Healthcare Facilities: CMS Proposed Rule Outlines Provider Tax Phase-Down Requirements Under WFTC; Collective Changes Detail Incremental Limits to State Funding Options

Research evidence excerpt

Healthcare Facilities: CMS Proposed Rule Outlines Provider Tax Phase-Down Requirements Under WFTC; Collective Changes Detail Incremental Limits to State Funding Options

sed, with only one

program on record ever utilizing the second prong to collect tax revenue above the

threshold dating back to 1992.

• New reporting expectations would require states to submit detailed tax data to CMS

to support calculation of the new thresholds and ongoing oversight and enforcement

of provider taxes. Within the rule, CMS proposes to substantially expand provider tax

reporting by layering in a one-time interim submission (December 31, 2026), a one-time

final submission (June 30, 2028), and more detailed ongoing quarterly reporting. With

these additional reporting requirements, CMS described an intention to improve

transparency and oversight into provider tax programs, including a desire to “enhance

scrutiny” as states adjust to the new requirements.

• CMS estimates total 2026 provider tax revenue of $98.6B, with hospitals ($61.8B)

representing the largest source of provider tax revenue, followed by MCOs ($28.1B)

and nursing facilities/intermediate care facilities ($7.3B). CMS’s economic

discussion within the proposed rule highlighted that nursing facilities are a meaningful

(though smaller) provider-tax category, with CMS estimating that they are expected to

comprise $7.3B of provider tax revenue in 2026 vs $61.8B for hospitals and $28.1B for

MCOs. While SNFs remain exempt from the indirect hold harmless changes and will

remain subject to the threshold calculated based on the tax structure enacted and imposed

a/o July 4, 2025, we believe that given the materiality of provider taxes across classes,

any tightening or standardization of thresholds will matter for states’ ability to finance