Lawmakers Worried About State Medicaid Programs'Use of Provider Taxes

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By James Swann

Feb. 18 — Two House Republican lawmakers are worried that there's a lack of oversight in how state Medicaid programs use provider taxes to fund their expenditures, according to a letter sent to the CMS Feb. 18.

The letter, from Energy and Commerce Subcommittee on Health Chairman Joe Pitts (R-Pa.) and subcommittee Vice Chairman Brett Guthrie (R-Ky.), said that while states increasingly are using provider taxes to pay for their share of Medicaid expenses, the Centers for Medicare & Medicaid Services may not have accurate data to ensure states are complying with program requirements.

They asked for a response within 30 days of the agency's receipt of the letter.

Provider taxes must cover all providers within a specific category and must be at the same rate for all providers within the category, according to Medicaid regulations. States that fail to meet the requirements can lose their federal Medicaid funding.

While acknowledging he's not familiar with the intimate details of every state's Medicaid program, Matt Salo, the executive director of the National Association of Medicaid Directors, told Bloomberg BNA that provider taxes are a long-standing and legitimate financing tool for Medicaid.

“There are decades of history of legislative and regulatory oversight, including a fair amount of fine tuning over that time, over the funding,” Salo said, referring to provider taxes.

Salo also said each provider tax in every state is carefully negotiated with the CMS in order to comply with federal regulations.

Oversight Issue

The CMS last provided guidance on the use of Medicaid provider taxes in a July 2014 letter that raised the possibility that some states were taxing only Medicaid managed care organization (MCO) services.

The guidance letter said the CMS was “concerned that such taxes are not consistent with applicable statutory and regulatory requirements because they target Medicaid providers and treat such providers differently for purposes of the tax from other individuals or entities.”

The Government Accountability Office also weighed in on provider tax oversight in a July 2014 report, finding that the CMS wasn't able to ensure it has accurate data on state Medicaid program financing .

Pitts and Guthrie also said the GAO previously has speculated that some states may be using provider taxes to raise their state Medicaid expenditures, which then allows them to receive more federal Medicaid funding.

Request for Information

The letter to the CMS asked for information on the oversight duties of the agency, including:

  •  what actions the CMS took regarding the possibility that some states were taxing only Medicaid MCO services, beyond issuing the July 2014 guidance;
  •  what actions the CMS takes to make sure states are in compliance with federal regulations regarding provider taxes;
  •  whether the CMS performs regular audits or reviews of state provider tax arrangements;
  •  whether any states have waivers for provider tax arrangements; and
  •  what actions the CMS has taken when it has discovered states out of compliance with provider tax arrangements.

    To contact the reporter on this story: James Swann in Washington at

    To contact the editor responsible for this story: Janey Cohen at

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