Preserving Medicaid Funding for Vulnerable Populations – Closing a Health Care-Related Tax Loophole Proposed Rule

Section 1902(a)(2) of the Social Security Act (the Act) requires states to share the responsibility of financing the Medicaid program with the federal government, by providing at least 40 percent, depending on the state, of reimbursement for expenditures under the state plan. There are several ways states can finance the non-Federal share, including health care-related taxes under section 1903(w) of the Act. States have historically looked for ways to shift this responsibility more toward the federal government, and both Congress and CMS have sought to address these cases.^[1]