Although Hospital Tax Programs in Seven States Complied With Hold-Harmless Requirements, the Tax Burden on Hospitals Was Significantly Mitigated

Since 2003, the United States Government Accountability Office has identified Medicaid as a high-risk program. Between Federal fiscal years (FYs) 2011 and 2017, Medicaid expenditures rose 42 percent from $430 billion to $610 billion. By FY 2025, Medicaid is projected to have annual expenditures of $958 billion. The Social Security Act requires States to provide at least 40 percent of the non-Federal share of Medicaid expenditures, while up to 60 percent may be derived by local sources, including health-care-related taxes, as long as the taxpayer is not held harmless for the tax payment. However, this cost sharing requirement only applies to the aggregate of annual Medicaid program expenditures, not on a service-specific basis.