Medicaid Program; Closing a Health Care-Related Tax Loophole Final Rule Summary

On February 2, 2026, CMS published in the Federal Register (91 FR 4794) a final rule to address what it describes as a loophole in a regulatory statistical test applied to state proposals for Medicaid tax waivers. The test is designed to ensure, as required by statute, that non-uniform or non-broad-based health care-related taxes, as authorized under a waiver, are generally redistributive. That “inadvertent loophole” allows some health care-related taxes, especially on managed care organizations, to be imposed at higher tax rates on Medicaid taxable units than non-Medicaid taxable units, which CMS says is contrary to statutory and regulatory intent for health care-related taxes to be generally redistributive.

According to CMS, the final rule “closes the loophole” by finalizing the proposed policies to add safeguards so that tax waivers that pass the current statistical test but are not generally redistributive are not approvable. These policies also implement recently added statutory requirements.