Republican efforts to restrict taxes on hospitals, health plans and other providers that states use to help fund their Medicaid programs could strip them of tens of billions of dollars.

The move could shrink access to healthcare for some of the nation’s poorest and most vulnerable people, warn analysts, patient advocates and Democratic political leaders.

No state has more to lose than California, whose Medicaid program, called Medi-Cal, covers nearly 15 million residents with low incomes and disabilities. That’s twice as many as New York and three times as many as Texas.

A proposed rule by the Centers for Medicare & Medicaid Services, echoed in the Republicans’ House reconciliation bill, could significantly curtail the federal dollars many states draw in matching funds from what are known as provider taxes. Although it’s unclear how much states could lose, the revenue up for grabs is big. For instance, California has netted an estimated $8.8 billion this fiscal year from its tax on managed care plans and took in about $5.9 billion last year from hospitals.

California Democrats are already facing a $12-billion deficit, and they have drawn political fire for scaling back some key healthcare policies, including full Medi-Cal coverage for immigrants without permanent legal status. And a loss of provider tax revenue could add billions to the current deficit, forcing state lawmakers to make even more unpopular cuts to Medi-Cal benefits.

“If Republicans move this extreme MAGA proposal forward, millions will lose coverage, hospitals will close, and safety nets could collapse under the weight,” Gov. Gavin Newsom, a Democrat, said in a statement, referring to President Trump’s “Make America Great Again” movement.

The proposals are also a threat to Proposition 35, a ballot initiative California voters approved last November to make permanent the tax on managed care organizations and dedicate some of its proceeds to raise the pay of doctors and other providers who treat Medi-Cal patients.

All states except Alaska have at least one provider tax on managed care plans, hospitals, nursing homes, emergency ground transportation or other types of healthcare businesses. The federal government spends billions of dollars a year matching these taxes, which generally lead to more money for providers, helping them balance lower Medicaid reimbursement rates while allowing states to protect against economic downturns and budget constraints.

New York, Massachusetts and Michigan would also be among the states hit hard by Republicans’ drive to scale back provider taxes, which allow states to boost their share of Medicaid spending to receive increased federal Medicaid funds.

In a May 12 statement announcing its proposed rule, CMS described a “loophole” as “money laundering,” and said California had financed coverage for more than 1.6 million “illegal immigrants” with the proceeds from its managed care organizations tax. The Centers for Medicare & Medicaid Services said its proposal would save more than $30 billion over five years.

“This proposed rule stops the shell game and ensures federal Medicaid dollars go where they’re needed most — to pay for health care for vulnerable Americans who rely on this program, not to plug state budget holes or bankroll benefits for noncitizens,” Mehmet Oz, the Centers for Medicare & Medicaid Services administrator, said in the statement.

Medicaid allows coverage for noncitizens who are legally present and have been in the country for at least five years. And California uses state money to pay for almost all of the Medi-Cal coverage for immigrants who are not in the country legally.

California, New York, Michigan and Massachusetts together account for more than 95% of the “federal taxpayer losses” from the loophole in provider taxes, the Centers for Medicare & Medicaid Services said. But nearly every state would feel some impact, especially under the provisions in the reconciliation bill, which are more restrictive than the CMS proposal.

None of it is a done deal. The Centers for Medicare & Medicaid Services proposal, published May 15, has not been adopted yet, and the reconciliation bill is likely to be altered significantly in the Senate. But the restrictions being contemplated would be far-reaching.

A report by Michigan’s Department of Health and Human Services, ordered by Democratic Gov. Gretchen Whitmer, found that a reduction of revenue from the state’s hospital tax could “destabilize hospital finances, particularly in rural and safety-net facilities, and increase the risk of service cuts or closures.” Losing revenue from the state’s managed care organizations tax “would likely require substantial cuts, tax increases, or reductions in coverage and access to care,” it said.

The Centers for Medicare & Medicaid Services declined to respond to questions about its proposed rule.

The Republicans’ House-passed reconciliation bill, though not the Centers for Medicare & Medicaid Services proposal, also prohibits any new provider taxes or increases to existing ones.

The American Hospital Assn., which represents nearly 5,000 hospitals and health systems nationwide, said the proposed moratorium on new or increased provider taxes could force states “to make significant cuts to Medicaid to balance their budgets, including reducing eligibility, eliminating or limiting benefits, and reducing already low payment rates for providers.”

Because provider taxes draw matching federal dollars, Washington has a say in how they are implemented. And the Republicans who run the federal government are looking to spend far fewer of those dollars.

In California, the insurers that pay the managed care organizations tax are reimbursed for the portion levied on their Medi-Cal enrollment. That helps explain why the tax rate on Medi-Cal enrollment is sharply higher than on commercial enrollment. More than 99% of the tax money the insurers pay comes from their Medi-Cal business, which means most of the state’s insurers get back almost all the tax they pay.

