New CMS Rules On Medicaid Financing Exacerbate Harms to Millions of Americans, Health Care Providers, and State Budgets

07.22.2026 / Statement

WASHINGTON, D.C. - Yesterday the Centers for Medicare & Medicaid Services (CMS) released the third in a series of new rules that implement the most sweeping cuts to the Medicaid program in its 60-year history, significantly limiting health care access by constructing unnecessary eligibility hurdles and making it harder for states to pay for the health care services that Medicaid beneficiaries need.

In response, Families USA's executive director Anthony Wright issued the following statement:

"The latest rule goes beyond the harsh restrictions already imposed by Congress to further narrow the options that states have to fund Medicaid services and providers. In recent months, states like North Carolina and Idaho have been seeking to plug Medicaid budget shortfalls and cover new costs by raising insurance premium taxes (or redistributing taxes already in place) and using a portion to fund Medicaid. If finalized, the rule would all but close this funding avenue for states. Along with Congress' other restrictions on taxing health care providers - restrictions that gut Medicaid funding in all states - CMS estimates this new proposed rule will cut $198.7 billion in state Medicaid funding over 10 years.

"This rule comes at a time when states are already under significant budgetary pressure to foot the bill for the cost of implementing complex and unnecessary work reporting requirements; in tandem with a proposed rule that slashes Medicaid provider payments and further eliminates state flexibility.

"Taken together, these three rules serve as a coordinated dismantling of the Medicaid program, including its eligibility systems, payment structures and financing mechanisms, with disastrous impacts on individuals and health care systems.

"As states finalize their budgets and are just starting to make tough choices forced by the massive Medicaid cuts made by Congress, the President is making already bad budget cuts much worse with more restrictive regulations and rollbacks. These new federal rules and regulations make the fiscal shock of implementing the President's big budget bill much worse for Medicaid patients, providers, and the health system and services we all rely on.

"All fifty states need funding options and are grappling with how to comply with the new federal law. Of the latest proposed rules to come from CMS - on state directed payments (SDPs), work reporting requirements, and provider taxes - each has taken a much harsher pathway forward than originally laid out by Congress, rolling back access to Medicaid nationwide. The rules are complicated, but the impacts are clear: less money for care, higher administrative burden, and painful budgetary tradeoffs.

"The fiscal squeeze is double-sided: states simultaneously lose revenue to support Medicaid patients and the providers that serve them and are required to spend new state dollars to implement the work requirements and redetermination mandates that H.R. 1 imposes. State officials estimate that implementing work reporting requirements alone will require millions in state funds - some states project as much as $30 million to put in place new IT and enrollment systems and hire new staff to verify eligibility and compliance. State costs will far outspend the $200 million provided in H.R. 1 to support implementation; and now states will have fewer viable options for raising revenue to fill these gaps.

"As we approach the Medicaid and Medicare anniversary on July 30, these rules are a grim birthday present that harms the health care of millions of Americans and undermines more than 60 years of capacity and care.

"The proverbial tide is coming in; these rules are the first waves of the impending tsunami of the big budget cuts passed last year. Our health system and safety net can't handle these additional administrative cuts to Medicaid that will saddle millions of Americans in every state with added costs and confusion.

"The cumulative effect of these rules is a system that covers fewer people, pays providers less to serve them, and diverts public dollars away from care delivery and into paperwork and administrative red tape - all while the burden falls most heavily on individuals and families.

"Families USA policy experts are reviewing incoming proposed rules and will continue to connect with advocates on implications for states and enrollees as these policies unfold."