Republicans are in a fix. Medicaid costs have exploded over the past six years, and the system is rife with waste, fraud, and abuse. Democrats don’t want to do anything meaningful about it, but large majorities of voters support most of the Republicans’ proposed tweaks. Well … all except one, which pits old-guard Republicans against the populist insurgents.
But a solution exists.
As a body, the Senate is reliably more than a decade behind the rest of the country, politically. But political realities still do have an impact.
Medicaid — federally subsidized health care for the poor — is out of control. Since 2019 (or during COVID and President Joe Biden’s time in office), the federal expense has ballooned 56.5%. There are currently 72 million people on the rolls, or about a quarter of the American population. Republicans want to do something about it, and they’re right to.
Some of the GOP’s proposals are remarkably popular with the American public. Cutting the deceased from the rolls, for example, polls at 86% approval — about as close as you’re going to get to everybody these days. Similarly, cutting illegal immigrants from the rolls polls at 82%.
Democrats say it isn’t happening — but they sure seem angry about it.
Take work requirements. A new rule would make able-bodied adults without dependents do something — anything — to qualify for benefits. Work. Volunteer. Train. Whatever. And Americans overwhelmingly support the idea.
As it turns out, so do most people collecting benefits.
Then there’s this: thousands of working-age adults who self-report spending four or more hours a day watching TV or playing video games. Requiring those folks to work polls lower, but still polls at 72% approval.
Now comes a less popular idea — but no less important.
Some states are dodging their share of Medicaid spending by gaming the system. A convoluted scheme lets state governments shuffle money back and forth with hospitals, inflating how much they appear to spend. That trick boosts their federal match and lowers what they actually have to pay.
Here’s how it works. States are supposed to split Medicaid costs 50-50 with the federal government. But instead of paying a hospital $100 for a procedure and getting $50 back, a state will pay $106, then slap the hospital with a $6 tax — so the state’s net cost is still $100. But because the state “spent” $106, Washington reimburses the state $53 instead of $50. Congratulations: The federal taxpayer just got fleeced for an extra three bucks.
That example comes from the Committee for a Responsible Federal Budget — a nonpartisan watchdog group that wants the loophole closed.
It’s a classic shell game. It undermines the spirit of federal aid and violates basic fairness. Yet it persists — partly because it’s buried in bureaucracy and partly because few politicians want to pick a fight with hospital lobbyists or state budget directors.
The scam may be obvious. Fixing it won’t be.
That’s because nearly every state south of Alaska plays this game to some degree — but rural, low-tax states depend on it the most.
Rural hospitals operate on thinner margins. Fewer beds. Older, poorer patients. Less insulation from federal policy swings. Obamacare made a bad situation worse.
In the past 15 years, 139 rural hospitals have either shut down completely or converted to outpatient-only facilities. A third blamed Obamacare directly. That’s more than three times the annual closure rate of urban or suburban hospitals.
Bigger hospitals typically collect the lion’s share of the kickback under the provider tax scam. But rural hospitals live on the edge — which makes them more dependent on that extra funding and more exposed if it goes away.
And that’s where the GOP’s internal conflict begins.
Rural states tend to lean Republican. So do rural voters more broadly. Cities and suburbs go blue; the countryside votes red. That means this fight pits two factions within the party against each other: fiscal conservatives who want to end the grift vs. populist conservatives more concerned with shielding vulnerable Americans — the “forgotten men and women” Trump made central to his coalition.
For one group, it’s about principle. For the other, survival.
The fight also feeds into Democrats’ hoped-for battle, which ignores all the pesky details about illegal aliens, dead recipients, and able-bodied men and instead focuses on any threats to rural hospitals and the poor. They’d much prefer to say Republicans cut your health care — a talking point that polls strongly in their favor — and run on that in the midterm election.
The White House is well aware of this reality, so it wants a fix. Republican Sens. Josh Hawley (Mo.), Susan Collins (Maine), and Jim Justice (W.V.) all represent just the sorts of states a provider tax crackdown would impact hardest and have proposed a separate Rural Hospital Stabilization Program to soften the blow and protect the 700 or so hospitals already on the margins. It’s a long-needed fix, but the kind of thing previously ignored by a Republican Senate that leans toward traditional supply-side economics.
As a body, the Senate is reliably more than a decade behind the rest of the country, politically. But political realities still do have an impact, and this is just the type to push senators to action. The rest of their cuts are important and poll very well. Instead of cracking down on a faulty system that has already just slowed the problem down, there’s a chance here to come up with a better solution. It’s worth taking seriously.
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The Committee for a Responsible Federal Budget, 2016: Provider tax limits should be on the table for Medicaid reform
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