Senate Republicans Propose Gutting Medicaid Further To Make Trump Tax Cuts Permanent

The Senate Finance Committee, which oversees changes made to taxes and social safety net programs like Medicare and Medicaid, dropped their portion of edits to House Republicans’ reconciliation package on Monday afternoon.

Committee Republicans propose steeper cuts to certain programs, including Medicaid and the Child Tax Credit, in order to make President Donald Trump’s 2017 tax cuts permanent. The panel has also proposed a slower phase out on the Biden-era clean energy tax credits, though experts point out the overall effect would still be equal to gutting the clean energy incentives.

Many Senate Republicans have vocalized issues with a handful of provisions in the House version of the bill — Sen. Lisa Murkowski (R-AK) has warned against a “full-scale repeal” of current energy tax credits; Sen. Josh Hawley (R-MS) has made some noise about cutting Medicaid; Sen. Ron Johnson (R-WI) goes back-and-forth daily about whether he’s content with the federal spending cuts outlined in the bill. 

On Medicaid, at least, it appears that the Senate finance panel is recommending changes that go further than what key Senate Republicans have said publicly they’re comfortable with. Let’s break it down: 

Medicaid

Many of the proposed Medicaid cuts specifically target the expansion population — the individuals that are eligible to receive health insurance as a part of the expansion that took effect under the Affordable Care Act.

“It’s not an outright repeal, but I think it’s hard to not see the parallels between the efforts to totally repeal the ACA and what’s going on now,” Allie Gardner, senior policy analyst on the Center for Budget and Policy Priorities health policy team, told TPM.

“They are stripping a number of the ACA provisions down to its bone …. really decimating provisions of the ACA,” she added.

Provider taxes

One of the Medicaid changes that’s likely to see the most pushback from other Republicans in the Senate is the Senate Finance Committee’s proposal to lower the provider taxes from 6% to 3.5% by 2031 for states that have expanded Medicaid under the Affordable Care Act. This would not affect nursing homes and intermediate care facilities.

The Finance Committee Republicans’ plan cranks up the attack on provider taxes, with more severe limits.

The House-passed bill would already curb states’ ability to levy taxes on healthcare providers by placing a moratorium on new or increased provider taxes. Meaning states wouldn’t be able to increase their provider taxes or in the case of Alaska — which currently does not use revenues from provider taxes to finance part of their state’s share of Medicaid spending — wouldn’t be able to adopt a provider tax. This will still apply to nonexpansion states in the Senate’s plan.

Restricting provider taxes would put many states in a difficult financial position; over the years many states have had to adjust and increase their tax rates to provide cover for increased Medicaid payment rates. States will have to make difficult decisions around provider rates, eligibility and benefit cuts to existing programs or scramble to find other financing options in their state budgets to cover the cost themselves. Without a way to replace the money they make from provider taxes — which many states won’t be able to come up with, experts say — millions will lose access to healthcare.

Some Senate Republicans, who had already pushed back on the Medicaid cuts outlined in the House-passed bill, are now warning against the plan to ramp up cuts to provider taxes. 

Sen. Josh Hawley (R-MO) said he’s “alarmed” that the Senate Finance Committee would go even further than House’s proposal and said that the plan “needs work.”

“I don’t know why we would defund rural hospitals in order to pay for Chinese solar panels,” Hawley told reporters Monday evening.

Work requirements

Senate Republicans are sticking with the House’s idea to implement Medicaid work requirements on the Medicaid expansion population — a plan that has been universally popular among Republican lawmakers for decades and one that congressional Republicans coalesced around early on in the reconciliation process as they looked for ways to obfuscate cuts to the program, as TPM has reported.

But the Finance Committee text takes the House version up a notch. It adds in a provision that would require adults with dependent children older than 14 to prove they work, attend school or perform community service for 80 hours a month.

Experts tell TPM these kinds of restrictions are difficult to implement at the state level and they force enrollees to wade through extra red tape.

“Maybe there’s one kid in the house that is under 14 and there’s one kid that’s over 14 … it just adds another layer of complication to states trying to implement this correctly,” Gardner told TPM.

The House-passed version exempts all adults with dependent children from said work requirements.

