CMS points steerage on Medicaid supplier tax overhaul

Dive Transient:

• The CMS issued preliminary steerage Friday on the way it plans to implement new restrictions on supplier taxes in Medicaid, one of many main modifications to the safety-net insurance coverage program throughout the Trump administration.
• The One Massive Stunning Invoice Act signed into legislation this summer season largely prohibits new or elevated supplier taxes, that are preparations that almost all states use to finance their share of Medicaid funding. Critics argue the taxes unfairly improve the federal authorities’s Medicaid prices.
• The brand new steerage outlines specifics on the brand new limits in addition to a transition timelines for states. “Whereas closing a loophole that some states had been benefiting from to shift billions in prices onto federal taxpayers, we’ve crafted coverage that provides states time to transition as the brand new tax limits are carried out,” CMS Administrator Dr. Mehmet Oz mentioned in an announcement.

Dive Perception: 

All U.S. states aside from Alaska use supplier taxes to finance a few of their share of Medicaid spending, mostly taxes on nursing services and hospitals, in keeping with well being coverage analysis group the KFF. 

The tax preparations are largely supported by suppliers, as they end in larger Medicaid reimbursements. Nevertheless, opponents of the insurance policies — together with the Trump administration —  argue the preparations permit states to shift extra prices again onto the federal authorities.

States obtain matching funds from the federal government to assist Medicaid applications. In consequence, critics say the taxes allow them to obtain federal funds with out allocating extra of their very own cash. 

Now, supplier taxes are set for an overhaul. The GOP’s One Massive Stunning Invoice Act prohibits states from placing new preparations in place or rising charges on current taxes. Moreover, the legislation requires states which have expanded Medicaid to regularly decrease the protected harbor restrict the place they’ll maintain suppliers innocent for the price of the tax. 

The supplier tax provisions ought to save taxpayers greater than $200 billion over the subsequent decade, in keeping with the CMS. The insurance policies are one of many largest decreases in federal Medicaid spending included within the huge tax and coverage invoice, which additionally provides work necessities for beneficiaries and provides new restrictions to state-directed funds. 

Underneath the brand new steerage despatched to states final week, the CMS offered some element on the way it will outline which supplier taxes had been enacted and imposed when the legislation was handed this summer season, setting the brink for the protected harbor freeze. 

Nevertheless, the company mentioned it deliberate to concern further steerage and potential rulemaking on this part of the legislation.

Moreover, the One Massive Stunning Invoice Act modified when states may obtain a waiver on necessities that taxes should be broad-based and uniform throughout suppliers. Meaning some sorts of taxes, together with these on managed care plans, received’t be allowed sooner or later below the legislation, in keeping with KFF. 

States may have till the tip of their fiscal 12 months in 2026 to totally adjust to these necessities on managed care plans, in keeping with the CMS’ letter. They’ll have till the tip of their fiscal 12 months in 2028 for different entities.