ICYMI: New HHS Report Finds Working Families Tax Cuts Will Lower Health Care Costs Across the Board

ICYMI: New HHS Report Finds Working Families Tax Cuts Will Lower Health Care Costs Across the Board

WASHINGTON, D.C. - A new report from the Department of Health and Human Services' Office of the Assistant Secretary for Planning and Evaluation (ASPE) finds reforms to Medicaid provider taxes and state-directed payments in The One Big Beautiful Bill will lower health care prices for Americans across the board.

The report projects the reforms will reduce non-Medicaid health care prices by as much as 3.5 percent, generating between $502 billion and $875 billion in savings for taxpayers, families, and businesses over the next decade, with annual savings reaching $100 to $175 billion once the reforms are fully in place.

The savings extend beyond Medicaid: ASPE estimates that every $100 billion in Medicaid savings produces another $29 billion in savings for Medicare and commercial coverage plans, which lowers health care costs and the tax burden for hardworking American families.

WORD ON THE STREET

Fromthe HHS ASPE Research Report:

A significant source of Medicaid expenditure growth is the proliferation of state directed payments (SDPs) - and their subsidization by provider taxes - with provider tax-supported spending growing over 270 percent from 2008 to 2018, far outpacing growth in state general fund spending.

Because of provider taxes and intergovernmental transfers (IGTs), under which revenue from local governments or facilities run by state or local governments is transferred to the state, the impact of these increased Medicaid expenditures falls disproportionately on the federal budget. In addition, by linking SDPs to the ACR, hospitals have an added incentive to negotiate higher commercial rates, increasing costs to commercial insurance beneficiaries as well.

Payments were expected to reach over $300 billion by 2034, without the Working Families Tax Cut (WFTC) legislation, commonly referred to as the One Big Beautiful Bill Act.

By 2025, the average service covered by an SDP was compensated at 186 percent of the Medicare rate, well above the limit newly set by the WFTC legislation.

Reforms to provider taxes and SDPs are projected to reduce non-Medicaid prices by up to 3.5 percent, relative to a no policy baseline, benefiting non-Medicaid payers by $502-$875 billion from 2025-2034. When fully phased in, the annual benefit will be $100-$175 billion.

THE BOTTOM LINE

The One Big Beautiful Bill is lowering health care costs while strengthening the Medicaid program.

For years, states have used provider taxes and state-directed payments to draw down additional federal Medicaid dollars and increase provider payments. Those higher payments also put upward pressure on costs for commercial insurance and Medicare.

HHS' analysis shows the reforms in the Big Beautiful Bill will reduce Medicaid spending, lower prices for non-Medicaid payers, and generate significant savings for taxpayers. The report also finds these changes could lead to lower premiums in commercial insurance markets.

The result: a more sustainable Medicaid program and lower health care costs for Americans.