That imbalance, which the Centers for Medicare & Medicaid Services describes as a loophole, is one of the main things Republicans are trying to change. If either the CMS rule or the corresponding provisions in the House reconciliation bill were enacted, states would be required to levy provider taxes equally on Medicaid and commercial business to draw federal dollars.

California would likely be unable to raise the commercial rates to the level of the Medi-Cal ones, because state law constrains the Legislature’s ability to do so. The only way to comply with the rule would be to lower the tax rate on Medi-Cal enrollment, which would sharply reduce revenue.

The Centers for Medicare & Medicaid Services has warned California and other states for years, including under the Biden administration, that it was considering significant changes to managed care organizations and other provider taxes. Those warnings were never realized. But the risk may be greater this time, some observers say, because the proposed changes are echoed in the House-passed reconciliation bill and intertwined with a broader Republican strategy — and set of proposals — to cut Medicaid spending by close to $800 billion.

“All of these proposals move in the same direction: fewer people enrolled, less generous Medicaid programs over time,” said Edwin Park, a research professor at Georgetown University’s McCourt School of Public Policy.

California’s managed care organizations tax is expected to net California $13.9 billion over the next two fiscal years, according to January estimates. The state’s hospital tax is expected to bring in an estimated $9 billion this year, up sharply from last year, according to the Department of Health Care Services, which runs Medi-Cal.

Losing a significant slice of that revenue on top of other Medicaid cuts in the House reconciliation bill “all adds up to be potentially a super serious impact on Medi-Cal and the California state budget overall,” said Kayla Kitson, a senior policy fellow at the California Budget & Policy Center.

And it’s not only California that will feel the pain.

“All states are going to be hurt by this,” Park said.

Wolfson writes for KFF Health News, a national newsroom that produces in-depth journalism about health issues and is one of the core operating programs at KFF — the independent source for health policy research, polling, and journalism.

Dear Liz: I have too many credit cards that I opened to get frequent flier points. I understand that closing a credit card lowers your credit scores. How long does the ding last? How long should I wait before closing another card? Do you have any other advice on this subject? You probably have discussed this in previous columns but it might be worth repeating.

Answer: If you have a lot of cards, closing a few is unlikely to significantly hurt your credit scores as long as you do so strategically.

A big chunk of your credit scores is determined by how much of your available credit you’re using. You want a large gap between the amounts you charge and your credit limits. Try to keep open the cards with the highest credit limits. If you have multiple cards with the same issuer, ask if the credit limit from a card you’re closing can be transferred to one you’re keeping.

Even if your scores do dip because of a closure, the effect is likely to be short-lived if you continue using credit responsibly.

Ideally, you would review your portfolio of credit cards every year or so to determine which cards to keep and which to close. Travel rewards cards typically have annual fees, sometimes significant ones, so you’ll want to make sure every card you have is at least paying for itself in annual rewards and benefits.

Also consider the mental load involved. As you age, you may find it more difficult to monitor multiple accounts and keep track of all the details. You may want to simplify your finances by winnowing your cards down to just one or two. At that point, keeping your finances manageable will be more important than maintaining the highest possible credit scores.

Dear Liz: If someone inherits my retirement account, is there any way they can avoid having their Medicare premiums increased for one year?

Answer: A large-enough retirement account could affect their Medicare premiums for up to 10 years, not just one.

Normally inheritances aren’t taxable, but retirement accounts are the exception. Withdrawals from inherited retirement accounts are usually taxable as income, and most non-spouse inheritors must drain a retirement account within 10 years. Withdrawals from inherited Roth accounts aren’t taxable, but the accounts still must be drained by the inheritor within a decade.

If the inheritor is on Medicare, taxable withdrawals could boost income enough to increase their Medicare premiums, thanks to the income-related monthly adjustment amounts (IRMAA). This surcharge starts once modified adjusted gross income exceeds certain amounts, which in 2025 is $106,000 for single filers and $212,000 for married couples filing jointly.

Anyone who inherits a retirement plan should get advice from a tax pro, but that’s particularly important when withdrawals might affect tax brackets and Medicare premiums. The pro can help determine how quickly or slowly the money should be withdrawn to maximize how much the inheritor gets to keep.

Dear Liz: I waited until age 70 to start collecting Social Security. My wife turns 65 this year so her full retirement age is 67. Can she start collecting Social Security benefits now based on my benefit or should we wait until her full retirement age?

Answer: If she applies for Social Security now, she would be “deemed” to be applying for both her own benefit and her spousal benefit and given the larger of the two. She would not be allowed to switch to the other benefit later.

Most people are better off waiting at least until their full retirement age to apply, and many will maximize their lifetime benefits by delaying until age 70. Her mileage may vary, of course, so it’s worth using a Social Security claiming calculator and consider getting advice from an objective source, such as a fee-only financial advisor.

Liz Weston, Certified Financial Planner, is a personal finance columnist. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.