** UPDATE: The Senate passed the reconciliation bill Tuesday afternoon after the publication of this story by a 50-50 vote, with Vice President JD Vance breaking the tie. It now goes to the House.**
The advocacy group for Kentucky hospitals is sounding the alarm about a massive bill that’s near passage in the U.S. Senate, saying its cuts to Medicaid could cause the closure of hospitals and loss of 20,000 jobs.
The Kentucky Hospital Association has changed its tune on the bill since May, when it supported a version that passed the House, making it an outlier among state and national health care groups.
Jim Musser, the senior vice president for policy and government relations at the Kentucky Hospital Association, explained in an interview with Kentucky Public Radio that the changes made to the bill in the Senate chamber “will devastate health care in the Commonwealth of Kentucky.”
“It's a double blow,” Musser said. “First and foremost, it is damaging to the access to care and damaging to the health of our people. And then on top of that, it's going to damage the economy.”
The Senate changes specifically endanger billions of dollars in direct Medicaid payments that Kentucky hospitals receive each year under a state and federal agreement to improve care.
The Senate reconciliation bill — dubbed the “Big Beautiful Bill” by President Donald Trump and its supporters — would cut taxes by $4.5 trillion over the next decade, along with more than $1 trillion of cuts in federal spending on Medicaid, according to the nonpartisan Congressional Budget Office.
The Senate was voting on the bill throughout Monday night and into Tuesday morning, with Trump demanding he receive a bill to sign before July 4. If the Senate passes the bill, it would be sent to the House, which could either approve the changes and send it to the president’s desk, or make changes of its own, which would delay that timeline. Republicans hold a slim majority in both chambers.
Musser said the major changes made to the bill in the Senate that alarmed hospitals were its cuts to state provider taxes that fund portions of states’ Medicaid budget, as well as cuts to state-directed Medicaid payments that increase the reimbursement rate hospitals receive for treating Medicaid patients. The CBO estimated these changes would cut $340 billion in Medicaid spending for states over the next decade.
According to Musser, such cuts would undermine the Kentucky Hospital Rate Improvement Program, in which provider taxes partially fund directed payments to hospitals, which allow increased Medicaid reimbursements that are closer to the average commercial rate. The increased rates are value-based, dependent on hospitals meeting certain quality metrics in order to be eligible.
Kentucky hospitals on average have a 2% operating margin, but without these state-directed payments, they would operate in a negative 7% hole.
“There are some that will still be viable, but there will be a number of them that are going to either have to close entirely or dramatically reduce the services that they're able to offer,” Musser said.
Musser noted the bipartisan nature of the Hospital Rate Improvement Program, which was created with legislation in Frankfort in 2019 and updated without controversy in subsequent years. The program was also approved by the first Trump administration and the administration of Democratic President Joe Biden.
In January, Kentucky Hospital Association officials said the program directs $2.2 billion annually to Kentucky hospitals at no cost to the state.
“I think that some of the folks who are the loudest and most adamant about making cuts to this program haven't thought those kinds of things through,” Musser said. “They just see it as a way to cut a welfare program, and it's not a real smart way to go about doing it, quite frankly.”
Musser said the Medicaid dollars to hospitals have allowed them to expand services like oncology and behavioral health, in addition to their emergency departments. And those dollars have come because hospitals have met quality metrics, decreasing their unplanned admission rates and serious infections, while increasing screening for sepsis.
“If cancer treatment goes away in your local hospital because the Medicaid dollars are gone, that affects everybody, not just Medicaid patients,” Musser said. “I don't think they've quite thought about the economic impact.”
There are also the larger economic impacts of hospitals, which are often one of the largest employers in a community. Musser noted that hospitals have in large part replaced the declining coal mining industry in much of eastern Kentucky, but also said the cuts could affect urban hospitals.
“Everybody thinks of bourbon and horses as our signature industries, and they are, but the economic impact of Kentucky's hospitals is larger than bourbon and horses combined,” Musser said.
KHA says House version much better than Senate
National health groups representing hospitals and rural health care providers had similar dire warnings about the version of the bill that passed the House, which cut an estimated $800 billion from Medicaid.
Most of these cuts and the estimated 8 million people that would lose Medicaid would happen because of the House bills’ new work reporting requirements for enrollees, as well as more frequent eligibility checks for all. The national groups — as well as the Kentucky Rural Health Association — said these changes would hurt not just the poor who lose coverage, but also many primary health care providers who rely on Medicaid patients to stay open in rural areas.
In contrast, the Kentucky Hospital Association said in May when the House bill passed that it would “preserve” Medicaid, thanking the Republican members of Kentucky’s House delegation that voted for the bill.
The work requirements and increased eligibility checks are still in the Senate bill, but its cuts to provider taxes and state-directed payments for hospitals are exactly the types of provisions the association was fearing, according to Musser.
“(The House version) may not have been exactly everything that every group wanted, but we also had a pretty good idea that what the Senate was going to do was not going to be helpful at all,” Musser said. “A lot of the folks who are complaining about the House bill, I think now look at it and say, ‘Gee, that wouldn't be such a bad deal if we could go back to that.’”
GOP Rep. Brett Guthrie, who represents a portion of western Kentucky, played a key role in the Medicaid changes of the House bill as chairman of the House Energy and Commerce Committee. Musser said he was grateful that Guthrie’s version did not jeopardize the Kentucky Hospital Rate Improvement Program, which is why he received public thanks from his group.
“He actually did things with a scalpel rather than a meat cleaver,” Musser said.
Tuesday morning, Senate leaders indicated they would not vote on an amendment of GOP Sen. Rick Scott of Florida, which would make states responsible for paying 30% of the costs of covering their Medicaid expansion population, instead of the current 10%. Musser said that amendment would have been “extraordinarily unhelpful,” as many states wouldn’t be able to afford keeping the expansion in place.
“I think there's a disconnect between Senator Scott and the president,” Musser said. “I think there are members in the Senate who are working very hard to undermine the president's promises (to preserve Medicaid).”
If the bill does pass the Senate, Musser says his group is already communicating with Kentucky’s House members to reject the changes that affect hospitals.
“We have been telling them right along, including as recently as (Monday), please hold tight to the House language,” Musser said. “The Senate will do irreparable damage to us if, if you're accepting what the Senate has done.”
Musser noted that this may be a large task, as the bill includes many other items that will be hard to vote against, such as tax cuts. He also noted the plight of GOP Sen. Thom Tillis of North Carolina, who “was willing to die on the Medicaid hill.” He voted against the Senate bill over its Medicaid cuts and drew the ire of Trump, forcing him into announcing he would not run for reelection.
“I don't think anybody wants to be the one who has it hung around their neck that they caused a $4.5 trillion tax increase,” Musser said. “That's kind of what we're up against.”
While Trump is wanting to sign a finished bill by July 4, Musser said “it's better to get it right than fast.”
“That July 4 deadline is kind of arbitrary,” he said. “And while everybody needs to work to a deadline, it's more important that they get it right, because the health care of millions of Americans really is on the line with what they're doing.”
State government and politics reporting is supported in part by the Corporation for Public Broadcasting.
