HFMA asks Congress to delay Medicaid cuts, study alternatives ahead of One Big Beautiful Bill vote
An HFMA proposal would pause Medicaid payment cuts.
HFMA has written Republican congressional leaders to suggest a three-year delay of Medicaid funding cuts while a national commission studies a comprehensive overhaul of all Medicaid financing. If unsuccessful, the Medicaid cuts included in the One Big Beautiful Bill Act would go into immediate effect. View the full letter here.
Andrew Donahue, FHFMA, CPA, and director of healthcare finance policy at HFMA, discussed why HFMA made the late pitch to Congress shortly before it plans to vote on the One Big Beautiful Bill Act and what the approach could accomplish. President Trump and Republican congressional leaders recently said they are pushing for passage of the bill by July 4.
Q: Could you give us an overview of this letter?
Donahue: It’s a comment letter to Senate Majority Leader John Thune and House Speaker Mike Johnson.
To be clear, we are not providing recommendations for any specific policy choices that have been proposed by the House or Senate. Rather, we are humbly asking for an opportunity — in the bottom of the ninth inning — to respond to their design and implementation. As evidenced by the COVID-19 pandemic, the U.S. healthcare financing and delivery system was not constructed to absorb external shock. This is the largest single proposed reform to federal Medicaid funding in U.S. history. We believe it would serve both parties and the communities we serve to take a beat and carefully study the effects and unintended consequences of proposed changes before proceeding.
Our communities and medical facilities have grown so reliant on provider taxes to offset reimbursement below cost — and the same with state directed payments, the disproportionate share hospital (DSH) program, etc. But the approach policymakers are taking right now with the One Big Beautiful Bill — more piecemeal reform — is arguably how we arrived where we are today with a patchwork of unsustainable payment mechanisms that jeopardize access to care for vulnerable populations. Addressing Medicaid financing in silos — devising a state innovation here, delaying a federal subsidy there, winding down a program here — is problematic insofar as it is devoid of any clear organizing principle or logic. If the goal is to derisk the healthcare safety net for those who need it, a more comprehensive and holistic approach will be needed.
Q: What specifically then are you proposing?
Donahue: We’re recommending a delay. Specifically, the letter suggests three things. First, delay by three years any material changes to or prohibitions against current state Medicaid financing, including but not limited to provider taxes, state directed payments and DSH supplemental payments.
Second, during the same period, enact a national bipartisan commission to study the future of Medicaid, the health needs of the anticipated beneficiary population — including commensurate financing needs — and recommend revisions to and/or limitations against DSH and non-DSH supplemental payment programs, directed payment regulations, and other state-level financing designs such as provider taxes, etc.
And third, if these recommendations of the national bipartisan commission fail to achieve legislative approval by Congress by Dec. 31, 2028, enact an immediate phase-in of desired policy reform. In theory, this would not impact Congressional Budget Office scoring so the package could still advance Congress as Republican leaders intend.
Q: When would the three-year clock start?
Donahue: We’re proposing to delay Medicaid finance reform by three years — calendar years 2026, 2027 and 2028. If the commission does not complete its work including legislative passage and enactment by then, beginning 2029, implement a condensed reform schedule over the subsequent three-year period (calendar years 2029-31).
Q: What effect are you hoping to get from this approach?
Donahue: In a best-case scenario we would organize a bipartisan commission, rally the brightest minds in medicine and finance, buy time for Medicaid-dependent facilities to brace for change, and broker a more sustainable and predictable program for the communities we serve.
Still, even if this political environment proves too challenging to achieve success with a commission model, we believe the process itself will stimulate a national conversation and reframe our approach to navigating delicate societal concerns, such as funding healthcare services for the most vulnerable among us.
