Federal Register #CMS-2452-P

CMS Proposed Rule: Indirect Hold Harmless Thresholds for Medicaid Health Care-Related Taxes

This opportunity concerns a proposed regulatory change by the Centers for Medicare & Medicaid Services (CMS) under the Department of Health and Human Services: - CMS is proposing to revise standards for identifying indirect hold harmless arrangements related to health care-related taxes in Medicaid - Implements provisions from the Working Families Tax Cut (WFTC) legislation - Establishes new indirect hold harmless thresholds for health care-related taxes - Sets the threshold based on the applicable percent of net patient revenue attributable to taxes imposed as of a future date - Introduces a phase down of the threshold in Medicaid expansion States - Proposes to sunset a secondary prong in the determination process - Adds a new permissible class for health care-related taxes, specifically including services of health insurers (excluding managed care organizations) - Aims to enhance CMS oversight of Medicaid tax structures - No OEMs, vendors, or specific products/services are involved, as this is a regulatory action - Affects administrative practices, Medicaid tax policy, and oversight mechanisms

Description

This proposed rule aims to revise standards for determining whether an indirect hold harmless arrangement exists for a health care-related tax. It implements provisions from the Working Families Tax Cut (WFTC) legislation, which establishes new indirect hold harmless thresholds for health care-related taxes effective October 1, 2026, and includes a phase down in expansion States starting October 1, 2027. The rule also proposes to sunset a secondary prong to the indirect hold harmless determination and add a new permissible class to enhance CMS oversight of health care-related taxes. Comments on the proposed rule are due by September 21, 2026.

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