CMS proposes Medicaid rules cutting $246 billion over decade, hospitals warn of layoffs

September 9, 2026 at 02:00 PM1 min

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The Centers for Medicare and Medicaid Services has proposed two rule changes that would cut federal Medicaid spending by $246 billion from fiscal 2026 through 2035. Hospital executives say the cuts could force layoffs, service line closures, mergers, or shutdowns. The proposals come after Congress already passed $911 billion in Medicaid reductions over a decade.

Key Facts

The CMS provider tax rule would reduce federal Medicaid spending by $246 billion from fiscal 2026 through 2035.
Congress previously passed Medicaid cuts totaling $911 billion over a decade through the One Big Beautiful Bill Act.
Golden Valley Memorial Healthcare CEO Craig Thompson now travels to Washington every other month to seek reversal of the Medicaid cuts.
The Congressional Budget Office scored the provider tax and state-directed payment provisions at roughly $332 billion.

Proposed Rule Changes

The two CMS rules target provider taxes and state-directed payments, mechanisms states use to draw additional federal Medicaid matching funds. CMS actuaries estimate the provider tax rule alone would cut $246 billion in federal Medicaid spending from fiscal 2026 through 2035. The CBO previously scored the provider tax and state-directed payment provisions in the One Big Beautiful Bill Act at about $332 billion. Hospital executives told Politico the combined impact could force staff cuts, service line closures, mergers, or permanent shutdowns.

Hospital Impact

Golden Valley Memorial Healthcare, a 50-bed rural Missouri hospital, operates the only maternity ward within about an hour's drive. CEO Craig Thompson said inflation and shrinking Medicaid payments had already closed half of the system's maternity beds. Thompson now travels to Washington every other month to advocate for reversing the Medicaid cuts. Robert Nelb, policy director at America's Essential Hospitals, said the safety net is already struggling and urged CMS to stick to the statute.