State-directed payments

The Senate finance text proposes cutting certain existing state-directed payments to providers over time. The House-passed bill, in contrast, limited future payments but grandfathered existing arrangements. 

Medicare

The Senate text also proposes new eligibility rules for Medicare, including verification of citizenship or lawful permanent residency in order to continue receiving benefits.

Another provision would adjust cost sharing for individuals who are on both Medicare and Medicaid. Loren Adler, a health policy expert at the Brookings Institution, noted that the provision would mean “1.3 million low-income Medicare beneficiaries see higher premiums and/or cost-sharing, no longer receiving financial assistance they’re eligible for,” he said in a post on Twitter, citing an analysis by the nonpartisan Congressional Budget Office.

Clean Energy Tax Credits

The Senate Finance Committee’s plan takes a slower, more flexible timeline for phasing out some of the Biden-era clean energy tax credits included in the Inflation Reduction Act but the changes still equate to a major rollback of President Joe Biden’s legislative victory on tax credits that boost investments on clean energy projects.

Credits for business and other entities

The Finance committee text eliminates one of the most stringent provisions included in the House-passed bill. It gets rid of a measure that would have required clean-energy related construction to start within 60 days of the bill being signed into law for it to qualify for the credits promised under the IRA.

The Senate Finance Committee instead proposes a slower phase out of the promised tax credits. For example, solar panels and wind farms would need to begin construction this year in order to receive the full credit amount, the Finance Committee text says. Meanwhile, projects that would begin construction in 2026 would get 60% of the credit; projects that begin construction in 2027 would receive 20% of the credit and projects constructed in 2028 or later would not be eligible for the credit at all.

Without the Republican cuts, the credits implemented under the IRA would have effectively lasted until 2032 or when U.S. emissions from the electric sector are 25% lower than their 2022 levels.

The Senate text carves out exceptions for hydro, nuclear and geothermal power, allowing those projects to receive full credit if they begin construction before 2034. 

The bill “singles out solar and wind — the two sources that would have added almost all new capacity over the next decade,” Trevor Higgins, senior vice president for energy and environment at the Center for American Progress, told TPM.

The Senate bill also loosens up the foreign entity restrictions House Republicans put in the bill, which experts previously described to TPM as a “bad faith” and “unworkable” provision that Republicans say will prevent nations like China, Iran, North Korea and Russia from having access to the tax subsidies.

The House-passed bill barred the credits from applying to any energy project that involved any relationship to these countries — including having components, subcomponents or minerals used in the project from said countries or having an individual involved in the project that has even loose ties to those countries. The Finance committee text instead seeks to set thresholds for how much of the value of a component may come from those foreign countries.

Higgins said the Senate Finance committee did change the language of the text but that the rules they are hoping to implement “remain unworkable.” He added that ironically foreign entity restrictions are imposed only on clean energy projects.

Credits for individuals

Higgins told TPM most consumer facing incentives are also effectively terminated under the Senate text.

When it comes to electric vehicles and home energy efficiency improvements, including the rooftop solar panels, the Senate text proposes phasing out the credits 180 days after the bill’s enactment rather than by the end of 2026, which is what the House-passed bill required. This will likely speed up the phase out.

Despite the changes and slower phase outs, Higgins told TPM that the cuts equate to a ‘”complete repeal of the clean energy tax credits” included in the IRA.

Sen. Thom Tillis (R-NC), who had previously indicated he was not happy with the cuts implemented by the House-passed bill, said he is “generally satisfied” with the changes made to the clean energy tax credits by the finance panel.

Though the changes might be enough to get Senate Republicans, like Tillis, who were not happy with the cuts fully on board, House Freedom Caucus members — who pushed for the steep and almost immediate cuts — might not be happy with the changes if the Senate package makes it to the House.

Rep. Chip Roy (R-TX) declared on Monday afternoon that he “will not vote for this.”

Child Tax Credit

The Senate Finance Committee is proposing a smaller increase in the Child Tax Credit. Senate Republicans are planning on increasing it to $2,200 per child rather than the House’s proposal of $2,500 per child.

The Senate proposal also keeps the House-passed proposal that would take eligibility for the Child Tax Credit away from children who are U.S. citizens or lawful permanent residents if both of their parents lack a Social Security number.