Preliminary guidance, issued in November by the Centers for Medicare & Medicaid Services (CMS), could threaten $1.5 billion1 in Medicaid funding for Louisiana, and derail the state’s efforts to make sure hospitals and doctors are paid fairly for treating people with low incomes who rely on Medicaid.2

The guidance aims to clarify Medicaid financing provisions contained in H.R. 1, the harmful new law that makes deep cuts to health care and food assistance to fund tax cuts for wealthy people and corporations.

If finalized, the guidance could limit Louisiana’s ability to use provider assessments to finance the state’s share of Medicaid costs. These assessments – also known as provider taxes – are used by Louisiana and 48 other states3 to expand access, support Medicaid providers, and improve health outcomes. If these payments are severely restricted, it could affect health care access and quality for more than 1.5 million residents enrolled in Medicaid across the state.4


Provider Assessments are Vital for Louisiana Medicaid

Nearly 15 in 36 Louisianans rely on Medicaid for affordable health care coverage, making the program vital for low-income families, people with disabilities7, and rural communities.8 The program is jointly funded by the state and federal governments, with federal dollars providing the majority of support and representing the largest source of federal funding in Louisiana’s budget– roughly $15 billion.9 To draw down these federal funds, the state uses a combination of revenue sources, including provider assessments, to provide health care coverage to Medicaid recipients. 

States levy provider assessments on health care providers such as nursing homes, hospitals, ambulances, or managed care organizations (MCO). Every state except Alaska has used these assessments to finance their share of Medicaid costs for decades.10 

Last July, Congress passed House Resolution 1 (H.R. 1), a harmful budget and tax megabill that cuts federal Medicaid funding more than $900 billion over the next 10 years.11 Part of this law restricts how states can finance their share of Medicaid spending. As a result, Louisiana is prohibited from levying any new or increased provider assessments and will be required to phase down many existing provider assessment rates beginning in Federal Fiscal Year 2028.12

But, the megabill left key implementation details unclear. The Centers for Medicare and Medicaid Services (CMS) has now stepped in with preliminary guidance13 that goes beyond the language of H.R. 1 and could force Louisiana’s Medicaid program to face deeper and more immediate cuts than anticipated.


Provider Assessments in Louisiana

In Louisiana, money from provider assessments–particularly on hospital inpatient and outpatient revenue–is a key source of Medicaid funding. These dollars are combined with other state funding sources to draw down substantial federal matching funds and support targeted investments that expand access to care for low-income residents.

Just last year, Louisiana increased its hospital assessment rates14, a move that’s projected to generate an additional $334 million compared to the year before. In total, the hospital assessment will bring in an estimated $648 million to support major investments in the state, including: (1) hospital-directed payments15 16 17 tied to specific quality and outcome priorities, and (2) a significant increase in physician reimbursement rates.18


Hospital Assessment Increase Generates New Revenue for Louisiana’s Medicaid Program

Hospital Assessment RevenueFederal Matching FundsTotal
FY 202519$314 M$1.1 B$1.4 B
FY 202620$648 M$2.3 B$2.9 B
New Revenue from Increased Rates$334 M$1.2 B$1.5 B


1. Hospital-Directed Payments Focused on Targeted Outcomes 

The Louisiana Department of Health plans to use $298 million of the new hospital assessment revenue21 to increase its hospital directed payment program for the 2026 fiscal year. The Department allocated this money, and other state funds, to direct $921.5 million toward this program. This was matched with approximately $3.2 billion in federal dollars.22 Together, these funds are used to increase Medicaid reimbursement rates to hospitals serving patients across the state.

Hospitals that receive the higher payments are expected to address targeted initiatives aimed at tackling some of the state’s most pressing health challenges. Specifically, these investments focus on: 

  • reducing infant mortality, 
  • expanding behavioral health services, and 
  • improving access to treatment for people with substance use disorders. 

These initiatives help hospitals deliver more comprehensive, coordinated care to Louisianans and improve financial stability for safety-net providers that serve a large share of Medicaid patients.

