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.
Part of
- California's budget, the MCO tax and Proposition 35
The MCO tax and Proposition 35
- Medicaid financing and eligibility operations
Managed-care plan exits and transitions
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FQHC Talent. (2026, April 7). Paragon Institute Report: $19B in State Medicaid Funding at Risk from MCO Tax Phase-Out. Source: Paragon Health Institute. Retrieved September 28, 2026, from https://www.fqhctalent.com/intel/paragon-institute-19b-mco-tax-exposure-april-2026
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