Americas Healthcare Services: CMS Proposes Medicaid Provider Tax Reform Framework to Implement OBBA Section 71115

Research evidence excerpt

Americas Healthcare Services: CMS Proposes Medicaid Provider Tax Reform Framework to Implement OBBA Section 71115

Equity Research

22 July 2026 | 7:32PM EDT

Americas Healthcare Services: CMS Proposes Medicaid Provider Tax

Reform Framework to Implement OBBBA Section 71115

On July 21, 2026, CMS released a proposed rule implementing Section 71115 of the Scott Fidel

+1(212)902-7304 | scott.fidel@gs.com

One Big Beautiful Bill Act (OBBBA), which overhauls the Medicaid provider tax Goldman Sachs & Co. LLC

framework by replacing the longstanding 6% indirect hold harmless safe harbor with Sarah Conrad

state- and provider-class-specific thresholds based on taxes enacted and imposed +1(212)357-2448sarah.conrad@gs.com|

as of July 4, 2025 (link, link). The proposal would effectively freeze most provider Goldman Sachs & Co. LLC

Valentine Vlasovtaxes at existing levels, phase down allowable thresholds in Medicaid expansion +1(212)934-0210 |

states beginning in FY2028, eliminate the longstanding “75/75” exception, and valentine.vlasov@gs.comGoldman Sachs & Co. LLC

establish significantly enhanced reporting and oversight requirements.

CMS estimates the proposal will cause Medicaid expenditures to decline by roughly

$384 billion over 2026-2035, including approximately $246 billion of lower federal

spending over the same period. The lower projected spending is driven by provider

tax revenue falling by $199 billion over the same period.

Under the proposal, each state would receive a unique threshold for each provider

tax class based on actual tax collections and net patient revenue associated with

taxes enacted and imposed as of July 4, 2025. New provider taxes or post-July 2025

tax increases generally would not increase allowable thresholds. For Medicaid