Last week, the Centers for Medicare & Medicaid Services (CMS) announced that it is issuing preliminary guidance to states regarding the implementation of new federal requirements on healthcare-related (provider) taxes in Medicaid.

According to the news release, providing this guidance gives states time to plan their efforts to meet the requirements outlined in the Working Families Tax Cuts (WFTC) legislation (Public Law 119-21) while CMS develops additional policies, guidance, and implementing regulations.

CMS will generally ban new or increased healthcare-related taxes and stop financing practices that previously allowed some states to improperly draw federal matching funds.

Key program elements and preliminary guidance on sections 71115 and 71117 are:

• Indirect Hold Harmless Threshold
• Provider Tax Loophole Transition Periods
  •  Transition Period for Taxes on Services of Managed Care Organizations
  •   Transition Period for Taxes on All Other Permissible Tax Classes

“CMS is restoring the federal-state partnership by ensuring that Medicaid dollars are spent responsibly, transparently, and in service of the beneficiaries who depend on this program for their health and dignity,” said CMS Administrator Dr. Mehmet Oz, in a statement. “While closing a loophole that some states were taking advantage of to shift billions in costs onto federal taxpayers, we have crafted policy that gives states time to transition as the new tax limits are implemented.”