MMA Opposes CMS Proposed Rule that Restricts Medicaid Provider Taxes

July 16, 2025

On July 8, the MMA submitted a formal comment in opposition to a Centers for Medicare and Medicaid Services (CMS) proposed rule that would dramatically restrict states’ ability to impose Medicaid provider taxes on insurance companies. 

At least seven states have used these taxes to draw down federal matching funds to pay Medicaid providers appropriately. 

“To be clear, the need to increase Medicaid provider payments is existential for Medicaid programs across the country,” the MMA said in its comment. “The compounding effects of low Medicaid payments, rising medical practice costs, and growing enrollment threaten clinic viability and patient access to needed services.” 

While the proposed rule is technically complex, it effectively renders Medicaid provider taxes on insurance companies inviable for the purpose of financing Medicaid payment increases. States interested in raising Medicaid rates will have to do so with less federal help, which is difficult given states’ small tax bases, balanced budget requirements, and other state spending priorities. 

CMS argues that the proposed rule closes a “loophole” that has allowed states to draw down disproportionate matching funds. In its comment, the MMA counters that, “state and federal budgets are disproportionate as well. Minnesota’s $70.9 billion spending in 2024 pales in comparison to the federal government’s $6.8 trillion spending in 2024. Within this context…the current rules on Medicaid provider taxes promote equitable skin in the game.” 

If adopted, the proposed rule will block the MMA’s momentum toward securing higher Medicaid payments for Minnesota providers. In the 2025 Minnesota Legislative Session, the MMA championed a bill that would have increased all outpatient Medicaid payments from roughly 70% of Medicare to 100% of Medicare using a Medicaid provider tax on insurance companies. An amended version of the bill, which limits the rate increase to outpatient mental health services, ultimately passed and opened the door to expanding the rate increase to all outpatient services in the future. Unfortunately, the bill’s implementation is dependent on CMS approval, which is unlikely given the provisions included in President Trump’s budget bill and the CMS proposed rule. 

The MMA is committed to continuing its fight for appropriate Medicaid payments to physicians. For more information, contact Adrian Uphoff, manager of health policy & regulatory affairs.