CMS Releases Guidance on Medicaid Tax Changes that will Likely Lead to Ohio Budget Shortfall

By Ohio Academy of Family Physicians / December 16, 2025

The Centers for Medicare and Medicaid Services (CMS) recently issued guidance on new restrictions to Medicaid provider taxes, a federal policy change that is expected to cause a substantial revenue shortfall for Ohio (Source: CMS releases guidance on provider taxes, Healthcare Finance News, November 21, 2025).

Nearly every state uses provider taxes to fund a portion of its Medicaid program. Ohio taxes providers, such as insurers, nursing homes, and hospitals, to generate revenue that funds the state’s share of Medicaid spending and draws down the federal match. New restrictions on provider taxes were included in Hr 1, sometimes referred to as the One Big Beautiful Bill Act.

One section of the new preliminary guidance details the elimination of particular provider taxes on Medicaid managed care organizations that Ohio and six other states use.

The primary ways in which the Ohio Department of Medicaid can lower spending to account for the revenue shortfall include reducing provider reimbursement rates, eliminating services covered by Medicaid, or cutting eligibility groups, such as the Medicaid expansion group.

Other provisions related to provider taxes in HR 1, including reduced limits on provider taxes in states that have adopted Affordable Care Act Medicaid expansion, will also affect Ohio in the coming years. KFF estimates nationally that these restrictions to provider taxes will altogether cut federal spending on Medicaid by $226 billion over the next decade.