2. Significant Increase in Physician Reimbursement Rates

Louisiana is also using revenue from the increased hospital assessment to raise Medicaid reimbursement rates for doctors, who typically get paid far less for treating Medicaid patients than those who have Medicare or private insurance. Last July, the Louisiana Department of Health increased Medicaid physician payments to 85 percent of Medicare rates for certain services.23 State legislators and Gov. Jeff Landry have set a goal of having certain Medicaid reimbursements equal Medicare rates by fiscal year 2028.24

For fiscal year 2026, these physician rate increases are expected to increase the Medicaid budget by $258.4 million. This increase breaks down to: $28.5 million in hospital assessment revenue, $7.1 million in MCO premium assessment revenue, $22.3 million from the State General Fund, and $200.5 million in matching federal funds.25

This investment is intended to make it easier for Medicaid enrollees to find doctors who will see them. Higher rates encourage more providers to participate in Medicaid, particularly specialists and doctors in rural areas where shortages are most severe. The rate increases prioritize physician-provided primary care, obstetric services, non-specialty mental health care, substance use disorder treatment, family planning, and women’s health.26 These services are foundational to early intervention, chronic disease prevention, and improved maternal and child health outcomes.


CMS Guidance Puts Hospital Assessment Increase at Risk

Louisiana legislators raised the state’s hospital assessment rates through a routine House Concurrent Resolution (HCR) in early June.27 This legislation passes annually, and is intended to stabilize hospital funding across the state.28 A month later, President Trump signed H.R.1 into law, prohibiting states from imposing “new or increased” provider assessments. The law, however, did not clarify how rate changes adopted just before its effective date should be treated. That left CMS to interpret the rules.

On Nov. 14, CMS issued preliminary guidance29 that is significantly more restrictive than the language in H.R. 1 itself. Under this interpretation, Louisiana’s recent hospital assessment increase could be deemed ineligible for federal Medicaid matching funds, even though it was approved by the Legislature before the federal law took effect.

The guidance is only the first step in the federal rulemaking process. Depending on how the CMS moves forward, Louisiana could lose as much as $1.5 billion30 in Medicaid funding. The state is already relying on this funding to pay physicians and hospitals, meaning that a final rule could create major budget gaps for the state. Even worse, it could reverse much of the progress Louisiana has made toward expanding access and improving quality of care for low-income communities. 

It is essential that Louisiana’s congressional delegation use their power and influence at the federal level before CMS finalizes its rule. Louisiana’s elected officials must protect this critical source of funding to ensure that the state’s investments in providers, hospitals, and improved patient outcomes are preserved.



