teach how to administer it.

He cited the insights offered by his co-instructor, Ray Rath, who is in recovery from heroin and is a certified peer support counselor. In training sessions, Mr. Rath recounts how, after a nasal spray of Narcan yanked him back from a heroin overdose, he found himself on the ground, looking up at police officers and emergency medical responders. They were snickering.

“Ah this junkie again, he’s just going to kill himself; we’re out here for no reason,” he recalled them saying.

Mr. Rath said he speaks with trainees about how the individuals they revive are “people that have an illness.”

“And once we start treating them like people, they feel like people,” he continued. “They feel cared about, and they want to make a change.”

He estimated that during the years he used opioids, naloxone revived him from overdoses at least 10 times. He has been in recovery for five years, a training instructor for the last three. He also works in homeless encampments in Kansas, offering services to people who use drugs. The back of his T-shirt reads: “Hope Dealer.”

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As you read the article (below) you are right to be concerned for current state budget negotiations and the states overall reliance on a new provider tax CMS approved last year allowing New York to implement an MCO Tax on health insurers.

In general, NYS generates billions of federal dollars utilizing a variety of provider taxes as described in the article.

It was the Biden Administration that approved New York’s application to implement the MCO Tax, and the Governor is under great pressure to deliver on this implementation given the promises that were made last year to hospitals and nursing homes where they are waiting on promised rate increases that were only partially delivered in last year’s budget. The remainder is supposed to come from New York’s new MCO Tax.

Provider taxes under fire as Congress looks for Medicaid cuts

Conservatives liken state provider taxes to “money laundering” and see limiting these financing tools as a way to slash federal healthcare spending.

Modern Healthcare, 4/28

When Rep. Chip Roy (R-Texas) grudgingly supported the budget that paved the way for renewing President Donald Trump’s tax cuts, he signaled that the price for his vote included targeting an arcane but growing source of state Medicaid funding: provider taxes.

States levy provider taxes to help fund their share of spending in the joint federal-state health program, which effectively shifts a greater portion of Medicaid costs to the federal government. Often, providers volunteer to pay these taxes, or at least don’t loudly protest, because they sustain Medicaid.

The tactic is entirely legal under federal law. And despite halting efforts dating to President George W. Bush’s administration and since to limit provider taxes, states have grown increasingly dependent on them over the decades. That’s made these taxes a target for conservatives such as Roy, who liken them to a criminal enterprise.

When Congress completed the fiscal 2025 budget resolution April 10, Roy made clear that his continued cooperation with GOP leaders is dependent on policies that curb provider taxes. He also declared that Trump is on his side.

“The president committed to a minimum of $1 trillion in real reductions in mandatory spending” including “Medicaid reforms addressing eligibility, waste, fraud, abuse and the disastrous money laundering schemes pervasive in the program,” Roy said in a news release at the time.

The budget resolution proposes cutting at least $1.5 trillion in spending over the next decade to partially offset the $4.5 trillion cost of extending expired and expiring provisions of the Tax Cut and Jobs Act of 2017. Congress returned from a two-week recess Monday and the Republican majority intends to move swiftly on the tax-and-spending-cuts package.

The House Energy and Commerce Committee, which has jurisdiction over Medicaid and Medicare, is responsible for finding up to $880 billion in spending reductions. Trump has declared Medicare off-limits. Excluding Medicare means Medicaid is the likely source for nearly all of those cuts, according to the Congressional Budget Office.

Trump also vowed to veto legislation that cuts Medicaid in an interview with Time magazine last week. “They’re going to look at waste, fraud and abuse,” he said. But provider taxes and other financing mechanisms states use to maximize federal Medicaid outlays plausibly fit under the expansive definition of “waste, fraud and abuse” the GOP has adopted.

‘Really painful cuts’

Curbing or eliminating provider taxes, or healthcare-related taxes as they are also called, could go a long way to reaching the $880 billion goal, Brian Blase, president of the right-leaning Paragon Institute, said during a briefing to congressional aides and reporters on the day the House approved the final budget resolution.

“These are various savings that we expect would come from a full elimination of states ability to tax providers,” Blase said, displaying a chart that described healthcare-related taxes as “money laundering.” According to Blase, this alone would save the federal government at least $700 billion over 10 years.

Limiting or banning provider taxes would reduce federal spending, but it wouldn’t make Medicaid costs disappear.

“Governors and state legislatures are given no choice but to make really painful cuts, really large cuts to their Medicaid programs, because they’re both getting less federal funding than they would under current law, and they would be restricted on their ability to raise revenues,” Georgetown University professor Edwin Park said during a virtual briefing the school’s Center for Children and Families hosted Wednesday.

