Hospitals CMS Proposed Rule Outlines MSPP Phase-Down Requirements Under OBBBA & Caps “Grandfathered” Programs in 2026 & 2027

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Hospitals CMS Proposed Rule Outlines MSPP Phase-Down Requirements Under OBBBA & Caps “Grandfathered” Programs in 2026 & 2027

J P M O R G A N North America Equity Research

21 May 2026

Hospitals

CMS Proposed Rule Outlines MSPP Phase-Down

Requirements Under OBBBA & Caps “Grandfathered”

Programs in 2026 & 2027

This evening, CMS released a proposed rule containing formal details regarding Managed Care and Facilities

ACimplementation of Medicaid provider tax/SDP rate caps enacted under the Benjamin Rossi

OBBBA. This included incremental details regarding a cap on grandfathered state (1-212) 622-9603

programs covering the 2026 and 2027 rating periods that would prevent states from benjamin.rossi@jpmorgan.com

increasing the overall size of MSPPs in the coming years ahead of formal Lisa C. Gill

enactment of related provider tax/SDP rate phase-downs set to begin in 2028. (1-212) 622-6466

While the proposed rule does not move up the timeline on the OBBBA’s provisions lisa.c.gill@jpmorgan.com

related to Medicaid provider taxes/SDP rates, we highlight changes that appear to John Stansel, CFA

prevent states from increasing the overall size of a grandfathered SDP in 2026 and (1-212) 622-0083

john.stansel@jpmorgan.com

2027. With ARDT/HCA/THC/UHS all following the practice of not including

Cole Harrisunapproved MSPPs as part of forward guidance, we do not anticipate any material

(1-212) 622-9068

downside impact on program applications in 2026 or 2027 on the assumption that cole.harris@jpmorgan.com

states are more likely to opt to maintain program sizes in future applications for J.P. Morgan Securities LLC

those two rating periods (vs willingly choosing to reduce the size of funding

requests). However, we believe that the added program documentation