6 min read

In Waterville, the windows of Northern Light Inland Hospital still reflect the morning sun.

Soon, there will be no warm welcome inside. The hospital, a community fixture for decades, will close its doors on June 11. The birthing center, already closed, is silent. No newborn cries. No anxious partners pacing. No nurses hurrying down the halls. And now, with a sweeping push from Republicans in Congress to eliminate a key Medicaid funding mechanism, the silence may spread.

It starts with what sounds like a technical fix: getting rid of so-called “provider taxes.” These are fees that states collect from hospitals and health care providers in exchange for a generous match from the federal government. Then, the state returns the money to the hospitals through Medicaid payments. It’s a cycle that has helped states like Maine bring in billions in federal funds over the years.

Republican lawmakers call it a gimmick, an accounting trick to squeeze more money from Washington. They’re not wrong that it’s complicated. But they’re dead wrong about the effect cutting it would have. Because if this change goes through, it won’t just affect accounting ledgers. It will gut state budgets, slash Medicaid rolls and close more hospitals like Inland, especially in rural states like Maine, where access is already fragile.

To understand the stakes, just look around. In recent months, MaineGeneral Health shuttered its pediatric behavioral unit in Augusta. It was the only dedicated inpatient program in the region for children in crisis. Now, those kids will be bounced around emergency rooms or sent hundreds of miles away.

And it’s not just central Maine. Twelve birthing units in the state have closed since 2010. Most recently, Waterville lost its only maternity ward. Expectant mothers now must travel 20 to 40 miles, sometimes in winter storms, just to deliver safely. “If I had gone into labor early, I don’t know what we would have done,” said Eva, a Waterville mother whose second child was born last year. “We didn’t have a plan B. Waterville was our plan A, B and C.” Now, it’s gone.

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These closures aren’t happening in a vacuum. Hospitals are under immense pressure: low Medicaid reimbursement rates, rising labor costs and a population with increasingly complex health care needs. Maine is the oldest state in the country, and its rural geography makes delivering care more expensive than average. Add the potential loss of hundreds of millions in federal matching funds, and you’re looking at a health care system on the verge of collapse.

Currently, 49 states and the District of Columbia use some version of provider taxes. It’s legal. It’s sanctioned by federal law. And it’s been part of Medicaid’s structure for over 30 years. Here’s how it works: a state charges hospitals a tax. It then uses that revenue to draw additional money from the federal government under Medicaid’s matching formula. The federal dollars, often much greater than the original tax amount, are then distributed back to hospitals to help cover the cost of care. It’s like pooling your money to buy in bulk. Everyone gets more than they put in.

But some Republicans see it as double-dipping. A March 2024 proposal from the House Energy and Commerce Committee would eliminate provider taxes altogether, arguing that they distort the true cost of Medicaid. One proposal suggests that eliminating these taxes could reduce state budgets by as much as $612 billion over 10 years.

These measures are part of broader efforts to achieve $880 billion in federal budget savings. The exact impact on Medicaid will depend on which provisions are implemented, but any version could be devastating.

If the proposal becomes law, the federal government could claw back more than $600 billion in Medicaid payments over a decade.

Though the proposed cuts would affect every state, the damage in rural ones like Maine will be uniquely severe. The Maine Hospital Association says provider taxes bring in nearly $900 million in federal matching funds annually. That’s roughly one-third of all Medicaid spending in the state. If those dollars disappear, rural hospitals will close. Specialty services will vanish. And vulnerable patients, children, seniors, people with disabilities, all of us, will fall through the cracks.

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“People talk about cutting Medicaid like it’s an abstract thing,” said Steve Michaud, president of the Maine Hospital Association. “But in Maine, Medicaid is how thousands of people see a doctor, get medication, or recover after surgery. It’s not a budget line. It’s a lifeline.”

To be fair, Republicans aren’t trying to destroy Medicaid. They want to save money. But as with most things in health care, the devil is in the details. Eliminating provider taxes might shrink federal outlays, but the costs won’t disappear; they’ll just shift. They’ll fall on state governments, local taxpayers and patients.

Emergency rooms will see more uninsured visits. Rural EMS services will struggle to transport mothers in labor or children in crisis. The state and counties will shoulder larger health costs. Charities and churches will try to fill the gaps. And when the bill comes due, it will be paid not in dollars, but in delays and diminished care.

Take Nicole, a nurse in central Maine who works the overnight shift at a community hospital already struggling to stay open. “If we lose federal funds, I don’t know how we keep the lights on,” she says. “We’re already stretched thin. Losing more staff means patients waiting hours — or days — for treatment.”

Or Jeff and Samantha, parents of a child with severe autism who depended on MaineGeneral’s now-closed pediatric behavioral unit: “We are feeling abandoned,” Samantha says. “No one else would take him. We ended up in the ER for three weeks straight last year. He was doing so much better when in treatment at MaineGeneral. Taking away his care will be devastating, both to him and to us as a family.”

Or the elderly couple in Jackman, 80 miles from the nearest birthing center. Their daughter, pregnant with her first child, had to move to Bangor for two months just to be close to care.

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There’s a better way forward. Congress should strengthen, not dismantle, Medicaid financing. That means protecting provider taxes and the enhanced federal match that keeps Medicaid viable in rural states, increasing base Medicaid reimbursement rates so hospitals don’t have to rely on workaround funding just to break even, targeting waste, fraud and administrative bloat instead of cutting payments to frontline providers.

Investing in rural health care infrastructure, including telehealth and transportation, will help close gaps in access. And in Maine, lawmakers should fight like hell to preserve the system that helps our communities survive. That means pushing back against federal cuts, exploring state-level stopgaps and listening to the doctors, nurses and patients on the ground. Because what’s at stake isn’t politics. It’s people.

Not all storms come with thunder. Some arrive in the form of quiet decisions made in distant committee rooms, decisions with the power to undo decades of progress. But Mainers know something about weathering storms. We rallied during COVID-19. We took care of our neighbors through blizzards and blackouts. And we will speak up when the systems that keep us healthy are threatened.

The choice before us is simple: We can let the funding dry up. Or we can raise our voices and say: this far, no further. Let Waterville’s silence be a wake-up call, not a sign of what’s to come.

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