States are required to phase out tax structures that shift costs to the federal government.
The Centers for Medicare & Medicaid Services (CMS) finalized a rule to end certain health care–related tax arrangements that federal officials say allowed states to increase federal Medicaid payments while reducing their own financial contributions. The agency said the rule reinforced existing statutory limits by prohibiting higher tax rates on Medicaid-related business than on non-Medicaid business and by blocking indirect or opaque tax structures.
According to CMS, such arrangements generated an estimated $24 billion annually for state budgets and contributed to growth in the federal share of Medicaid spending over the past decade.
“Medicaid only works when every partner meets its obligations. … With this rule, CMS is ending these inappropriate schemes and ensuring every federal Medicaid dollar is used as Congress intended,” said CMS Administrator Dr. Mehmet Oz.
The rule establishes phased compliance deadlines through fiscal year 2028 and implements directives passed by Congress, with the agency stating that federal Medicaid funds must be used solely to support eligible beneficiaries.
As the Lord Leads, Pray with Us…
- For Administrator Oz and other CMS personnel as they work to implement reforms that balance out state contributions for Medicaid recipients.
- For federal and state officials as they transition to the congressionally mandated coverage of care under Medicaid.
- For the president and department secretaries as they seek to protect taxpayer resources and ensure effective aid to states.
Sources: Centers for Medicare and Medicaid Services, Newsweek
