The Red Line

In early June, Connecticut instituted a $375 million hospital tax increase, adding near-50% to its last reported hospital tax net revenue of $790 million in fiscal 2024. Mostly likely, the increase violated the One Big Beautiful Bill Act, or pre-existing federal law, or both.

The state has offered a confusing and unconvincing defense, claiming to have the approval of Center for Medicare and Medicaid Services (CMS), whose role in the matter is also suspect.  

Connecticut’s June increase looks like a reversion to the state's regular abuse of its hospitals, which the Connecticut Hospital Association has described as follows “For many years, Connecticut used the tax primarily to bolster the state budget – resulting in revenue gains for the state, and overall net losses for hospitals.”  

CMS was asleep at the switch concerning Connecticut’s past abuse of its hospitals. Is it turning a blind eye yet again as Connecticut employs the shakiest of rationales for its latest assault on its hospitals?

Thursday, August 7th is now tariff day, postponed recently from August 1^st and originally from Liberation Day in April. Despite delayed execution, tariffs, in combination with the One Big Beautiful Bill, are central to Making American Great Again. Some may be surprised that MAGA is a plan, not just a slogan.

Last month’s Monthly Treasury Statement showed tariff revenue running already at annual rate of $324 billion, or $3.2 trillion over the next decade. In early June, the Congressional Budget Office scored Trump’s emerging tariff regime at $3.0 trillion over the decade. President Trump has just struck a trade agreement with the European Union. These admittedly preliminary results and estimates reflect revenue that offsets almost completely the $3.4 trillion increase in deficits and debt that the CBO ascribes to the OBBB.

In pure dollar terms, this should calm deficit hawks.

With the OBBB rewarding income generation and tariffs penalizing consumption, the combo is revolutionary in modern times.

The “one big beautiful bill” is poised to clean up a financing scheme that lets states abuse the Medicaid program for extra money.

Forty-nine states use so-called healthcare provider taxes to siphon money from the federal Treasury, supposedly to fund health coverage for the poor.

State governments tax providers—mainly hospitals—but return much of the money right back to the hospitals, labeling it a “supplemental payment.” Under this label, the returning money triggers a federal matching payment.

The federal matching funds have financed both Medicaid’s explosive growth and state spending unrelated to the program. Connecticut used federal funds from provider taxes to close its enormous state budget deficit in 2017. The state continues to rely heavily on the gimmick.

Some public sector union abuses are not only alive and well, but more egregious than ever.

In Connecticut, state employees are retiring with pension benefits higher than their last salary. How? It's a classic scheme known as "spiking."

Tens of thousands of Connecticut state employees enjoy the unlimited right to spike overtime —— that is, to work enormous hours of overtime just before retirement for the sole purpose of boosting the pensions calculation, which includes overtime pay in immediate pre-retirement years.

Senator Ron Johnson and others gave the One Big Beautiful Bill a cold reception when it arrived in the Senate, warning that the bill will balloon deficits and debt, which are already ginormous. Jamie Dimon, J.P. Morgan Chase CEO predicted a crisis – not if, but as soon as six months from now.

There’s no greater contributor to the recent rapid growth in deficits and debt than Medicaid under the Democrats, and, thus, no more appropriate GOP target financially and politically.

Medicaid’s explosive growth results both from recently expanded enrollment and from long-running problems in the Medicaid provider tax scheme that forty-nine states employ.

The Bill controls enrollment somewhat by imposing work requirements on able-bodied single childless adults. Yet, House Republicans punted on the Medicaid provider tax scheme, which a 2018 Senate report called a “shell game.”