CMS has published a proposed rule, Medicaid Program; Amending the Indirect Hold Harmless Threshold of Health Care Related Taxes (CMS-2452-P), outlining how the agency intends to implement Section 71115 of H.R. 1.
The proposal would reduce the indirect hold harmless threshold for certain provider taxes, establish new definitions that differ from previous CMS guidance, strengthen compliance requirements, and create new state reporting obligations. CMS estimates the rule would reduce federal Medicaid spending by approximately $246 billion between 2026 and 2035.
While the proposal leaves provider taxes on nursing homes and intermediate care facilities largely unchanged, Ohio's hospital and managed care organization provider taxes could be affected. As a Medicaid expansion state, Ohio would be required to gradually reduce affected provider taxes to comply with the new 3.5% hold harmless threshold by 2032, if the rule is finalized.
The proposed rule is open for public comment for 60 days, with comments due on or around September 19. CMS has also released a fact sheet summarizing the proposal.