BUDGET PROJECT: Missouri would lose $3.77 billion in State and Federal Provider Taxes from FY 2020-2026

Missouri Budget Project releases study with impact of Provider Tax changes in Graham-Cassidy Proposal

Due to the accelerated pace of activity in Washington DC regarding efforts to repeal and replace the Affordable Care Act, the Missouri Budget Project felt it important to offer its analysis of the impact of the proposed changes to the Missouri state budget. The Graham-Cassidy proposal, as it stands today, would repeal major elements of the Affordable Care Act (ACA), make changes to other ACA provisions, fundamentally alter federal Medicaid financing, and reduce federal spending for health coverage. According to a study put out yesterday by the Kaiser Family Foundation:

The Graham-Cassidy proposal would:

•   Repeal the ACA Medicaid expansion and individual insurance market subsidies—including premium tax credits, cost-sharing reductions,and the basic health program—as of 2020.
•   Create a new block grant program to states, which replaces the ACA’s Medicaid expansion and insurance subsidies, for years 2020-2026.States would have flexibility to use these funds to cover the cost of high-risk patients, assist individuals with premiums and cost-sharing,pay directly for health care services, or provide health insurance to a limited extent to people eligible for Medicaid.
•   Convert federal funding for the traditional Medicaid program from a guaranteed match to a capped amount.The conclusions in the study provide a state by state analysis of the impact of the bills redistribution of federal dollars via the new block grant program to states and the impact of capping federal dollars on a per capita basis for the period between fiscal years 2020 to 2026. The Kaiser study found that over the period of 2020 – 2026 that Missouri would see an increase in federal funding of $4.3 billion dollars due to the new block grant proposal but would simultaneously experience a decrease in federal funds due to the capping of Medicaid dollars on a per capita basis of $1.3 billion dollars. The net effect of those two provisions would provide roughly $3 billion dollars in additional funding for Missouri over that time period.However, while the Missouri Budget Project does not dispute these findings, it should be clear that the Kaiser study does not include the impact of the reduction in the allowable rate of provider taxes which will also reduce the amount of funding Missouri has available to fund its Medicaid program. Under the Graham-Cassidy proposal, the limit on provider taxes will drop from the current 6% rate to 4%, or a cut of one-third. The impact of that change will be significant. Our calculations demonstrate a reduction of $3.77 billion state and federal dollars over period of 2020 – 2026 (this calculation does not account for inflation). The years after 2026 would continue to see a reduction of close to a billion dollars a year in state and federal dollars going on into the future. As a result, even with increased funding over the short-term due to the block grant funds, Missouri will have a net loss of revenue for health care services of $731 million over the 2020-2026 fiscal period (see Table on next page). Following 2026, the loss will be magnified due to the expiration of the block grant funds.

For questions contact Brian Colby, Policy Director, Missouri Budget Project: bcolby@mobudget.org