References

  1. Author calculations, Louisiana Legislative Fiscal Office and Shawn Hotstream. (2024). Fiscal Note House Concurrent Resolution 3 of the 2024 Regular Session. https://legis.la.gov/legis/ViewDocument.aspx?d=1381427; Louisiana Legislative Fiscal Office and Anthony Shamis. (2025). Fiscal Note House Concurrent Resolution 2 of the 2025 Regular Session. https://legis.la.gov/legis/ViewDocument.aspx?d=1423997 ↩︎
  2. Department of Health & Human Services. (2025, November 14.) Section 71115 and 71117 of Working Families Tax Cuts Legislation on Provider Taxes. Centers for Medicare & Medicaid Services. https://www.medicaid.gov/medicaid/downloads/providertax_dcl_11142025.pdf
    ↩︎
  3. Burns, A., Hinton, E., Williams, E., & Rudowitz, R. (2025, March 26). 5 Key Facts About Medicaid and Provider Taxes. Kaiser Family Foundation. https://www.kff.org/medicaid/5-key-facts-about-medicaid-and-provider-taxes/ 
    ↩︎
  4. Louisiana Department of Health. (2025, December 1). Medicaid Enrollment Trends Report – December 2025. https://ldh.la.gov/assets/medicaid/MedicaidEnrollmentReports/EnrollmentTrends/EnrollmentTrends_202512_print.pdf 
    ↩︎
  5. Louisiana Department of Health. (2025, December 1). Medicaid Enrollment Trends Report – December 2025. https://ldh.la.gov/assets/medicaid/MedicaidEnrollmentReports/EnrollmentTrends/EnrollmentTrends_202512_print.pdf 
    ↩︎
  6. U.S. Census Bureau. (2025). Population estimates, July 1, 2025 (V2025), resident population and net change — Louisiana. Population Estimates Program. https://www.census.gov/quickfacts/fact/table/LA# 
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  7. Center on Budget and Policy Priorities. (2025, November 4). Introduction to Medicaid https://www.cbpp.org/research/policy-basics-introduction-to-medicaid.
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  8.  Center For Children and Families. (2025, January 15). Medicaid’s Role in Small Towns and Rural Areas. https://ccf.georgetown.edu/2025/01/15/medicaids-role-in-small-towns-and-rural-areas/
    ↩︎
  9. House Fiscal Division of the Louisiana House of Representatives. (2025, April 8). Fiscal Year 2026 Executive Budget Review, Louisiana Department of Health (Slide 41). https://house.louisiana.gov/housefiscal/DOCS_APP_BDGT_MEETINGS/DOCS_AppBudgetMeetings2026/FY%2026%20LDH.pdf 
    ↩︎
  10. Burns, A., Hinton, E., Williams, E., & Rudowitz, R. (2025, March 26). 5 Key Facts About Medicaid and Provider Taxes. Kaiser Family Foundation. https://www.kff.org/medicaid/5-key-facts-about-medicaid-and-provider-taxes/ 
    ↩︎
  11. Congressional Budget Office. (2025, October 28). Public Law 119-21, to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14 Title VII, Finance, Subtitle B, Health, Chapter 1, Medicaid. https://www.cbo.gov/system/files/2025-10/PL-119-21-Medicaid%20_0.pdf 
    ↩︎
  12.  H.R.1 – 119th Congress (2025-2026): An act to provide for reconciliation pursuant to title II of H. Con. Res. 14. (2025, July 4). https://www.congress.gov/bill/119th-congress/house-bill/1 
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  13. Department of Health & Human Services. (2025, November 14.) Section 71115 and 71117 of Working Families Tax Cuts Legislation on Provider Taxes. Centers for Medicare & Medicaid Services. ↩︎
  14. HCR 2, 2025 Leg., Reg. Sess. (La. 2025). https://legis.la.gov/legis/BillInfo.aspx?i=248472 
    ↩︎
  15. Department of Health & Human Services. (2025, November 19). Section 42 C.F.R. § 438.6(c) preprint – LA_Fee_IPH.OPH_Renewal_20250701-20260630. Centers for Medicare & Medicaid Services. https://www.medicaid.gov/medicaid/managed-care/downloads/LA_Fee_IPH.OPH_Renewal_20250701-20260630.pdf
    ↩︎
