The federal government recently proposed new restrictions that that will make financing affordable health care more difficult for states. We are deeply concerned that the proposed rule substantially goes beyond what is required by H.R. 1 and would threaten Minnesotans’ access to health care by making it more difficult to fund essential services.
During the public comment period where organizations and individuals could weigh in, the Minnesota Budget Project submitted the following letter:
September 18, 2026
Dr. Mehmet Oz
Administrator, Centers for Medicare & Medicaid Services
U.S. Department of Health and Human Services
Attention: CMS–2454–IFC
P.O. Box 8016
Baltimore, MD 21244–8016
Re: RIN 0938-AV93 – Medicaid Program; Amending the Indirect Hold Harmless Threshold of Health Care-Related Taxes (CMS 2452-P)
Dear Administrator Oz,
Thank you for the opportunity to comment on the proposed rule from the Center for Medicare & Medicaid Services (CMS) titled, “Medicaid Program; Amending the Indirect Hold Harmless Threshold of Health Care-Related Taxes.” We refer to this throughout as “the Medicaid provider tax rule” or “the proposed rule.”
The Minnesota Budget Project is writing in opposition to provisions in the proposed rule that will make financing affordable health care more difficult for states.
The Minnesota Budget Project advocates for investments to better the lives and well-being of lower-income Minnesotans and Minnesotans of color, narrow racial divides, and make Minnesota a state where everyone can thrive. Our health care work focuses on the effects of state and federal health care policies on Minnesotans’ ability to live healthy lives and get the care they need.
In Minnesota, roughly 1.3 million people have health care coverage through Medicaid (also known as Medical Assistance) and MinnesotaCare, the two main paths to affordable health insurance for low-income and working-class Minnesotans. Because of these programs, people can afford essential health care services and supports that they need so they can work, care for their families, and live in dignity. In Minnesota and across the country, provider taxes long have been an important funding source for these affordable health care programs and others like them.
The proposed rule substantially goes beyond what is required by H.R. 1 and would threaten Minnesotans’ access to health care by making it more difficult to fund essential services.
The proposed rule would expand what provider tax restrictions apply to. Changes in this rule go beyond what was originally included in H.R. 1 and extend restrictions on provider taxes to include certain taxes on health insurers, even if they do not go towards funding Medicaid. H.R. 1 prohibited states from implementing new provider taxes or increases starting July 4, 2025, and broadening what qualifies as a provider tax under this new rule would even further limit the options Minnesota has for funding affordable health care options.
Changes in the proposed rule increase burdensome reporting and financial penalties for states beyond what was included in H.R. 1. The proposed rule creates new requirements that states report more complex data regarding provider taxes and their usage every quarter. In a time where states are already working on a compressed timeline to implement sweeping changes from H.R. 1, added reporting requirements cause further strain for states. The rule goes even further and adds harsher penalties if states end up collecting more revenue than allowed within the thresholds permitted in H.R. 1. If collected revenue exceeds the threshold, states would have to return all of the funding and federal matching funds associated with that tax, not just the amount that exceeded the threshold. Requiring states to return all associated funding is a harsh and disproportionate penalty that could create unexpected costs and threaten not only health care but also other essential state services.
This proposed rule could harm people’s access to affordable health care. Restricting provider taxes takes away tools that Minnesota and other states have long used to meet the needs of their residents. The changes in the proposed rule add new limits and restrictions beyond what was originally included in H.R. 1, and could put services that people rely on at risk.
Minnesotans are all better off when people have the health coverage they need to survive and thrive, but this new proposed rule would add significant barriers to how states can finance options for affordable health coverage.
Thank you for the opportunity to comment on this important matter.
Jessie Luévano
Policy Analyst