A Look Under the Hood of Medicaid Support

In a video interview with Pharma Commerce, Marschall Runge, MD, PhD, dean of the University of Michigan Medical School and author of The Great Healthcare Disruption, addresses the potential impacts of a federal cap on Medicaid provider taxes and how such a policy could affect hospital systems. particularly in states like Michigan that have uniquely implemented Medicaid expansion.

Runge emphasized that hospitals already operate on extremely thin margins when it comes to Medicare and Medicaid reimbursement. Any policy that restricts revenue opportunities from these programs threatens their financial sustainability. He noted that, contrary to popular belief, hospitals often struggle just to break even under current public payer rates, and additional funding through provider taxes has historically helped improve access to care.

His primary concern centers on patient access. Runge pointed out that healthcare access is already limited due to workforce shortages—especially in primary care—and that wait times are growing. Reducing hospital revenue by capping provider taxes could exacerbate these issues, particularly in underserved areas.

He warned that a federal cap would create new challenges, not only financially but operationally, by potentially limiting patient access across the entire care continuum, from primary to specialty services. He stressed that focusing solely on budgetary savings without considering the downstream impact on health outcomes and system strain is shortsighted. In his view, the proposed cap would have minimal benefit to the federal budget but could lead to long-term harm to patient care and public health infrastructure.

Runge urged policymakers to think beyond dollars and cents and consider how such decisions affect real-world health outcomes, workforce strain, and already fragile access points within the healthcare system.

He also comments on how this proposal might affect access to care for Medicaid patients, particularly in expansion states; alternatives or modifications he would propose to ensure both fiscal responsibility and the sustainability of hospital funding; the role academic medical centers should play in shaping Medicaid policy moving forward; and much more.

A transcript of his conversation with PC can be found below.

PC: What role should academic medical centers play in shaping Medicaid policy moving forward?

Runge: I think academic medical centers have a broad mission. We consider our mission, on the one end, to provide the care that nobody else can provide—very complicated, high complexity care. On the other hand, when we provide care that anyone can provide, we want to provide the best care. We're shooting for excellence, and I think it's not just academic medical centers, but all major health centers have a similar goal.

In the state of Michigan, we do have funds that come from the hospitals and provide this supplemental increase for Medicaid patients. It's not coming from the federal government, it's not coming from the state government. It's coming from the hospitals—we get taxed. Why do we do that? Why do we agree to that tax? We agree to that tax because we think it's good for healthcare and it makes it feasible for us. I think if someone would just lift up the hood of the car a little bit and look at it, this has evolved. I'm not saying it's the best system, but it has evolved to make it possible to provide care for people that have limited resources.