Attorney General Bonta Opposes Trump Administration Proposed Rule That Would Unlawfully Disrupt How Medicaid Is Currently Funded, Shift More Costs to States

OAKLAND - As part of a coalition of 24 attorneys general, California Attorney General Rob Bonta submitted a comment letter opposing a proposed Trump Administration rule that would unlawfully force states to change how they fund Medicaid. Medicaid is the nation's safety net healthcare program for low-income Americans and is jointly funded by states and the federal government, with the federal government providing at least 50% of the cost of services. States use Medicaid provider taxes - healthcare-related taxes levied on providers and other healthcare entities - to help finance their share of Medicaid costs. A proposed rule by the Centers for Medicare and Medicaid Services (CMS), intended to implement the One Big Beautiful Bill Act, would significantly limit states' ability to use provider taxes and force them to find other ways to cover Medicaid costs. In doing so, CMS goes beyond what Congress required in the One Big Beautiful Bill Act.

"The One Big Beautiful Bill Act is already having serious consequences for Americans across the country and will continue to do so, and now the Trump Administration is trying to make matters worse," said Attorney General Bonta. "This proposed rule would restrict states' use of provider taxes and force them to find other ways to pay their share of Medicaid costs. It is unlawful and should be withdrawn or significantly changed."

According to KFF, CMS projects no enrollment losses as a result of the proposed rule, while the Congressional Budget Office estimated that the changes could leave 1.2 million more people uninsured by 2034, raising questions about the proposed rule's impact on coverage. The comment letter identifies several additional concerns, including that the proposed rule:

• Would improperly interfere with state regulation of health insurers. For the first time, CMS would penalize states for collecting taxes and payments from health insurance companies by reducing the amounts the states would receive for Medicaid. This would violate the law, threaten states'Medicaid programs, and improperly interfere with states' regulation of health insurance.
• Improperly applies new limits to collection of taxes and payments from health insurers. The One Big Beautiful Bill Act imposes new limits on some taxes and payments collected by states. CMS's proposed rule would apply those limits to taxes and payments on health insurers, but that is neither required nor allowed under the One Big Beautiful Bill Act.
• Eliminates a 30-year-old safety valve. CMS has also proposed to change its criteria for determining when taxes and payments will reduce federal Medicaid contributions. But some of these criteria were written into federal law by Congress and can't be changed by CMS.
• Piles on costly new paperwork. States could have to reconstruct financial records going back to mid-2025 and build entirely new reporting systems from scratch.

In submitting the comment letter, Attorney General Bonta joins the attorneys general of Arizona, Colorado, Connecticut, Delaware, the District of Columbia, Hawaii, Illinois, Maine, Massachusetts, Maryland, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Rhode Island, Vermont, Virginia, Washington, and Wisconsin.