CMS proposes delay of Medicaid provider-tax rule

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The Centers for Medicare & Medicaid Services has proposed delaying until July 1, 2010, the enforcement of a Medicaid rule that would limit the use of provider taxes.

The rule, which would tighten the "hold harmless" test for provider tax programs, is one of seven controversial Medicaid regulations that healthcare providers, including nursing homes, largely oppose. It is under a congressional moratorium set to expire this July 1.

This rule would impose "subjective, overly broad standards for determining the existence of hold harmless arrangements," according to a letter from the American Hospital Association to to Acting Administrator Charlene Frizzera of CMS. Under such arrangements, which are impermissible, tax-paying providers are being "held harmless" for the payment of a tax.

Providers believe the rule would ultimately eliminate provider tax programs, which are authorized by statute. The rule also would make it more difficult for states and healthcare providers to understand whether a provider tax program under development could meet the approval of CMS. Congress included the current moratorium on the rule as part of its American Recovery and Reinvestment Act.