On October 20th, HHS’ Office of the Assistant Secretary for Planning and Evaluation (ASPE) held a forum on Medicaid provider taxes and state-directed payments (SDPs) based on its September 2026 research report. ASPE projects that the 2025 reconciliation law (OBBBA) will reduce non-Medicaid healthcare prices by up to 3.5%, generating an estimated $502 billion to $875 billion in savings for non-Medicaid payers from 2025 through 2034. 

ASPE reported that SDPs grew from $43 billion in 2021 to $144 billion in 2025, with covered services paid at an average of 186% of Medicare rates. OBBBA caps SDP payments, phases down grandfathered payments beginning in 2028, freezes existing provider taxes, and lowers the provider tax safe harbor in expansion states from 6% to 3.5% by FY 2032. 

Critics, including the National Health Law Program, cite projected federal funding reductions and warn that states may respond by reducing provider payments, benefits or eligibility. 

Topics: HHS, Medicaid