AAMC Comments on Medicaid Provider Tax Hold Harmless Threshold Proposed Rule

 The AAMC on Monday submitted comments (PDF) responding to the Centers for Medicare & Medicaid Services (CMS) proposed rule, “Medicaid Program; Amending the Indirect Hold Harmless Threshold of Health Care Related Taxes.” The proposed rule seeks to implement section 71115 of the One Big Beautiful Bill Act (OBBBA, P.L. 119-21, PDF). Section 71115 places a moratorium on new health care related taxes in Medicaid (often referred to as provider taxes), freezes existing provider tax rates, and incrementally reduces maximum allowable tax rates for existing provider taxes in Medicaid expansion states beginning in federal fiscal year 2028. The proposed rule defines when a provider tax would be considered “enacted and imposed,” discontinues what is referred to as the 75/75 prong of the indirect hold harmless test, and establishes health insurers as a permissible class for provider taxes, subjecting these taxes to agency oversight [refer to Washington Highlights, July 24].   

The AAMC’s comments generally supported the proposed definitions of “enacted” and “imposed,” but asked the agency to continue its flexibility in working with states that may still have unresolved questions or concerns. The AAMC asked the CMS to withdraw its proposal to remove the 75/75 test as well as its proposal to retrospectively calculate the harmless thresholds and determine compliance with the thresholds. Comments further asked the CMS not to finalize its proposal to add “services of health insurers” as a new provider tax class, as it is unnecessary and creates more confusion. Overall, comments highlighted the AAMC’s appreciation for the agency’s willingness to work with states, but warned against overly complicated proposals as well as those that go beyond the OBBBA.