The concept of provider taxes is not very complicated: They are levies on providers and health insurance companies that states use to finance their share of Medicaid costs while triggering bigger federal payments.

Every state but Alaska has some form of provider tax, according to the health policy research institution KFF. The Government Accountability Office, a nonpartisan investigative arm of Congress, reported the share of state Medicaid funding derived from provider taxes rose from 7% in 2008 to 17% in 2018. It is believed to be higher now.

The money laundering charge is based on the fact that most of the taxes get paid back to providers via Medicaid reimbursements. Providers typically come out ahead on the deal.

Where things get complicated is in how the taxes and payments are defined, measured and regulated. One key restriction is that the taxes must be broad-based. States also may not pay out more than 6% of a provider’s net revenue. And there are complicated statistical measures the Centers for Medicare and Medicaid Services uses to regulate payments.

CMS weighs regulation
CMS may be on the verge of taking action against provider taxes without Congress.

The agency submitted a proposed rule — the text of which is not public — to the White House Office of Management and Budget on April 19 entitled “Preserving Medicaid Funding for Vulnerable Populations — Closing a Health Care-Related Tax Loophole.” The Health and Human Services Department first declared its intention to draft this regulation in the Unified Agenda the OMB published in December, when President Joe Biden still occupied the White House.

“This proposed rule would update existing regulations that govern the process for states to obtain a waiver of the statutory requirements that healthcare-related taxes are broad-based and uniform to ensure that taxes passing the statistical test are generally redistributive,” HHS wrote at the time.

That language suggests the statistical analyses that CMS uses could be at play.

Congress rushes to cut taxes, Medicaid

Big savings, however, would likely have to come from Congress. The juiciest target is the 6% cap. According to the CBO and KFF, lowering that 6% cap to 0% would save the federal government $612 billion over 10 years. Cutting the threshold to 5% would save $48 billion.

States, providers and Medicaid enrollees would be squeezed, said Robin Rudowitz, director of the KFF Program on Medicaid and the Uninsured.

“It would make it more difficult for states to come up with their state share of spending. And if that happens, states have options to basically reduce spending on the program, raise taxes or cut spending from other areas,” Rudowitz said.

Park echoed those sentiments. “States will have to make deep, damaging cuts to their Medicaid programs — not just provider payment rates, but eligibility and benefits,” he said. Providers share these concerns, he said.

Provider taxes and Medicaid financing are legitimate issues to address, but Republicans are hyping these taxes to disguise the real consequences of huge Medicaid cuts, whatever form they may take, Park said. “It allows federal policymakers to misleadingly claim they’re not making explicit cuts to eligibility, benefits and provider payments,” he said.

House Republicans have floated policies that would slash healthcare spending, largely in Medicaid, by trillions of dollars. “These aren’t proposals that are targeted or designed to deal with specific issues that have risen in terms of state compliance with the long-standing provider tax rules that raise concern, but rather they are about generating significant federal savings,” Park said.

House Republican leaders are pressing to extend the Trump tax cuts and reduce federal spending by the end of May. The Energy and Commerce Committee is likely to begin debating specific measures early next month.

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April recess is over and federal reps will be headed back to work this week. Keep in mind that May 7th is the day that House Leadership has chosen for a mark up in the E&C committee–the committee of jurisdiction that will make the recommendations for the healthcare cuts that ended up in the House passed budget resolution. That’s nearly a trillion in cuts that will be $880-ish for Medicaid (over 10 years) and an additional amount that will be cut or “saved” from allowing the enhanced tax credits to expire under the ACA.

Republican leaders have floated a number of proposals to find $880 billion in savings in Medicaid, but it’s not clear which ones will stick. Some GOP lawmakers oppose massive Medicaid cuts, especially ones that would reduce benefits. (House) E&C Chair Brett Guthrie (R-Ky.) has said the committee can reform Medicaid “in a way that doesn’t take away people’s benefits,” though Democrats argue it’s impossible given the size of savings the committee is tasked with finding.

Among the key proposals that don’t directly touch benefits are ones that would slash a tax that states levy on providers to generate Medicaid funding and cut the enhanced federal match rate that Medicaid expansion states receive. Republicans have also voiced support for Medicaid work requirements.

But the proposals have prompted some pushback from state lawmakers, who fear the loss of billions of dollars in federal funding would force states to cut Medicaid benefits or raise taxes.

Opportunities for Action:

May 7th Events In District–if you have a member on the E&C, this is a great day to be agitating in the district as they are debating the future of Medicaid in Washington DC. Members have been saying that they support Medicaid for “vulnerable” people, but what’s really important is what they are NOT saying. For instance, they are not saying that they will protect coverage for the nearly 20 million working people who gained coverage through Medicaid expansion. Medicaid expansion under ACA is emerging as the key target of the Republican attack and their main message is that these newer Medicaid enrollees are not part of the “vulnerable” groups that Medicaid was “intended” to serve. Yes, they are laying the groundwork for their “waste, fraud and abuse” narrative which will serve as rationale for their suggested cuts.

