Paragon Institute Report: $19B in State Medicaid Funding at Risk from MCO Tax Phase-Out
CMS released guidance requiring states to wind down MCO taxes by end of FY2026 under H.R. 1 provision. California's MCO tax raises $8.4B in 2025 (99%+ from Medicaid MCOs), generating a projected $19.4B over 4 years through federal matching.
CMS estimates $33-75B in federal savings 2026-2030. For California FQHCs, this threatens the Medi-Cal rate increases and program expansions funded by Prop 35 MCO tax revenue.
Paragon Institute analysis shows states have no state-funded replacement.
Primary source
AHA / Paragon Health Institute analysisFQHC Talent. (2026, April 7). Paragon Institute Report: $19B in State Medicaid Funding at Risk from MCO Tax Phase-Out. Primary source: AHA / Paragon Health Institute analysis. Retrieved June 12, 2026, from https://www.fqhctalent.com/intel/paragon-institute-19b-mco-tax-exposure-april-2026
More in Funding & Budget
Dec 31
CalAIM Section 1115 Waiver Expires December 2026 — $1.2B/Year at Stake
Jun 10
The $50B rural health fund is now real money with real deadlines: Florida June 17, Alaska June 22, Indiana July 1, Tennessee July 6-20 — and FQHCs must compete for every dollar
Jun 10
The first post-H.R. 1 budget season splits the states: New York invests $80M in FQHCs while Colorado cuts rates 2% and New Jersey stares into a $3.6B/yr hole
Jun 10
LA County's Measure ER Passes — the $1B/Year Safety-Net Sales Tax Pulls Ahead by ~24,000 Votes as 'Yes' Prevails on Late Ballots; Backers Declare Victory June 10, County Certifies by July 2