  16.  Department of Health & Human Services. (2025, November 19). Section 42 C.F.R. § 438.6(c) preprint – LA_Fee_IPH.OPH1_Renewal_20250701-20260630. Centers for Medicare & Medicaid Services. https://www.medicaid.gov/medicaid/managed-care/downloads/LA_Fee_IPH.OPH1_Renewal_20250701-20260630.pdf  
    ↩︎
  17. Department of Health & Human Services. (2025, November 19). Section 42 C.F.R. § 438.6(c) preprint – LA_Fee_IPH.OPH2_New_20250701-20260630. Centers for Medicare & Medicaid Services. https://www.medicaid.gov/medicaid/managed-care/downloads/LA_Fee_IPH.OPH2_New_20250701-20260630.pdf
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  18. Louisiana Department of Health. (2025, July 29). Louisiana Medicaid Increased Physician Reimbursement Rates Beginning July 1, 2025 [Press release] https://ldh.la.gov/news/7537  
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  19. Louisiana Legislative Fiscal Office and Shawn Hotstream. (2024). Fiscal Note House Concurrent Resolution 3 of the 2024 Regular Session. https://legis.la.gov/legis/ViewDocument.aspx?d=1381427
    ↩︎
  20. Louisiana Legislative Fiscal Office and Anthony Shamis. (2025). Fiscal Note House Concurrent Resolution 2 of the 2025 Regular Session. https://legis.la.gov/legis/ViewDocument.aspx?d=1423997 
    ↩︎
  21. Louisiana Legislative Fiscal Office. (2025, October). Fiscal Highlights Fiscal Year 2025-2026 (100). https://lfo.louisiana.gov/files/publications/FIHI/FIHI%20FY%2026.pdf 
    ↩︎
  22. Author calculations, Department of Health & Human Services. (2025, November 19). Section 42 C.F.R. § 438.6(c) preprint – LA_Fee_IPH.OPH_Renewal_20250701-20260630. Centers for Medicare & Medicaid Services. https://www.medicaid.gov/medicaid/managed-care/downloads/LA_Fee_IPH.OPH_Renewal_20250701-20260630.pdf ; Department of Health & Human Services. (2025, November 19). Section 42 C.F.R. § 438.6(c) preprint – LA_Fee_IPH.OPH1_Renewal_20250701-20260630. Centers for Medicare & Medicaid Services. https://www.medicaid.gov/medicaid/managed-care/downloads/LA_Fee_IPH.OPH1_Renewal_20250701-20260630.pdf;  Department of Health & Human Services. (2025, November 19). Section 42 C.F.R. § 438.6(c) preprint – LA_Fee_IPH.OPH2_New_20250701-20260630. Centers for Medicare & Medicaid Services. https://www.medicaid.gov/medicaid/managed-care/downloads/LA_Fee_IPH.OPH2_New_20250701-20260630.pdf
    ↩︎
  23. Louisiana Department of Health. (2025, July 29). Louisiana Medicaid Increased Physician Reimbursement Rates Beginning July 1, 2025 [Press release] https://ldh.la.gov/news/7537 
    ↩︎
  24.  Act No. 306, 2025 Leg., Reg. Sess. (La. 2025) https://legis.la.gov/Legis/BillInfo.aspx?s=24RS&b=SB190&sbi=y 
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  25. Louisiana Legislative Fiscal Office. (2025, October). Fiscal Highlights Fiscal Year 2025-2026 (94). https://lfo.louisiana.gov/files/publications/FIHI/FIHI%20FY%2026.pdf 
    ↩︎
  26. Act No. 306, 2025 Leg., Reg. Sess. (La. 2025) https://legis.la.gov/Legis/BillInfo.aspx?s=24RS&b=SB190&sbi=y
    ↩︎
  27. HCR 2, 2025 Leg., Reg. Sess. (La. 2025). https://legis.la.gov/legis/BillInfo.aspx?i=248472 
    ↩︎
  28. La. Const. Article 7, §10.13. https://legis.la.gov/legis/law.aspx?d=860286 
    ↩︎
  29. Department of Health & Human Services. (2025, November 14.) Section 71115 and 71117 of Working Families Tax Cuts Legislation on Provider Taxes. Centers for Medicare & Medicaid Services. https://www.medicaid.gov/medicaid/downloads/providertax_dcl_11142025.pdf 
    ↩︎
  30. Author calculations, Louisiana Legislative Fiscal Office and Shawn Hotstream. (2024). Fiscal Note House Concurrent Resolution 3 of the 2024 Regular Session. https://legis.la.gov/legis/ViewDocument.aspx?d=1381427; Louisiana Legislative Fiscal Office and Anthony Shamis. (2025). Fiscal Note House Concurrent Resolution 2 of the 2025 Regular Session. https://legis.la.gov/legis/ViewDocument.aspx?d=1423997 
    ↩︎