THE ONE BIG BEAUTIFUL BILL WILL HELP IDAHO’S HOSPITALS
The One Big Beautiful Bill Act (OBBBA) has been signed into law, providing significant
benefits to Idahoans, including cutting taxes for working families, promoting American
manufacturing and energy dominance, and strengthening health care programs to support our
most vulnerable populations.
Nevertheless, the “politics of fear” have continued and disinformation misleads Idahoans
about the law’s impact on Idaho’s health care system. In reality, this law represents the
largest investment in rural health care in decades.
The OBBBA ensures a more responsible use of taxpayer dollars by ending loopholes certain
states use to get higher Medicaid payments from the federal government. There are two
main tools states use to draw down more funds: state-directed payments and provider taxes.
However, it is important to know that Idaho is not one of the states playing games with federal
funding. Idaho does not use state-directed payments and does not have non-nursing home
provider taxes above 3.5 percent.
A responsible steward of taxpayer dollars, Idaho will not be affected by these reforms.
Instead, Idaho’s rural hospitals will benefit from a new Rural Health Transformation Program
that allocates money to all states, not just those using gimmicks to draw down more federal
money.
This $50 billion rural hospital fund is available to all states and 50 percent will be divided
equally among states. This means Idaho stands to gain at least $100 million per year for five
years. This is arguably the single largest investment in rural health care in more than 20
years. While it provides a way for states that do rely disproportionately on federal funding to
make a financial plan, states like Idaho can provide immediate relief to rural hospitals and
establish the tools necessary to be successful in the future.
To understand how the bill’s reforms will save taxpayer dollars, it is important to understand
how state-directed payments and provider taxes work.
State-directed payments are used with Medicaid managed care and allow states to increase
rates to providers over the base reimbursement rate. The Biden Administration expanded
these payments to reach as high as the average commercial rate, much higher than those
routinely paid by federal health programs. The OBBBA prohibits new state-directed payments
over Medicare rates immediately and gradually phases down existing payments beginning in
2028. Again, Idaho does not currently use state-directed payments, but there is nothing in the
law to prevent it from using these payments in the future.
For provider taxes, states levy these fees on hospitals and other entities, then use that
revenue to collect more federal dollars. For every dollar states spend on Medicaid, the
federal government matches at a higher rate. The match is nine-to-one for the Obamacare
expansion population, which gives states an incentive to spend more on healthy, able-bodied
individuals than on vulnerable patients. The OBBBA stops provider tax gaming immediately
and incrementally lowers states’ maximum rate beginning in 2028 until it reaches 3.5 percent.
Because Idaho does not currently have a non-nursing home provider tax above 3.5 percent, it
is ahead of the curve. Recognizing nursing homes overwhelmingly serve vulnerable patients,
Congress exempts those provider taxes from the phase down.
Curbing waste, fraud and abuse in the Medicaid program provides past-due and desperately
needed improvement to the program and does not jeopardize rural hospitals. The states that
have relied on financing gimmicks have necessary budgetary decisions to make in the years
ahead. However, the reality is for states like Idaho, this bill represents a reward for the wise
stewardship of taxpayer dollars and a historic investment in rural health care.
