Today, the Federation of American Hospitals (FAH) submitted formal comments to the Centers for Medicare & Medicaid Services (CMS) on its proposed rule, “Preserving Medicaid Funding for Vulnerable Populations—Closing a Health Care-Related Tax Loophole” (CMS–2448–P). 

The proposed rule seeks to narrow how states use health care-related taxes—particularly those on managed care organizations (MCOs)—to finance the non-federal share of Medicaid. While FAH supports CMS’s goal of preserving Medicaid funding, the comment letter outlines serious concerns that the proposal could jeopardize states’ ability to fund their Medicaid programs and maintain access to care. 

Key FAH Recommendations: 

• Rescind and reissue the proposed rule to reflect the newly enacted One Big Beautiful Bill Act (OBBBA) and its interactions with the proposed changes. 

• Narrow the scope of the rule to apply only to MCO taxes, consistent with the original rationale and CMS’s burden estimate. 

• Maximize the transition period for states to comply, aligning with OBBBA’s longer timeline and past CMS regulatory precedents. 

The FAH emphasized that hospitals and other providers—unlike MCOs—serve a broader population and should not be subjected to additional regulatory uncertainty that could destabilize Medicaid financing. 

Read the full letter here.