CMS releases guidance on new Medicaid provider tax regulations to comply with WFTC legislation
CMS has issued preliminary guidance to assist states in implementing new federal restrictions on healthcare-related provider taxes in Medicaid, aligning with the Working Families Tax Cuts legislation to prevent shifting costs and save taxpayers $200 billion over a decade.
CMS reported that they are working on further policies, guidelines, and implementing regulations, and the recent guidance is supposed to give states time for planning to meet Public Law 119-21, the Working Families Tax Cuts legislation (WFTC). WFTC will no longer allow states to rely on provider-tax financing structures that shift their share of Medicaid costs to federal taxpayers. The new legislation should save taxpayers $200 billion over the next decade, according to the agency.
The guidelines include:
An overview of restrictions on new or increased healthcare-related taxes.
Details regarding transition periods and next steps after a financing loophole is closed.
The ending of “new or increased health care-related taxes” and “financing practices that previously allowed certain states to inappropriately draw down federal matching funds.”
Clear definitions of “enacted” and “imposed.”
According to the guidance, states will have until the end of their state fiscal year ending in 2026 to implement the regulations regarding taxes on services of managed care organizations and until the end of their state fiscal year ending in 2028 to implement regulations on taxes on all other permissible tax classes.
