CMS finalized the “Medicaid Program; Preserving Medicaid Funding for Vulnerable Populations – Closing a Health Care Related Tax Loophole” rule, which revises compliance requirements for health care related provider taxes, on Feb. 2, 2026.
The rule codifies H.R. 1’s ban on certain provider taxes that meet technical federal requirements but effectively shift most of the tax burden onto providers with higher Medicaid volumes.
This rule also sets extended compliance timelines for states with managed care organization (MCO) taxes, offering more flexibility than the proposed rule and 2025 provider tax guidance.
The Children’s Hospital Association commented on the proposed rule, emphasizing the role of provider taxes in Medicaid and the potential impact on children’s access to care.
Our summary outlines the provisions within the rule that are most relevant to children’s hospitals.
