KFF Analysis: Medicaid Provider Tax Reforms Could Result in Cuts for 31 States

Following the passage of HR 1 and subsequent guidance from the Centers for Medicare and Medicaid Services (CMS), states will need to make changes to existing provider taxes.

Analysis released from independent health care research organization KFF on December 1, 2025, estimates that 31 of 51 Medicaid programs (including Washington, DC) will require reductions in provider tax programs.

The issue brief couples analysis of recent CMS guidance and the KFF survey of state Medicaid programs, providing a unique marriage of information.

Because of changes in HR 1, KFF estimates that 22 states, including four intending to implement new taxes on managed care organizations and 18 intending to expand existing taxes, will not be able to make those changes this year. From the KFF budget survey, 31 states had non-exempt (taxes on nursing homes or intermediate care facilities) provider taxes as of July 1, 2025, that exceed 3.5% of net patient revenues. This means that each of those states will be required to make reductions in the percentages of their taxes by 2032, reducing the amounts of funding the state can collect and attribute to their non-federal share of Medicaid funding. Separate provisions changing waivers of uniformity will require provider tax restructuring in at least seven states.

The KFF brief provides valuable information on state utilization and upcoming necessary changes to provider tax utilization. The full brief can be accessed here.