Article courtesy MIRS News for SBAM’s Lansing Watchdog newsletter
The Citizens Research Council (CRC) reports that the state’s current budget is worth $84 billion when money from provider taxes is considered. The taxes are assessed on health insurers, ambulance services and hospitals, later returned to them as larger Medicaid payments.
Without the Medicaid-related taxes in the mix, the Fiscal Year (FY) 2026 budget, which was created behind schedule because of negotiation challenges between the Democratic-controlled Senate and Republican-led House, the budget is worth $74.6 million.
“We get revenue from that tax. We use that revenue to draw federal funds, probably better than $2 federal to every $1 state…there’s a big multiplier effect when we bring revenue into the Medicaid program,” said Bob Schneider, the senior research associate of the Citizens Research Council of Michigan. “Then most of that money gets passed back to those providers in the form of an enhanced Medicaid reimbursement.”
Schneider spoke Thursday morning as part of the CRC’s virtual presentation on the recent budget.
Previously, Schneider served as the State Budget Office’s director of the health and human services office, as well as the Michigan House Fiscal Agency’s associate director.
In early July, President Donald Trump’s One Big Beautiful Bill Act (OBBBA) tightens up federal Medicaid costs, solidifies tax cuts from his first term and ramps up funding for immigration enforcement. One of OBBBA’s goals was to limit states’ potential misuse of provider taxes, with critics viewing them as a type of “money laundering” scheme that inflates Medicaid matching funds from Washington, D.C.
Schneider said the most immediate pressure from OBBBA’s Medicaid reforms was on insurance provider assessments (IPAs), affecting the state’s health plans overseeing Medicaid benefits.
“We were going to lose the insurance provider assessment . . . we would lose $450 million in current revenue that helps draw federal funds to support Medicaid, and we would have either needed to absorb that Medicaid cut, or we would have needed to find other revenue somewhere else.”
Among budget implantation bills was HB 4968. Schneider explained the legislation instructs Michigan’s Department of Health and Human Services to restructure the assessments, no longer imposing the largest tax on Medicaid health plans – which would have directly violated OBBBA’s latest restrictions.
He described DHHS as submitting a waiver to the federal government, detailing how Medicaid health plans will have parity with private insurers through the provider tax system, dodging a termination of $450 million in healthcare revenue.
“I don’t know if it’ll happen next week or in a month or in six months, but when the federal government says, ‘look, this tax needs to end,’ the legislation says ‘DHHS, you have the authority now to . . . tax everybody the same, submit a new waiver that says we’re going to change our tax structure, and this structure will comply with your strict rules.’”
In the current fiscal year, Michigan is aligned to oversee $6 billion in provider tax reimbursements linked to hospitals and $3.3 billion to insurers.
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