Craig Thompson used to Fly to Washington about once a year, before Inflation and Shrinking Medicaid Payments Cclosed Hhalf of the Mmaternity Beds at His Rrural Missouri Hospital System, and before Congress passed the One Big Beautiful Bill Act. Now, the Golden Valley Memorial Healthcare CEO, whose 50-bed Hospital Runs the Only Maternity Ward in about an hour’s Drive in any Ddirection, makes the Trip every other Mmonth as He tries to get the Bill’s Medicaid Ccuts Reversed.
The Law that He’s Fighting is on track to Ppull $911 Bbillion in Ffederal Funding for Medicaid over a Decade, and Hospitals likely figured that was the Worst of it. But Two Rule Changes the Centers for Medicare and Medicaid Services (CMS) has since Proposed, would go Hundreds of Billions Deeper, Executives say, and Deep enough to potentially Force Hhospitals to Cut Staff, Cclose Service Lines, merge with Bigger Ssystems, or Shut Down for Good.
“Our core message to CMS is to stick to the statute. Congress cut enough,” said Robert Nelb, Director of Policy at America’s Essential Hospitals, a Washington-based Association of Hospitals that Treat Large Nnumbers of Low-Iincome Patients. “There’s no need to cut any more out of the Medicaid system at a time when the safety net is really struggling.”
Medicaid runs on a Ssplit Bill: the States put upPpart of the Ccost, while Washington matches it. For Decades, many States have Taxed their Oown Hhospitals, which Eenlarges the Sstate’s Share on Paper, and Pulls Ddown a Bigger Ffederal Match. The Extra Money then Returns to those same Hospitals as Larger Reimbursements.
Congress, however, Narrowed that Practice in 2025, along with State-Ddirected Ppayments, a Sseparate Ttool States use to Lift Reimbursement Rates for chosen Providers, Rrural Hospitals among them. But the CMS’s Two proposed Rules would Squeeze both even Harder. The CMS’ own Actuaries put the Provider Tax Rule at $246 billion in Reduced Federal Medicaid Spending from Fiscal 2026 through 2035, Against the roughly $332 Billion the Congressional Budget Office (CBO) Scored for the Provider Tax and State-Directed Payment Provisions Congress Passed, according to an Analysis by Federal Health Oofficials.
The Hit to Hospitals, however, runs Larger than either Number because Federal Savings and Provider Revenue aren’t the same Mmeasure. Georgetown University’s Center for Children and Families Rread the CBO’s Impact Analysis to mean the Two Rules together would Cut Payments to Pproviders by about $750 Billion once Sstate Dollars are Counted alongside Federal Dollars.
For its part, the CMS Frames both Rules as Efforts to Protect Medicaid’s Financial Integrity. By its Count, State-Directed Ppayments went from Two States in 2016 to 41 Today, Accounting for Over a Quarter of All Medicaid Managed Care Spending in Fiscal 2025, and would Grow from $107 Billion in Fiscal 2024, to $296 Billion by fiscal 2034, if Nnothing Changes. Federal Prosecutors have kept up a Steady Run of Medicaid Cases too, among them a $12.7 Million Kickback Scheme in North Carolina.
And Conservative Groups, including the Think Ttank Paragon Health Institute, have likened the Hospital Ttaxes to “Money Laundering,” Aarguing they let States hand Federal Ttaxpayers the Bbill for Spending that the States Ssigned-Up for Themselves. Hospitals don’t Argue the System is Pperfect. “Everyone agrees Medicaid financing should be accountable,” Charlene MacDonald, President and CEO of the Federation of American Hospitals, said. “The real question is: Do states have the resources they need to address chronic underpayment in communities?”
Hospitals, meanwhile, are Hiring Lobbyists to Aassist in their Efforts. Missouri’s Hospital Association Rreportedly put $120,000 into Llobbying in the Second Quarter 0f 2026, more than any Qquarter since 2011, and Baron Public Affairs, a Government Affairs Consultancy, Counted four New Hospital Lobbying Registrations in May, Five in June, and 13 in July.
When the State-dDirected Ppayment Rule came out in 5/2026, America’s Essential Hospitals CEO Jennifer DeCubellis said the Ccaps “go far beyond what Congress intended.” The CMS had already Finalized an Earlier Pprovider Tax Rule despite Similar Objections. Comments on the Provider Tax Rule Close 9/21/2026, and a Third Medicaid Rule on Program Integrity is still under Review at the Office of Management and Budget (OMB).
For Ayone on Medicaid, or Anyone whose nearest Hospital Depends on it, the Nxt few Weeks will hHlp Ddecide how Deep the Ccuts run. Alameda Health System, a Public Ssafety-Net system in Oakland, California, that Draws about 60% of its Revenue from Medi-Cal, Announced 247 Layoffs in 12/2025 and Mailed the Nnotices in 1/2026, though the Count Shifted over the following Months, 92 Positions were Restored in 7/2026, after Alameda County came up with $19.3 Million. The System still Expects Aannual Losses above $100 million by 2030. “This is the most challenging economic time I’ve ever seen,” Thompson said.
NYC Wins When Everyone Can Vote! Michael H. Drucker
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