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Republicans are seeking to limit a tax loophole that gives states more federal matching funds. Many state budgets could be hurt.
June 17, 2025, 3:53 p.m. ET
The Senate policy bill released Monday would cut billions of dollars more from Medicaid than the earlier, House-passed legislation — in large part by cracking down on a budgeting maneuver used by 49 states that congressional Republicans have called a scam or gimmick.
It does this by limiting Medicaid provider taxes, a loophole that states use to collect more federal matching funds for Medicaid, an insurance program for the poor that covers roughly 70 million Americans.
For decades, taxing providers like hospitals has been a major part of how states pay Medicaid bills, but this tactic has come under scrutiny in Congress this year as Republicans look for ways to help pay for President Trump’s tax cuts.
Cutting provider taxes would probably mean funding shortfalls of hundreds of billions of dollars for states over the next decade, leaving them with budget holes to fill. To offset the losses, states would most likely need to explore cutting other services or raising other taxes.
In scaling back Medicaid provider taxes, Senate Republicans are pursuing cuts that their House colleagues were hesitant to propose. House members had landed on freezing provider tax rates at current levels instead of reducing them. If the Senate passes its plan for provider taxes, the House and the Senate will have to reconcile their differences.
