Fact Check: The proposed legislation aims to restrict states from using certain financing mechanisms to increase federal Medicaid funding.

Fact Check: "The proposed legislation aims to restrict states from using certain financing mechanisms to increase federal Medicaid funding."

What We Know

The claim revolves around a proposed rule issued by the Centers for Medicare & Medicaid Services (CMS) on May 12, 2025, aimed at addressing specific financing mechanisms that states have utilized to increase federal Medicaid funding. According to the proposed rule, states have historically exploited a loophole involving health care-related taxes to generate federal Medicaid payments without contributing their fair share of financing. This practice has allowed states to impose higher taxes on Medicaid businesses, particularly managed care organizations (MCOs), while using federal funds to reimburse these taxes, effectively shifting the financial burden away from the states (CMS Fact Sheet).

The proposed rule seeks to prohibit states from imposing higher tax rates on Medicaid than on non-Medicaid businesses. It also aims to prevent the use of vague language to disguise taxes that specifically target Medicaid (Federal Register). The rule is expected to save the federal government over $33 billion in the next five years by closing these loopholes (CMS Fact Sheet).

Analysis

The evidence supporting the claim is robust and derives from official CMS documentation and regulatory proposals. The proposed rule explicitly states its intent to restrict states from using certain financing mechanisms that allow them to disproportionately tax Medicaid-related businesses while avoiding their financial responsibilities. This is a direct acknowledgment of the loophole that states have exploited, which has led to significant federal funding without corresponding state contributions (CMS Fact Sheet).

The reliability of the sources is high, as they originate from official government publications and regulatory documents. The CMS is a federal agency responsible for overseeing Medicaid and Medicare programs, and its proposed rules are subject to public comment and scrutiny, adding a layer of accountability and transparency (Federal Register).

However, it is important to note that while the proposed rule aims to restrict these financing mechanisms, its final implementation will depend on the outcome of the public comment period and any subsequent revisions made by CMS. Therefore, while the claim is accurate based on the current proposal, the ultimate effect will depend on the regulatory process.

Conclusion

Verdict: True
The claim that the proposed legislation aims to restrict states from using certain financing mechanisms to increase federal Medicaid funding is accurate. The proposed rule by CMS explicitly seeks to close loopholes that allow states to shift financial responsibilities to the federal government, thereby ensuring that states contribute their fair share to Medicaid financing. The evidence from official sources supports this conclusion, and the reliability of these sources is high.

Sources

1. Closing a Health Care-Related Tax Loophole Proposed Rule
2. Proposed Rule
3. CMS Refocuses on its Core Mission and Preserving the ...
4. CMS Proposes to Close Perceived Loophole in Medicaid ...
5. Senate version of Trump agenda bill cuts more from Medicaid
6. Senate GOP proposes bigger Medicaid cuts than House
7. Medicaid Financing: The Basics
8. CMS to end federal match for states' Medicaid funding ...