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Trump’s tax and spending megabill is bad news for New York hospitals, officials say
By
Jimmy Vielkind
Published Jul 2, 2025
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John Paraskevas/Newsday RM via Getty Images
By
Jimmy Vielkind
Published Jul 2, 2025
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President Donald Trump’s tax and spending bill grew worse for New York’s health care sector as it advanced through the U.S. Senate, officials and hospital advocates said.
Republicans who control the upper chamber of Congress changed several provisions of the legislation known as the One Big Beautiful Bill Act. One provision restricts “provider taxes,” which are special taxes on the health care sector that New York and other states use to fund Medicaid.
The Senate approved the bill Tuesday afternoon by a 51-50 vote. Vice President J.D. Vance cast the tie-breaking vote. Three Republicans joined the chamber’s Democrats – including New York Sens. Chuck Schumer and Kirsten Gillibrand – in voting no. The legislation goes back to the House, where some ruling Republicans have already raised objections.
Trump and other Republicans touted the legislation’s extension of tax cuts and increased funding for border security.
Democrats in New York focused on cuts to food assistance programs and Medicaid, which provides health coverage for low-income and disabled people.
“Senate Republicans moved one step closer to ripping health care away from millions of Americans to pay for massive tax breaks for billionaires,” Gov. Kathy Hochul said in a statement.
Senate Majority Leader John Thune, a South Dakota Republican, defended the changes in a floor speech this weekend.
“We're looking at an exceedingly rare opportunity to root out waste, fraud, and abuse, including the first real entitlement reform in decades. Reform that will put these programs on a more sustainable path for today's recipients and for tomorrow's,” he said.
The state estimates 1.5 million people will lose their health insurance as a result of the bill. Hospital groups say the cumulative effects of the bill’s provisions will eventually result in $8 billion less funding. That’s $1 billion more than the House version of the legislation that passed last month, according to the groups’ earlier estimates.
“It’s worse,” said Bea Grause, president of the Healthcare Association of New York State, which represents hospitals and health systems.
The biggest difference between the House and Senate versions was the Senate’s treatment of provider taxes. New York has several such state taxes, including some dating to the 1990s. The taxes focus on specific segments of the health care sector, like hospitals or nursing homes. They are then used to obtain more federal matching dollars.
For example, a state could levy a $1 billion tax on hospital revenue. If that money were then spent through the Medicaid program, it would be matched by the federal government. The result is that hospitals would get back the $1 billion they were taxed, as well as extra money from Washington. The state would remain whole.
“I think gimmick is an absolutely fair word, because you are gaming the system that finances healthcare at the federal level, and you're undermining the spirit of the law,” said Bill Hammond, senior fellow at the Empire Center, a fiscally conservative think tank.
Grause said the taxes were “ a federally approved mechanism to allow the state to tax just a smaller, well-defined class of health care providers in order to raise the state [funding] share without taxing everyone.”
Provider taxes are currently capped at 6%. The Senate bill includes a provision that would eventually reduce the allowable threshold to 3.5%, starting in 2028.
New York’s hospital surcharge is currently 4.77%, according to Healthcare Association of New York State Vice President of Fiscal Policy Kevin Krawiecki. The state will lose $1.5 billion in revenue because of the lower cap on just that levy, he said. A state official said the overall effect of curtailing provider taxes would reach $3.3 billion by 2032.
More immediately, a separate tax on managed care organizations, which New York lawmakers enacted last year, could be annulled. That levy brings in $1.8 billion annually, state officials said.
The Senate version of the fiscal bill retains several elements of the House legislation that advocates say will affect health insurance for tens of thousands of New Yorkers. The bill places work requirements on nondisabled adults. It also removes tax credits for noncitizens to purchase health insurance.
The health care system won’t be able to operate at its current levels after such a funding loss, Grause said. She warned that wait times could increase in emergency rooms as hospitals are forced to assist more people without other options.
“People still get sick and still need health care, so they will still need to come through those emergency room doors,” she said. “They just won't have insurance.”
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Jimmy Vielkind
Jimmy Vielkind covers how state government and politics affect people throughout New York. He has covered Albany since 2008, most recently as a reporter for The Wall Street Journal. Jimmy led a team of reporters that won a New York Press Club award for coverage of Andrew Cuomo’s downfall and was on a team that won a Gerald Loeb Award for coverage of Amazon’s HQ2 process. A native of the Capitol Region, Jimmy has two degrees in urban planning. His position is funded by a grant from the Corporation for Public Broadcasting. Reach Jimmy at [email protected].
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Gothamist is funded by sponsors and member donations
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