11/20/2025

CMS Releases Guidance on Medicaid Provider Tax Changes

The Centers for Medicare and Medicaid Services issued a “Dear Colleague” letter to clarify state implementation of Medicaid provider tax changes included in HR 1. LeadingAge summarized the guidance in its explanatory release, which outlines the law’s prohibition on new provider taxes not already in place before July 4, the phase-down of the hold harmless cap to 3.5 percent for expansion states and the tighter definition of “generally redistributive,” limiting the use of non-uniform or non-broad-based taxes.

The letter offers preliminary direction on sections 71115 and 71117, affecting hold harmless requirements and waiver flexibility tied to the uniform tax standard. 

Potential implications for Ohio:

• The prohibition on new provider taxes, combined with a narrower definition of what qualifies as “generally redistributive,” may constrain tools policymakers have traditionally used to bolster Medicaid rates.
• The phase-down of the hold-harmless standard could lead to adjustments to the structure of Medicaid payments.

LeadingAge Ohio will continue to watch how the Ohio Department of Medicaid interprets the federal guidance and will keep members informed as the state outlines next steps.