CMS Releases Preliminary Guidance to States on Provider Tax Limitations
(Nov. 18, 2025) Late Fri., Nov. 14th, the Centers for Medicare and Medicaid Services (CMS) issued a “Dear Colleague” guidance letter to states, accompanied by a press release, that was depicted as clarifying health care provider tax restrictions enacted in H.R. 1, the federal budget reconciliation bill that was signed into law on July 4, 2025. Specifically, the letter addressed transition periods and the next steps for compliance for states whose provider taxes were deemed to be out of compliance with the new provisions. While this guidance serves as a preview of upcoming proposed regulatory requirements that will be released as early as this week, for NYS, it seems to confirm that the current Managed Care Organization (MCO) tax will be allowed to continue at least until the end of the State’s fiscal year (i.e., March 31, 2026).
Members will recall that for continuing care providers, one of the more material provisions of H.R. 1 was the limitation on provider and MCO taxes. This is because funding increases enacted in the 2025-26 State Budget were made contingent on funding that was generated by these taxes.
CMS suggested that providing this guidance now will allow states time to plan their efforts to meet the new requirements as the agency develops additional policies, guidance, and implementing regulations. Importantly, the letter reiterates that the deadlines listed for bringing state Medicaid taxes into compliance represents the minimum transition period, leaving open the possibility that NYS' MCO tax might continue past March 31st. We will keep members apprised of the implications of the associated regulations when they are released. The Nov. 14th press release is here; to download the letter, click here.
Contact: Darius Kirstein, dkirstein@leadingageny.org, 518-867-8841