Committee Substitute March 1, 2025 in SFC: 

SFCcs/SB 249: Senate Finance Committee Substitute for Senate Bill 249 revises the Medicaid reimbursement structure by placing the responsibility for GRT reimbursement on managed care organizations (MCO) rather than on the Medicaid program itself. Under the bill, when a health care provider contracts with an MCO for Medicaid reimbursement, the MCO must reimburse health care providers for all applicable gross receipts taxes incurred on payments for Medicaid-covered services. Additionally, they are required to provide detailed payment documentation that clearly differentiates between Medicaid reimbursements for medical services and the amount reimbursed for gross receipts tax obligations.

The bill defines “managed care organization” as an entity eligible to enter into risk-based prepaid capitation agreements with the state’s Medicaid authority to provide health care and related services. The term “Medicaid” refers to the federal-state health care program administered under Title 19 and Title 21 of the Social Security Act.

The bill takes effect on January 1, 2026, providing time for managed care organizations and Medicaid administrators to implement necessary payment processing adjustments.

Implications
The SFC made two major changes to the original bill. First, it shifted the responsibility for gross receipts tax (GRT) reimbursement from Medicaid to MCOs. Second, the committee clarified payment documentation requirements by specifying that MCOs must differentiate Medicaid service payments from GRT reimbursement amounts in their financial reporting. The original bill had required an itemized list with a specific breakdown of Medicaid payments and GRT reimbursements, but the substitute refines this requirement to ensure clear financial documentation. These changes clarify the administrative structure of GRT reimbursements while shifting financial responsibility from Medicaid to private managed care organizations that operate under state contracts.

SFCcs/SB 249 ensures that health care providers do not bear the financial burden of gross receipts taxes on Medicaid payments, a longstanding concern among providers. By shifting reimbursement responsibility to managed care organizations, the bill aligns tax payments with the organizations that administer Medicaid funding, ensuring that tax burdens are incorporated into payment structures.

The requirement for separate documentation of GRT reimbursement increases transparency in Medicaid financial transactions, reducing disputes between providers and MCOs regarding payment breakdowns. However, placing the reimbursement obligation on MCOs may result in negotiations or adjustments to Medicaid capitation rates, potentially increasing state costs for managed care contracts if MCOs seek to recover these additional expenses.

By setting an effective date of January 1, 2026, the bill provides ample time for MCOs and Medicaid administrators to adjust payment processes and ensure compliance. However, delays in implementation could arise if MCOs encounter technical challenges in adjusting reimbursement workflows.

While this bill addresses the immediate tax burden on providers, it does not eliminate the underlying issue of GRT on health care services, which remains a concern for many providers and health care policy advocates.