AHA Urges CMS to Limit Retrospective Reconciliation in Medicaid Provider Tax Rule
The American Hospital Association submitted comments September 21 on CMS's proposed rule implementing Medicaid provider tax changes from the July 2025 reconciliation law. Beginning in fiscal year 2027, states cannot raise the provider tax indirect hold harmless threshold above the rate in place at enactment; for expansion states, the hospital threshold decreases 0.5 percentage points annually starting FY 2028. AHA opposes CMS's proposed retrospective reconciliation requirement, arguing it creates unpredictability for state Medicaid programs and adds administrative burden. AHA recommends CMS use prospective estimates for ongoing compliance monitoring and limit retrospective calculations to the one-time statutory threshold determination.
The retrospective reconciliation approach could force states to repay federal Medicaid matching funds after-the-fact based on actual tax collections, introducing budget uncertainty and potentially destabilizing hospital financing arrangements that rely on provider tax revenue.
Finance
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