The House’s budget reconciliation bill is projected to cause at least 7.8 million individuals enrolled in Medicaid to lose their health coverage.

SACRAMENTO, Calif., June 6, 2025 — With the Senate expected to vote on H.R. 1 in the coming days, 46 state medical associations have joined forces to implore the United States Senate to reject the proposed Medicaid cuts within H.R. 1. They argue these cuts would result in millions of patients losing coverage and even greater numbers facing reduced access to care, impacting children, pregnant individuals, seniors, veterans, people with disabilities, and working families. Statewide hospital associations have also voiced concerns, noting that the proposed cuts would affect all providers, including both physicians and hospitals.

The legislation, which entails $200 billion in reductions to existing and long-standing provider taxes, is expected to have a devastating impact on state budgets and the nation’s overall healthcare system, affecting Medicaid programs in 49 states.

Provider taxes, authorized under federal law and approved by both Republican and Democratic administrations, have been utilized by state legislatures in 49 states for decades. These taxes represent a valid financing tool employed by states in collaboration with the federal government to support vital health services and have been instrumental in keeping rural hospitals, maternity units, nursing facilities, and physician offices operational.

The bill also introduces detrimental changes to federal student loan programs, making it more challenging for students to pursue medical careers amidst critical physician shortages. We urge the Senate to seek more balanced solutions that expand the physician workforce and protect Medicaid for our patients.

“Enacting these provider tax cuts will create substantial deficits in state budgets, compelling states to either raise taxes or reduce benefits, coverage, and provider payments. These reductions will exacerbate overcrowding in emergency departments, and as uncompensated care burdens increase due to patients losing coverage, many rural hospitals, nursing homes, and community physician practices will be forced to close to all patients,” the letter states.

H.R. 1, as passed by the House of Representatives on May 22, 2025, includes three primary provisions that would significantly limit or eliminate existing provider taxes across the nation. These provisions apply broadly to all provider taxes, encompassing hospitals, nursing homes, managed care organizations, and other provider categories.

• Moratorium on New or Increased Provider Taxes (SEC. 44132) – According to H.R. 1, no provider taxes could be increased following the law’s passage and enactment, nor could state legislatures adopt any new taxes (covering 19 categories of provider taxes). This provision would freeze taxes, preventing them from keeping pace with rising healthcare costs. It also creates inequities between states.

• Revising Payments for Certain State Directed Payments (SEC. 44133) – Once a provider tax is in place, state Medicaid programs can use various rate methodologies to fund supplemental or enhanced payments to providers. Under H.R. 1, any future directed payments would be capped at the Medicare payment rate. Medicare physician payment rates are already 33% below the actual cost of providing care. These rates would not adequately compensate public hospitals and physician specialists caring for the most severely ill patients nationwide.

• Requirements Regarding Waiver of Uniform Tax Requirement for Medicaid Provider Tax (SEC. 44134) – H.R. 1 stipulates that provider taxes in multiple states must uniformly tax hospitals, nursing homes, and managed care organizations within each provider tax category. This uniformity requirement will be extremely difficult for most states to satisfy, effectively eliminating numerous provider taxes in various states. While the HHS Secretary has the discretion to allow for a transition period, states cannot depend on this.

“These provisions will destabilize state health systems, diminish access to care, and worsen the existing physician shortage. We instead urge you to protect Medicaid – a proven and cost-effective safety net serving 80 million vulnerable Americans,” the letter concludes.

SOURCE California Medical Association; Physicians for Medicaid

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