Tax writers float $15B rural fund to appease ‘Medicaid moderates’
Senate tax writers have proposed a $15 billion rural fund to support hospitals as part of President Trump’s reconciliation agenda aimed at gaining centrist backing. The fund is designed to allocate $3 billion annually over five years, with half distributed equally across all 50 states and the remainder distributed based on a federal formula.
This proposal emerged as a solution to concerns raised by “Medicaid moderates,” who fear hospital closures resulting from a recent mandate lowering the provider tax rate from 6% to 3.5% for Medicaid expansion states. Senate leadership defends this cap as essential for meeting fiscal targets, but some centrist Republicans are advocating for the tax cap to be removed.
The proposed relief fund has been described as insufficient by some lawmakers, highlighting ongoing tensions as the Senate faces a test vote on the larger legislative package. some representatives have criticized the current provider tax language and are pushing for further changes to better address hospital funding needs.
Senate tax writers float $15 billion rural fund to appease ‘Medicaid moderates’
Senate tax writers have offered to set aside $15 billion for rural hospitals as part of reconciliation, a late addition to President Donald Trump’s “big, beautiful bill” meant to win over centrist support.
The proposed fund would allocate $3 billion a year across five years, according to a memo circulated to Senate GOP offices on Wednesday morning. Half of that amount would get distributed equally to all 50 states, according to Punchbowl News, with the rest doled out based on a formula established by the federal government.
A Senate Finance Committee source declined to share the memo but confirmed its contents.
The idea of a stabilization fund has been floated since last week, when the Finance Committee announced it would force Medicaid expansion states to cut their provider tax to 3.5%, down from 6%.
Senate leadership argues the cap is necessary to meet the spending cut targets demanded by fiscal hawks as part of Trump’s tax agenda, but it has prompted vocal concerns among a bloc of “Medicaid moderates” warning of hospital closures stemming from the provision.
The fund is unlikely to satisfy those concerns, with centrist Republicans lobbying Senate Majority Leader John Thune (R-SD) to erase the cap on the provider tax, which states use to pay for their share of Medicaid expenses. Instead, Sen. Josh Hawley (R-MO) and others want the Senate bill to follow the House’s more modest freeze.
The memo represents an attempt to bring holdouts on board ahead of a test vote on the megabill later this week. On Tuesday, Thune urged his conference to set aside their misgivings with so much of Trump’s agenda wrapped up in the legislation.
Thune’s plea was met with warnings from Sen. Thom Tillis (R-NC), who is up for reelection in 2026, that the provider tax is “unworkable” in his home state, going so far as to compare it to the botched Obamacare rollout that haunted Democrats at the ballot box.
He told reporters the relief fund helps “a bit” with the hospitals, but has been sharing a fact sheet estimating that the effect on North Carolina could be billions of dollars. He and other GOP holdouts are pushing for a larger fund, while complaints over the provider tax have expanded to the House.
On Tuesday, Thune told the Washington Examiner he was comfortable with the current provider tax language despite 16 House centrists penning a letter to lobby for the lower chamber’s freeze.
THUNE MAKES HOLD-YOUR-NOSE PITCH TO ‘BIG, BEAUTIFUL BILL’ HOLDOUTS
“We like where we are,” Thune said. “I think we’re in a good spot.”
One centrist House Republican simply told the Washington Examiner, “Nope,” when asked if the Senate’s proposal would be able to pass in the lower chamber.
Hailey Bullis contributed to this report.
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