Trump Budget Seeks $600B Medicaid Cuts Targeting State Provider Tax Loophole

Republicans in Congress are proposing significant Medicaid cuts to finance President Donald Trump's domestic agenda, including tax cuts and other priorities. One key strategy involves eliminating a long-standing 'provider tax' loophole used by almost all states, especially Republican-led ones, where states tax hospitals and nursing homes and then reimburse them to draw higher federal matching funds; closing this loophole could save the federal government up to $600 billion over the next decade. Meanwhile, analyses show that reducing the federal minimum contribution to Medicaid could cost states like California, New York, and others nearly $468 billion, severely impacting coverage for vulnerable populations including children, older adults, and people with disabilities. These proposed cuts are expected to result in millions of Americans losing Medicaid coverage, according to the Congressional Budget Office, sparking opposition from some Republicans who represent swing districts and fear harming their constituents. The provider tax mechanism originated in New Hampshire in the 1980s as a budget tool and has since become entrenched, with some states relying on it for over a third of their federal Medicaid funding. While the GOP aims to achieve $880 billion in Medicaid savings, the debate continues over balancing fiscal goals with protecting healthcare access for vulnerable Americans.