Federal Policy
CMS Proposes Rule Implementing H.R. 1 Provider Tax Restrictions
CMS issued a proposed rule on July 21, 2026, implementing two of three provider tax restrictions from H.R. 1, which limits states' ability to use provider taxes to finance their Medicaid share. The rule prohibits new provider taxes and increases in existing taxes. This affects state Medicaid financing strategies and budget planning, with implications for how states fund their programs and potential pressure on state general funds. The proposal will proceed through standard notice-and-comment rulemaking.
Why it mattersThis rulemaking constrains a core state Medicaid financing mechanism, forcing state agencies to identify alternative revenue sources or reduce program spending.