Texas Court Invalidates CMS Rule On Private Mitigation Arrangements

A Texas district court vacated a 2024 CMS rule requiring states to police private arrangements that hold providers harmless for taxes paid to fund Medicaid. Federal law prohibits a state imposing provider taxes from directly or indirectly mitigating the effect of the tax.

Contrary to its previous interpretation of the statute, CMS promulgated a rule in 2024 that barred private mitigation arrangements among providers and required states to collect provider attestations denying participation in an unlawful mitigation arrangement beginning in 2028.

The court held CMS’ interpretation was contrary to the statutory text and arbitrary and capricious. It also nullified a provision in the rule that required recoupment actions against a state for allowing such arrangements to be heard by an administrative board instead of the courts.