CMS final rule lowers ceiling on provider taxes

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The Centers for Medicare & Medicaid Services finalized a rule that reduces maximum allowable provider taxes to 5.5%. 

The rule, which was scheduled to appear in the Feb. 22 Federal Register, is similar to the rule first proposed by CMS in March 2007. The previous cap on healthcare taxes was 6%. Nursing homes and other providers benefit from higher provider tax (or "bed tax") limits, which allow facilities to receive more government matching funding. 

CMS also set standards for determining the existence of “hold harmless” arrangements. States must avoid these arrangements, according to the Social Security Act, CMS explained. States have used the arrangements to collect taxes from providers to increase the amount of federal matching funds they receive and then return the taxes directly or indirectly to providers.