Study warns federal Medicaid changes could jeopardize nearly $1 billion in State revenue used to fund hospital care and public services over next ten years  

CONCORD, N.H. — A major state source of funding for New Hampshire’s Medicaid program and hospital system could be reduced by $1 billion over the next ten years due to new federal policy changes, according to a new report from the New Hampshire Fiscal Policy Institute.  

The revenue comes from the Medicaid Enhancement Tax (MET), a hospital provider tax that generated approximately $348 million in State Fiscal Year 2025, making it the fourth-largest source of state tax revenue. MET-generated funds, combined with federal Medicaid matching dollars, account for more than a quarter of all Medicaid spending in New Hampshire, supporting hospital care and health services statewide. 

Federal legislation enacted in 2025 will gradually restrict how much revenue states can raise through provider taxes. For states that expanded Medicaid, including New Hampshire, the federal cap on hospital provider taxes will be lowered from 6% to 3.5% by 2031, forcing New Hampshire to reduce its MET rate starting in October 2028. The gradually reducing rate could lower State revenue by as much as $1 billionover the next ten years and jeopardize at least that much in federal funds to support the health of Granite Staters as well. 

“These federal changes place a long-standing and increasingly important funding mechanism on an uncertain path,” said Jessica Williams, Policy Analyst at the New Hampshire Fiscal Policy Institute and the author of the study. “The Medicaid Enhancement Tax has become a cornerstone of Medicaid financing and hospital funding in New Hampshire, and upcoming federal limits could significantly reduce the resources available to support care.” 

Since Medicaid is a state-federal fiscal partnership, with the federal government financing at least half of expenditures, MET revenue allows New Hampshire to unlock additional federal Medicaid matching dollars. Most of that money flows back to hospitals, where it helps cover the cost of caring for uninsured patients, fills gaps left by lower Medicaid payments, and supports hospital operations, especially at small and rural hospitals. If Medicaid Enhancement Tax revenues are required to bring in $1 billion less in revenue between 2028 and 2035 than they would have without the policy change, more than $2 billionin funding for health services to Granite Staters could be lost when accounting for lost federal Medicaid matching dollars. 

Key findings from Hospital Provider Taxes and Support for Medicaid Financing in New Hampshire include: 

• MET is a large and growing revenue stream: The MET generated nearly $348 million in SFY 2025, accounting for 10.7% of all state tax revenue, and has grown faster than most other major tax revenue sources over the past decade. 

• High stakes for Medicaid financing: In State Fiscal Year 2025, approximately $756 million, or 27%, of total Medicaid funding came from MET-generated revenue and related federal matching funds. 

• Substantial potential losses: If the MET had been capped at 3.5% in SFY 2025, New Hampshire would have collected about $271 million less, including at least $149 million in lost federal matching funds. 

• Long-term fiscal pressure: If historical growth trends continue, New Hampshire could lose an estimated $1 billion in MET revenue by SFY 2035 due to the new federal restrictions. The federal matching revenue lost would total at least another $1 billion, leading to more than $2 billion less to fund health services for Granite Staters. 

The report also notes that these provider tax limits come as other federal Medicaid changes, including new work requirements, cost-sharing provisions, and coverage losses, are expected to increase uncompensated care and place additional financial strain on hospitals. 

“These impacts will show up in the next state budget, so lawmakers will need to think about what the loss of this revenue could mean for Granite Staters who rely on Medicaid for health coverage and for the financial stability of hospitals,” said Williams. 

To read the report, Hospital Provider Taxes and Support for Medicaid Financing in New Hampshire, visit https://nhfpi.org/resource/hospital-provider-taxes-and-support-for-medicaid-financing-in-new-hampshire/.  

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About New Hampshire Fiscal Policy Institute 

The New Hampshire Fiscal Policy Institute is a nonpartisan, independent research nonprofit organization that examines issues related to the state budget, the economy, policy decisions, and the financial security of Granite Staters, centering on issues relevant to people and families with low- and moderate-income. Learn more at www.nhfpi.org.