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A controversial federal proposal known as the “Big Beautiful Bill” could severely impact Missouri’s Medicaid funding, due to provisions that cap the state’s provider tax—a critical mechanism used to fund healthcare services.
This tax, known as the Federal Reimbursement Allowance (FRA), plays a vital role in Missouri’s contribution to its Medicaid program.
Missouri, like many states, imposes a tax on medical providers such as hospitals to fund its share of Medicaid. While the FRA has long received bipartisan support, some conservative lawmakers have criticized it as “money laundering.”
Senate Proposal Caps Tax, Threatens Budget Stability
The Senate version of the bill would limit Medicaid provider taxes to 3.5% by 2031, down from the current 4.2%, and much lower than the 5.47% average over the past decade.
Missouri Hospital Association spokesperson Dave Dillon warned that this reduction could either slash payments to healthcare providers or force the state to dip into its general revenue fund, creating a substantial budget deficit.
“Each 0.1% reduction translates to nearly $76 million in healthcare funding cuts,” said Dillon. He also raised concerns about the House version of the bill, which would freeze provider tax rates, reducing flexibility during economic downturns.
Senator Hawley Voices Concerns for Rural Hospitals
Sen. Josh Hawley (R-Missouri) criticized the Senate’s proposal, calling it “a mess” in its current form, particularly due to the threat it poses to rural hospitals, which make up nearly half of Missouri’s hospital system.
“I won’t support any legislation that puts rural healthcare at risk,” Hawley stated, emphasizing his commitment to preserving access to care in underserved regions.
Diverging Views Among Missouri Officials
Sen. Eric Schmitt has not yet commented on the Senate version, but has previously noted that the FRA shouldn’t be viewed as “free money,” signaling support for potential reforms.
Gov. Mike Kehoe, through spokeswoman Gabby Picard, said he backs the overall goals of the “Big Beautiful Bill,” including tax relief and energy independence, while remaining cautious about any changes to the FRA system.
In contrast, House Speaker Jon Patterson expressed concern that the proposed changes could result in massive state budget shortfalls, especially if Medicaid costs rise without matching federal support.
Mixed Support from State Lawmakers
While 64 Missouri legislators have pledged support for the bill in letters to Senators Schmitt and Hawley, several key figures, including Speaker Patterson, Sen. Lincoln Hough, and Speaker Pro Tem Chad Perkins, withheld their endorsements.
Hough has warned that any shift in the federal-state Medicaid cost structure could destabilize Missouri’s budget. Perkins emphasized his priority to support rural healthcare, while leaving federal negotiations to lawmakers in Washington.
The “Big Beautiful Bill” aims to implement sweeping federal reforms, but its proposed cap on Missouri’s provider tax could jeopardize vital Medicaid funding and destabilize the state’s healthcare infrastructure.
As debate unfolds in Congress, Missouri’s leaders remain split, with rural hospitals, healthcare access, and budgetary stability hanging in the balance.