A U.S. Senate tax proposal that alarmed Missouri health care leaders faces new obstacles to making it into the so-called 'Big Beautiful Bill.'
Forty-nine states, including Missouri, use what's known as medical provider taxes on hospitals, nursing homes and pharmacies to help pay for their Medicaid program. The Senate wanted to cap the medical provider tax at 3.5%, even though Missouri's rate has reached as high as close to 6%.
But on Thursday, the Senate parliamentarian, Elizabeth MacDonough, ruled that the proposal would need 60 votes under what's known as the Byrd Rule to make it into the wide-ranging tax cut, immigration and debt ceiling package known as the Big Beautiful Bill. Because Republicans only have 53 votes, it's highly unlikely that the proposal will be able to advance.
Edwin Park is a research professor at the McCourt School of Public Policy at Georgetown University. He said it's unclear what MacDonough found objectionable – and whether senators will try to rewrite the plan in order to pass parliamentary muster. (The New York Times reported parliamentarian rulings aren't made public, though Democrats who serve on the Senate Finance Committee made some of Macdonough's decisions public on Thursday.)
"It could be that the parliamentarian views the provision as not fixable in terms of the Byrd Rule," said Park, referring to a rule requiring anything in a reconciliation package to focus on fiscal issues and requiring 60 votes to waive the rule for non-budgetary matters. But it's also possible that the Senate Republicans may modify that provision in ways that are permissible according to the parliamentarian."
Politico reported on Thursday that Senate Republicans are optimistic about salvaging aspects of the medical provider tax plan in the bill. The House placed language in the reconciliation bill barring states from raising or expanding their medical provider taxes.
Taking aim at Medicaid expansion states
The Missouri Hospital Association estimated that the Senate plan capping medical provider taxes at 3.5% could cost the state hundreds of millions of dollars.
Craig Thompson, the CEO and president of Golden Valley Hospital in Clinton, Missouri, noted this week that Missouri's current tax is 4.2% – and predicted that lawmakers would respond to a budgetary shortfall by paying his largely rural hospital less money for treating Medicaid patients.
"We're already paid for Medicaid less than our cost to provide care," Thompson said. "From a simple economic standpoint, if you continue to erode even what we're getting paid today, it makes it harder and harder for us to provide those services and stay viable for the long term."
Some Republicans contended medical provider taxes amount to "money laundering," because hospitals ultimately get some of the taxes they send to the state back from the federal government. But Thompson said state lawmakers "played within the rules, within the bounds, and really has very judiciously utilized that provider tax to make sure that the state of Missouri has adequate resources to fund the Medicaid program."
"There's this perception, and it's misplaced, that Medicaid beneficiaries are despondent, lazy people who are just out taking advantage of the government," Thompson said. "Well, I can tell you: In the rural community that I serve, that is not the case. Medicaid recipients are farmers, they're ranchers, they're small business owners, they're veterans, and it's a whole bunch of kids. And to think that those individuals want to be on Medicaid, that is not the case. But for many, Medicaid is the resource they have to access health care services."
Park said it was noticeable that the Senate plan only affected states like Missouri which expanded Medicaid under the Affordable Care Act – while the 10 states that didn't buy into that program can keep medical provider taxes as high as 6 percent.
"The goal is to restrict those provider taxes, which were often either explicitly or indirectly financing the Medicaid expansion, to cause states to drop the expansion," Park said.
But Missouri can't easily cut itself off from Medicaid expansion, especially since voters in 2020 place language in the state constitution that requires state officials to enroll Medicaid applicants who earn up to around $21,000 a year.
The only likely way for Missouri to end its Medicaid expansion participation is for voters to repeal the constitutional language protecting the program.
"Provider taxes are a critical source of financing," Park said. "They're not the biggest source of financing to finance state Medicaid programs. But if you are reducing revenues related to these provider taxes, they're creating a budget shortfall. States have to balance their budgets, unlike the federal government, and there just aren't alternative sources."
Hawley and Schmitt's views
It was an open question whether the Senate's medical provider tax plan could have even crossed over the simple majority threshold.
That's because some GOP lawmakers, including Sen. Josh Hawley, disliked the Senate plan. Hawley told St. Louis Public Radio last week that the proposal "needed work," primarily because it could make it harder for rural hospitals to operate.
Hawley didn't immediately return a request for comment on the Senate parliamentarian's ruling.
Before the Senate plan came forward, Schmitt told St. Louis Public Radio that state lawmakers often took a cavalier attitude toward medical provider taxes. He recalled a time when was a member of the Missouri Senate where his colleagues described the tax as "free money."
"That's probably not a good way to look at it," Schmitt said earlier this month. "Maybe there's some reforms that can be had there."
Schmitt said in a statement on Thursday that "the Senate is working its way through the legislative process."
"The bottom line is we're going to get the One Big Beautiful Bill across the finish line to secure our border, cut taxes for Missouri families, and strengthen our national security," Schmitt said.
Some Missouri Republican lawmakers, including Congressman Bob Onder of St. Charles County, sharply criticized the Senate parliamentarian Elizabeth MacDonough for likely striking changes to Medicaid out of the budget package.
"She is not an absolute monarch," Onder wrote on X. "She should be overruled or fired."
Thune told reporters in Washington, D.C., that senators don't plan on trying to overrule MacDonough.
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