Senate Republicans are proposing cuts to the Medicaid program for low-income and disabled people that are more aggressive than policies the House passed to help pay for President Donald Trump’s sweeping tax package, according to people familiar with the legislation.
Notably, the Senate abandoned efforts to cut costs in the Medicare program that provides health insurance to people over age 65 and the disabled. The decision is good news for Humana Inc. and UnitedHealth Group Inc., which are major players in the Medicare Advantage insurance market.
Senator Bill Cassidy of Louisiana had pushed to clamp down on private Medicare Advantage insurers by making it harder to game the federal subsidy system by exaggerating the health challenges their enrollees face. But Cassidy’s proposal faced some opposition among Republicans.
The Senate bill also would require parents with children age 15 and older to work or do community service for 80 hours per month to qualify for health insurance through the Medicaid program. The House plan exempted all people with dependents from the work requirements.
The Senate plan — released on Monday — solidifies congressional Republicans’ decision to cut funding for Medicaid health insurance for the poor to pay for tax cuts.
Democrats are poised to attack them over that issue as next year’s midterm elections draw closer. Republicans are eager to portray the cost savings as reductions to “fraud, waste, and abuse” in the programs, though the changes would also lead to millions of people losing health insurance.
In its summary of the bill, the Senate Finance Committee described the provisions as “improving Medicaid for those who need it.”
The Senate went further than the House’s proposal to limit the options states have to fund their share of Medicaid, and treats states that have expanded their Medicaid programs under the Affordable Care Act more harshly.
The House bill would set a moratorium on new or increased taxes on medical providers, while the draft Senate bill would cut the amount that states that have not expanded Medicaid under the Affordable Care Act can tax health care providers to help fund their Medicaid programs.
The Senate proposal would gradually limit states to taxing providers at 3.5% of facilities’ net revenues from treating patients from the current level of 6%. In the Senate proposal, non-expansion states, such as Texas and Florida, would be frozen at current tax rates.
Some states tax health care providers, such as hospitals, to help raise money for state Medicaid budgets. Critics say limiting provider tax rates would simultaneously curb states’ ability to pay their higher tab as a result of the reductions to federal matching funds.
In the House proposal, states would also be limited from seeking new payments for providers that exceed Medicare payment rates. The House allowed higher rates for states that haven’t yet expanded Medicaid under the ACA.
The Senate proposal goes further, and reduces all state-directed payments gradually for expansion states to Medicare rates, and to 110% of Medicare rates for non-expansion states.
The Senate also made some changes to Medicaid work requirement policies that make them more strict in some ways, but also give states more time and resources to comply.
States would still have to implement work requirements by the end of 2026, and would have to provide enrollees with three months’ notice — meaning people would receive notifications just weeks before the midterm elections that they could lose their health coverage.
However, the Department of Health and Human Services could extend the deadline if states prove they’re making progress. The Senate draft bill also would give states $100 million in grants to implement the requirements.
Senate Republicans included in their bill a controversial House provision that would force more Medicaid beneficiaries to pay out-of-pocket fees for health care.
The Senate bill also would drop policies that would modestly change how pharmacy middlemen called pharmacy benefit managers do business in Medicare. They also plan to omit a proposal to boost pay for doctors in the Medicare program that had been included in the House proposal.
The PBM policy change is likely positive for Cigna Group and CVS Health Corp., which own two of the largest PBMs in the country. However, the legislation would ban a practice called “spread pricing,” where pharmacy benefit managers profit by paying pharmacies less than they charge state Medicaid plans for a medication.
Senators omitted a House provision that would have tweaked the Medicare drug price negotiation program that became law under former President Joe Biden to incentivize drugmakers to get their medicines approved to treat multiple rare diseases. Pharmaceutical companies had pushed for the policy’s inclusion.
Because the House and Senate versions of the legislation differ, the legislation would need to pass the House again before it goes to the president’s desk. How much to cut health care programs has been one of the major points of contention in assembling the tax package.
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