What is the Role of Provider Taxes in the MassHealth Program?
MassHealth, Massachusetts’ Medicaid and Children’s Health Insurance Program, provides health care coverage to around two million Massachusetts residents, and is jointly funded by the state and the federal governments. Massachusetts pays for a portion of its share of MassHealth spending with revenues from a type of assessment known as “provider taxes.” In Massachusetts, these provider taxes are assessments on hospitals, nursing homes, ambulance services, and managed care organizations.
Federal policymakers are currently considering several different changes to reduce federal spending on Medicaid. These proposals include limiting or eliminating states’ ability to receive federal Medicaid reimbursement on money raised through provider taxes. This would mean that states like Massachusetts would have to make up those lost revenues out of their own general funds—or make cuts to their Medicaid programs.
The goal of this brief is to explain what provider taxes are and to illuminate the critical role they play in helping to finance the MassHealth program. This brief does not estimate the impact on MassHealth of any specific federal policy proposal.