On Tuesday, CMS issued a proposed rule modifying the way states repurpose stakeholder taxes for the state’s Medicaid program, a practice the Trump Administration finds “exploitative.” CMS Administrator Oz says the proposed rule “stops the shell game,” as he has heard reports of states using directed payments to extend coverage to non-U.S. citizens. Under federal law, states can levy taxes and count them as part of their state share for Medicaid funding, as long as those taxes meet specific regulatory requirements. If implemented, the proposed rule would: 

• Prohibit states taxing of Medicaid businesses at higher rates than non-Medicaid ones; 

• Prevent the use of “ambiguous language” that could obscure Medicaid-specific taxes;  

• Adopt more safeguards to deter system manipulation; 

• Implement a phased timeline based on existing waivers.