CMS releases rule to limit Medicaid provider taxes

The Centers for Medicare and Medicaid Services is moving to restrict the taxes on providers and managed care companies that states use to fund Medicaid, proposing a rule to codify policies in federal HR 1, which passed last summer (Source: “CMS moves to codify limits on Medicaid provider taxes,” Healthcare Dive, July 22).
 
The rule released Tuesday would create new limits on the taxes based on provider and state, phase down allowable taxes in Medicaid expansion states and strengthen federal oversight of the arrangements. CMS actuaries estimate the changes will lower the federal government’s Medicaid spending by $246 billion over the next decade.
 
Providers oppose stricter constraints on alternative Medicaid financing mechanisms, arguing they’re necessary to make up for insufficient Medicaid reimbursement. Curbing the taxes will also make it harder for states to raise money to cover their residents’ Medicaid coverage.
 
Earlier this year, HPIO released a policy explainer on changes to Medicaid financing in Ohio. Data included in the explainer showed that the three largest taxes in Ohio (on hospitals, health insurers and nursing homes/LTC units) together raised $3.2 billion in state revenue in SFY 2025, comprising 24% of the state’s total share of the Medicaid budget.