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Page 14 – CMCS Informational Bulletin or to any affiliates, subsidiaries, successors, or clinics of the entity, or made to the entity or to any affiliates, subsidiaries, successors, or clinics of the entity as part of a nationwide health care provider network, exceeded $800,000. The federal funding prohibition applies to “any payments made directly to the prohibited entity or under a contract or other arrangement between a [s]tate and a covered organization.” Consistent with existing processes on quarterly expenditure reporting, states should expect to provide assurances that claims for FFP are only for Medicaid expenditures permitted by law. Subchapter C – Stopping Abusive Financing Practices Section 71114. Sunsetting Increased FMAP Incentive Section 1905(ii) of Act as added by section 9814 of the American Rescue Plan Act of 2021 (Public Law 117-2) provided a temporary (8 calendar quarters) 5-percentage-point FMAP increase to a state’s regular FMAP determined under section 1905(b) of the Act for states that newly expand eligibility to all individuals in the Medicaid adult group described in section 1902(a)(10)(A)(i)(VIII) under the state plan or waiver of such plan. As of November 2025, 4 states received this increase. Section 71114 amends section 1905(ii)(3) of the Act to end the availability of the 5-percentage- point FMAP increase incentive for states that adopt the Medicaid adult group expansion on or after January 1, 2026. Section 1905(ii)(3) of the Act, as amended by section 71114, is applicable to all states and the District of Columbia; it does not apply to the territories.34 Section 71115. Provider Taxes Under current law, states may use revenue generated through certain health care-related taxes to fund the non-federal share of Medicaid expenditures. Health care-related taxes must meet requirements in section 1903(w) of the Act and implementing regulations at 42 CFR Part 433. These requirements include that taxes must be imposed on a permissible class of providers and must be broad-based and uniform (unless a waiver is approved). The statute also prohibits multiple types of hold harmless arrangements, including those that guarantee taxpayers receive their tax cost back through Medicaid or other payments. Regulations at 42 CFR § 433.68(f) specify two specific types of hold harmless arrangements that involve guarantees: direct and indirect. An indirect hold harmless arrangement generally occurs when the state taxes health care providers at a high rate relative to their revenue, historically set to 6 percent of net patient 34 Territories are eligible for the expansion state enhanced FMAP for adults without dependent children, which states were eligible to receive for expansions prior to the Affordable Care Act under section 1905(z) of the Act (although we note neither American Samoa nor the Commonwealth of the Northern Mariana Islands have claimed any expenditures under this FMAP). As such, territories were not eligible for the increase under section 9814 of American Rescue Plan Act, and this sunset provision does not apply to them.