The provision in President Donald Trump’s tax bill that’s in limbo after the Senate’s referee called foul Thursday could cost Colorado more than $10 billion in Medicaid funding.
The Republicans’ One Big Beautiful Bill Act, which passed the House of Representatives in May, would reduce the number of people receiving Medicaid to partially offset the cost of extending trillions of dollars in tax cuts passed in 2017.
That already would cost Colorado somewhere between $8 billion and $14 billion in federal Medicaid funding over 10 years, according to the health policy nonprofit KFF.
But an amendment in the Senate could significantly increase costs by limiting how much states can collect by taxing health care providers.
The Colorado Hospital Association believes the state could lose an additional $10.4 billion over five years that it currently spends to cover more people through Medicaid and to compensate hospitals that see more low-income patients, said Ryan Westrom, the group’s vice president of financial policy.
The annual amounts lost would increase over those five years, reaching about $2.8 billion in 2031, he said.
The Senate parliamentarian, a nonpartisan figure whose job is to issue guidance on whether bills violate the chamber’s rules, called the amendment into question Thursday by issuing an opinion that it likely wouldn’t pass muster.
She also raised concerns about provisions that would forbid using Medicaid funds to cover gender-affirming care and punish states, like Colorado, that use their own money to insure undocumented people. The GOP legislation is a reconciliation bill, which limits debate time in the Senate and makes it easier to pass, but the rules don’t allow it to include any policy unrelated to the budget.
The parliamentarian’s guidance isn’t binding, but it does complicate a bill’s path. If a senator challenged a provision found to violate the rules, backers would need 60 votes to keep it. Republicans have 53 seats in the Senate.
Senate GOP leadership said they’ll work on amending the bill to pass muster. They face a delicate balance, because some Republican senators think the bill doesn’t do enough to cut spending, while others think the cuts would be too damaging to hospitals and other providers. Without the provider tax provision, the bill would lose about $250 billion in savings to offset the tax cuts, according to The Washington Post.
President Donald Trump has told congressional Republicans he wants the bill on his desk by July 4.
Hospitals agreed to pay the provider tax, with the state committing to spend the money on specific programs under Medicaid. Since the federal government pays at least half of Medicaid costs, the state can then claim matching money for spending what it collected from the provider tax.
Critics call provider taxes a “gimmick” to draw down more federal funds or even “money laundering,” though the practice is legal.
Colorado collects about $1.4 billion from hospitals each year. In most cases, hospitals end up at least no worse off, because the state distributes a portion of the money based on the share of Medicaid patients that each treats.
The proceeds also go to pay for the state’s share of the cost of covering the Medicaid expansion population. Colorado pays 10% of the cost of insuring adults up to 138% of the poverty line who wouldn’t qualify based on another factor, such as pregnancy or a severe disability.
Currently, federal law limits provider taxes to 6% of hospitals’ revenue from patient care. The amendment to the tax bill would reduce that by 0.5% per year over five years, until it reached 3.5%.
In the first year, Colorado would collect about $117 million less from hospitals, with the lost revenue climbing to about $585 million in 2031, Westrom said. The lost matching dollars would also increase over time.
If the bill passed with the amendment intact, the exact amount Colorado would lose would depend on choices the state makes, since the federal government matches different types of Medicaid spending at rates ranging from 50% to 90%, Westrom said.
The state faces a $700 million budget hole in the fiscal year that will start in July 2026, limiting its ability to offset any federal cuts. While some types of cuts in Medicaid spending would result in more lost federal dollars than others, Colorado doesn’t have any good options, Westrom said.
“No matter where the cuts are applied to, they would be devastating,” he said. “The numbers are staggering when you’re talking about $2.8 billion.”
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