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CMS final rule closes gaping Medicaid loophole

By CRFB.org  
   February 17, 2026

CMS has finalized a Medicaid rule that closes a loophole that allowed states to extract additional federal funding through Medicaid provider taxes. The rule reinforces and implements a provision of the One Big Beautiful Bill Act. The CBO estimates this provision will save $35 billion through Fiscal Year 2034. CMS estimates the provision will save $78 billion through FY 2036 in their base scenario, and nearly $313 billion compared to a scenario where exploitation of the loophole continues and proliferates across more states.

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