16 House Republicans Refuse to Support Senate Medicaid Cuts in ‘Big Beautiful Bill’

The GOP lawmakers say the provider tax rollback would destabilize funding and strain hospitals. They urge keeping the 6 percent ’safe harbor' threshold.

The U.S. Capitol building in Washington on May 22, 2025. Madalina Vasiliu/The Epoch Times

A group of 16 House Republicans is warning that they won’t support the Senate version of the One Big Beautiful Bill Act unless proposed Medicaid changes—particularly to the provider tax structure and state-directed payments—are rolled back.

In a June 24 letter to Senate Majority Leader John Thune (R-S.D.) and House Speaker Mike Johnson (R-La.), the group—led by Rep. David Valadao (R-Calif.)—voiced opposition to the Senate’s plan to lower the federal cap on Medicaid provider taxes from 6 percent to 3.5 percent.

This change, along with other Senate provisions, would place new financial strain on hospitals and make it harder for states to sustain existing Medicaid programs, they said.

“The Senate version treats expansion and non-expansion states unfairly, fails to preserve existing state programs, and imposes stricter limits that do not give hospitals sufficient time to adjust,” the lawmakers wrote.

They also cited concerns about rushed implementation timelines, penalties for expansion states, changes to work requirements, and cuts to emergency Medicaid funding.

Medicaid’s $914 billion annual cost is split between the state and federal governments, with the federal share accounting for roughly 66 percent. To help finance their share, most states rely heavily on provider taxes, which are levied on hospitals and other health care providers.

Lowering the 6 percent cap on provider taxes to 3.5 percent saves the federal government money because it reduces how much states can tax providers, recycle those funds into higher Medicaid payments, and then receive inflated federal matching dollars. So, by capping the tax lower, the federal share of Medicaid spending is reduced.

The provider tax mechanism—used by every state except Alaska—has become a cornerstone of Medicaid financing, and a source of controversy.

Critics have called it a budgetary gimmick that allows states to inflate Medicaid costs and get more federal funds without delivering more services. Still, many states and providers argue that without the provider tax, they would face deep cuts or be forced to raise taxes to make up the shortfall.

The Senate draft would reduce the provider tax “safe harbor” threshold from 6 percent to 3.5 percent. According to the Congressional Budget Office, eliminating the tax entirely would reduce the federal deficit by $612 billion over 10 years. Lowering the cap to 2.5 percent would save $241 billion, while reducing it to 5 percent would save $48 billion.

The House version of the bill takes a more cautious approach, maintaining the current 6 percent cap while preventing states from creating new provider taxes. The 16 Republicans argued in their letter that this approach “reflects a more pragmatic and compassionate standard” and urged that it be retained in the final package.

While the lawmakers voiced support for parts of the Senate bill that they said would strengthen Medicaid coverage for children, pregnant women, the elderly, and people with disabilities, they said the proposed reforms went too far.

“Protecting Medicaid is essential for the vulnerable constituents we were elected to represent,” they wrote. “Therefore, we cannot support a final bill that threatens access to coverage or jeopardizes the stability of our hospitals and providers.”

Although the letter did not mention rural hospitals specifically, some critics of the Senate plan have warned that it could accelerate closures of financially vulnerable facilities in rural areas. Supporters of the bill say that such concerns are overstated, and that reforms are necessary to put Medicaid on a more sustainable footing.

The provider tax remains one of several unresolved issues as Senate Republicans race to revise the bill and secure enough support ahead of a July 4 deadline for passage.

Thune told Fox News on June 24 that there’s “a lot of swirl” at this stage in the legislative process, but that “failure’s not an option.”

“We’re hearing people out, working, responding to their feedback, taking their input, trying to incorporate things into the bill that make it stronger and better but we have to get this done and I’m hopeful that we will succeed by the end of the week here in the Senate and then we'll see what the House can do and then we can get it on the president’s desk,” he said.

Johnson, too, expressed confidence in the bill’s passage.

“I’m gathering all the House Republicans together within the hour, and we are going to talk about the schedule ... the July 4th deadline is an important one,” he told Fox News. “The president is insistent about it ... I think we can get this job done.”

The House narrowly passed its version of the bill last month by a single vote, and now Thune faces a similar challenge in the Senate, where he can afford to lose no more than three Republicans.