President Donald Trump has proposed walking back a Medicaid payment policy enacted during his first term — a move that has been met with concern by hospitals that serve high volumes of Medicaid patients.
Here are seven things for ASC leaders and physicians need to know about the proposed rollback:
1. The policy was initially implemented by the Trump administration in 2018. It gives states greater flexibility in setting Medicaid payment rates through state-directed payment programs, which are supplemental funding mechanisms supported by both state and federal governments. Hospitals, particularly in rural and underserved communities, have come to rely on these programs to help bridge the gap between Medicaid reimbursements and the actual cost of care.
2. The Trump administration now wants to roll back this policy in an effort to make good on the president’s promise to cut back on Medicaid spending and inefficient financial structuring at the state level. In a June 6 statement, the president criticized current SDP practices as a “gimmick” that allows states to tax providers and redirect those funds as Medicaid payments — unlocking additional federal contributions in the process.
3. “These state directed payments have rapidly accelerated … and threaten the Federal Treasury and Medicaid’s long-term stability,” President Trump said in a June 6 statement. He also directed HHS to take action aimed at curbing “waste, fraud and abuse” in the Medicaid program, including ensuring that Medicaid payment rates do not exceed those of Medicare.
4. America’s Essential Hospitals, a trade organization which represents the nation’s safety-net providers, is pushing back strongly on the proposed reversal. The organization cited 2022 data showing that essential hospitals incurred $22.7 billion in uncompensated care costs, including $10.3 billion in unpaid Medicaid-related care.
5. “State directed payments help states close these gaps in Medicaid payment between Medicaid and other payers,” Beth Feldpush, DrPH, AEH’s senior vice president of policy and advocacy, said in a June 10 statement. “Many SDPs approved by the first Trump administration have allowed states to keep rural hospitals open; reduce infant and maternal mortality; and improve care quality, value, and access in other ways. These programs could be eliminated by this proposed policy reversal.”
6. Dr. Feldpush asserted that allowing states to have the flexibility to set Medicaid payment policies as they see fit is vital for services not covered by Medicare, including maternity care. Prior to the proposed rollback, hospitals in at least 10 states reported significant delays in receiving Medicaid supplemental payments — with some delays dating back to fall 2024. This has resulted in delays in service expansions and vendor payments, among other financial consequences.
7. Essential hospitals say they’re willing to engage in dialogue with policymakers but underscored that reforms must be data-driven and aligned with the real-world economics of safety-net care.
“Essential hospitals look forward to working with the administration to identify data-driven ways to advance the president’s goal to ‘love and cherish Medicaid’ and protect access to care for Medicaid beneficiaries,” Dr. Feldpush said.
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