MW Senate looks to cut $1 trillion from Medicaid. Here's who would be hurt most.

By Chris Matthews

Senate bill would cut even more from the healthcare program than the House version would

Senate Republicans have unveiled a sweeping plan to overhaul the Medicaid program, with changes policy analysts warn could lead to even greater coverage losses and pain for hospital systems than the aggressive proposal passed by the House of Representatives last month.

The text - released by the Senate Finance Committee as part of the party's broader effort to pass new tax and spending legislation championed by President Donald Trump - shows that the legislation aims to slash Medicaid spending by as much as $1 trillion over a decade, or $200 billion more than the House version.

The draft surprised many healthcare analysts and providers with a raft of cost-cutting provisions, including deeper restrictions on so-called provider taxes that have bolstered the financial health of state Medicaid programs but that critics say shift too much cost to the federal government.

"The text included some notable adverse surprises on Medicaid, posing problems for hospitals if maintained," Tobin Marcus, a policy analyst at Wolfe Research, wrote in a client note. "These are significant negative surprises," he said, noting that many senators have been vocally skeptical even of the more modest Medicaid cuts in the House version of the bill.

Work requirements, cost sharing and red tape

The Senate draft maintains many of the reforms in the House version, including a national work requirement for childless adults ages 19 to 64. Medicaid beneficiaries in that group must prove they are working or participating in other approved activities at least 80 hours per month by 2029 or risk losing coverage.

Democrats and some policy experts argue the provision is less about encouraging employment and more about limiting enrollment.

Bobby Kogan, a former adviser to the director of the Office of Management and Budget under President Joe Biden, called the measure a "work-reporting requirement" rather than a true work requirement.

"They've instituted so much red tape that enrolling becomes impossible for many," Kogan told MarketWatch in May. "Most people getting kicked off are actually working."

Cracking down on state financing practices

The most surprising provision in the Senate text is the crackdown on so-called provider taxes.

States often use provider taxes - fees collected from hospitals and other providers - to secure funds that, when spent, require the federal government to spend more as part of the Medicaid program.

Critics say providers earn more from federal payments than they lose in provider taxes, and they argue that these schemes are simply a way to get the federal government to shoulder more of the Medicaid burden.

The House version of the bill would prohibit new provider taxes going forward but would grandfather in existing arrangements. The Senate version would bar states from financing more than 3.5% of spending with provider taxes starting in 2031, down from the 6% allowed today.

States and providers in the crosshairs

States that expanded Medicaid under the Affordable Care Act could be hit especially hard, both because of the tighter provider-tax restrictions and because they rely more heavily on supplemental payments to finance care for low-income residents.

Hospitals serving low-income or rural populations, many of them in GOP-controlled states, could face serious financial challenges if the Senate draft were to become law.

"We anticipate significant pushback to the draft from Senators concerned about the impact of the Medicaid cuts on state budgets and rural hospitals, which likely will be buttressed by vocal opposition from state governors and the hospital industry," Spencer Perlman, director of healthcare policy research at Veda Partners, said in a Tuesday client note.

Publicly traded companies that rely heavily on Medicaid revenue could also be hit if this provision becomes law.

HCA Healthcare $(HCA)$ and Ardent Health $(ARDT)$ operate hospitals across states with large Medicaid populations, and these facilities often rely on the types of payments targeted in the Senate bill.

Managed-care insurers including Centene $(CNC)$, Elevance Health (ELV), UnitedHealth Group $(UNH)$ and Molina Healthcare $(MOH.AU)$ contract with states to provide Medicaid services - arrangements that could be destabilized by changes to Medicaid financing.

Expect GOP pushback

Perlman said that the Senate text should be viewed more as a "discussion draft" and that investors should expect material changes to the language as stakeholders air their concerns in the coming days.

Several Senate Republicans can be expected to push back on these changes, including Susan Collins of Maine, Josh Hawley of Missouri and Jim Justice of West Virginia, all of whom represent rural states with high Medicaid enrollment.

"We are cleareyed that conservatives and budget hawks in the Senate and the House believe the Senate's draft still does not go far enough in cutting spending," Perlman noted. "But our belief remains that the legislative text most likely needs to address the concerns of the more moderate elements of the Senate and the House Republican Conferences to become truly viable."

-Chris Matthews

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June 17, 2025 11:15 ET (15:15 GMT)

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