Mother’s Day Events: Medicaid is a critical program for pregnant women, postpartum care and for mothers generally. In addition, millions of people who got coverage under ACA are women and mothers. Consider how to use Mother’s Day to alert the public about the dangers to mothers and families in the current legislative debate. One idea: thousands of families have been impacted by SUD (substance use disorder) especially in the wake of the opioid epidemic–mothers have lost their children and been able to save them because of the expansion of Medicaid under ACA.

LEGISLATIVE UPDATES:

President Trump is Meeting With Speaker Johnson and GOP committee leaders in the House This Week:

Trump is holding a big 100 days rally in Michigan (and a bunch of other 100 day commemoration activities) but he doesn’t want the GOP House Members to come. He wants them to head back to DC to be ready to work on Tuesday. “It is much more important that everyone stay in Washington this week to work hard and fast on all of it – IT MUST BE DONE. We will unleash Economic Prosperity, and accelerate into the Golden Age of America,” Trump posted on Truth Social. “You will be missed, but your work is far too important to take any time off. Thank you for your attention to this matter. MAKE AMERICA GREAT AGAIN!”Trump’s not leaving anything to chance, he’s meeting with the GOP House team before the mark-ups begin to make sure everything goes smoothly in passing his “big, beautiful bill”. Read more in Roll Call.

NEWS CLIPS

Reuters: US House Republicans wrestle with Trump tax cuts, Medicaid needs

WASHINGTON, April 28 (Reuters) – Republicans in the U.S. Congress turn in earnest this week to their biggest challenge of Donald Trump’s presidency: trying to bridge internal divisions over proposed cuts to Medicaid and popular green energy initiatives to pay for a landmark tax-cut bill they hope to enact by June.

After a two-week recess marked by some heated encounters with constituents back home, Republican lawmakers in the House of Representatives are due to begin debating and voting on segments of Trump’s agenda legislation that would also fund his crackdown on immigration and bolster fossil fuel production and military spending.

Washington Post: An unpopular president continues to push radical changes on the country

Headlines this weekend describe Donald Trump’s presidency as in decline. His poll numbers are falling. His Pentagon is in disarray over its leader. His tariff policy has spooked markets and forced a partial retreat. His immigration policy is under challenge in multiple courts. Russian President Vladimir Putin has made a mockery of his pledge to end the war in Ukraine in a day. All of that is correct. It is not, however, the whole story of the first 100 days of Trump’s second term in office. There is a competing narrative, that of a president who continues to radically remake government, global alliances, the checks and balances of constitutional government, aspects of American culture and the power of the presidency itself. He may not get all he wishes, but he remains the dominant actor in the world, forcing others — institutions, foreign governments, lawmakers, others — to adapt and sometimes to appease.

The Hill: GOP stares down crucial stretch to pass Trump agenda

With the House aiming to pass the “one big, beautiful bill” by the end of May, and the Senate looking to follow suit quickly after, Republicans are staring down a key four-week stretch as the party works through a series of hot-button issues, headlined by spending cuts.

“It’s going be busy,” said Sen. Markwayne Mullin (R-Okla.), a top ally of Trump and Senate Majority Leader John Thune (R-S.D.). But he added that the intensity can be kept in check “as long as we’re communicating with both sides and there’s an open line of communication and we don’t start isolating ourselves.”

Mullin predicted there would be a few items that are “going to make the tension,” including the debate over how to score the cost of extending Trump’s tax cuts. But he said both chambers would work with the White House “and it’s just going to be a busy time trying to deliver some of the president’s priorities to the American people.”

Washington Post: Trump approval sinks as Americans criticize his major policies, poll finds

As he nears the end of his first 100 days in office, President Donald Trump is facing growing opposition to his ambitious and controversial agenda, with his approval rating in decline, majority opposition to major initiatives, and perceptions that his administration is seeking to avoid complying with federal court orders, according to a Washington Post-ABC News-Ipsos poll.

No president in modern times has moved more swiftly than Trump to remake so many parts of government, as well as some outside institutions. The moves range from shrinking and reshaping the executive branch to upending the global economic order to cracking down on illegal immigration to challenging leading universities.

The initiatives have caused significant disruption to individuals, institutions and financial markets. They have produced a flurry of lawsuits from opponents, which Trump is contesting. There are few bright spots in the survey for the president, and none of his policies tested in the poll enjoy majority support.