ICYMI: Ongoing Federal Developments Regarding Medicaid Provider Taxes and State Directed Payments

As you are likely aware, Congress and the Administration are in the midst of proposing significant changes to Medicaid, including Medicaid provider taxes and state directed payments. Here’s what you need to know.

One Big Beautiful Bill Act (OBBB)

• Congress is negotiating the OBBB, which includes significant proposed changes to Medicaid provider taxes, provider tax waivers, and state-directed payments (SDPs).

• The Senate has passed the OBBB, but the final outcome and what will be signed by President Trump is still uncertain.

Proposed Rule by Centers for Medicare & Medicaid Services (CMS)

• CMS published the Medicaid Program; Preserving Medicaid Funding for Vulnerable Populations—Closing a Health Care-Related Tax Loophole Proposed Rule, 90 Fed. Reg. 20578 (May 15, 2025) (the “Proposed Rule”) in the Federal Register on May 15, 2025.

• The Proposed Rule aims to address a perceived “loophole” in the regulatory statistical test applied to state proposals for Medicaid tax waivers.

• CMS is not proposing a new statistical test, but believes it is necessary to go beyond the mathematical results to address unintended loopholes in the Medicaid provider tax waiver requirements.

• Comments on the Proposed Rule are due by July 14, 2025.

Assistance and Strategic Planning

• Dentons has been actively involved in the OBBB negotiations, assisting clients with strategic planning, advocacy efforts, and drafting proposed amendments to the House and Senate language regarding Medicaid provider taxes and SDPs.

• The Dentons team is available to assist with comments on the Proposed Rule and other questions and strategic considerations regarding the OBBB’s Medicaid financing and SDP proposals.

Read the full article at dentons.com