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April 12, 2023

Texas Files Lawsuit Against CMS Challenging Bulletin Regarding Medicaid Supplemental Payment Rules

On April 5, 2023, the State of Texas filed a lawsuit in the Eastern District of Texas against CMS regarding its February 17, 2023 Informational Bulletin regarding “Health Care-Related Taxes and Hold Harmless Arrangements Involving the Redistribution of Medicaid Payments.” In the Bulletin, CMS states that it views private party arrangements to redistribute funds received from Medicaid Supplemental Payment Programs as a state guarantee to hold providers harmless from a provider tax, regardless of whether there is state involvement in the arrangement. CMS further states that these arrangements violate the “hold harmless” rule in 42 C.F.R. § 433.68, which governs funding of the state-share of Medicaid supplemental payment and directed payment programs. See State of Texas v. Brooks, Civ. Action. No.  6:23-cv-00161, Complaint (April 5, 2023) (U.S. District Court of the Eastern District of Texas, Tyler Division) for the complaint and more information. This lawsuit comes two years after the same court discussed, but did not rule on, redistribution arrangements. 

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