Medicaid Provider Taxes: Restricting Them Threatens Hospitals, the Health Care System and State Economies

States and the federal government jointly cover the costs of health care and services provided to the almost 80 million people covered by Medicaid — a lifeline for children and low-wage working families, veterans, vulnerable seniors and people with disabilities. Provider taxes are core funding mechanisms for the state portion of Medicaid, approved by bipartisan policymakers for decades, that fund almost one-fifth of state Medicaid program costs.

Federal proposals to eliminate or limit state options to generate revenue to pay for their share of Medicaid costs — including banning the use of provider taxes — would gut Medicaid by shifting costs onto states, threatening state and local economies and upending the core financing of the health care system.

Limiting states’ ability to raise the funds they need to cover Medicaid expenses is just another way for the federal government to cut its support for state Medicaid programs. Proposals that slash the funding streams states depend on to finance Medicaid only shift more costs to states and do nothing to address underlying health care costs for consumers.