May 13. 2014 8:36PM

House, Senate suggest Medicaid enhancement tax fix

State House Bureau

CONCORD — Both the Senate and House agree what they do this week with the Medicaid enhancement tax is a starting point and not the end.

The Senate and House over the next two days will approve their preferred solutions to fix the tax two superior courts found unconstitutional this year because it taxes hospitals but not other providers of the same health care services.

The rulings puts about $185 million to $190 million at risk this and next fiscal year. The Senate, which votes on House Bill 1613 on Thursday, would reduce the current tax rate from 5.5 percent over the next three years to 4 percent with an eye to eliminating it in the future.

The plan would use insurance tax revenues generated when 50,000 of the state’s adult poor join the state Medicaid program and others buy private insurance under the Affordable Care Act, and additional federal matching money to offset the loss of MET revenues.

While the House, which is scheduled to vote on Senate Bill 369 on Wednesday or Thursday, would clarify lawmakers’ intent to use the MET revenue for health care programs and eliminate a provision allowing the money to go into the state’s general fund.

The two-step House plan would also expand the base to include other health care providers beyond hospitals if the Supreme Court upholds the superior court rulings.

While the Senate plan — proposed by Senate President Chuck Morse, R-Salem — reduces what hospitals have to pay, it boosts payments to Medicaid service providers. The state, which has the lowest reimbursement rate in the country paying about 50 cents on the dollar for Medicaid services, would increase payments to near Medicare rates of about 100 percent of cost.

The proposal gradually reduces state payments reimbursing hospitals for services they provide but are not paid for. As more and more state residents have health insurance, state payments decrease.

Under the bill, lawmakers will have to decide how to cut $56 million from the fiscal 2015 budget and a reduction of about that amount of general funds every year going forward. For the next biennium, general funds would be reduced by about $112 million.

Morse has said all the state’s hospitals have to agree for the plan to move forward. However, hospitals are divided over what approach to take, according to NH Hospital Association President Steve Ahnen.

Some hospitals want the MET eliminated but others see it as a way to increase federal payments, he said last week.

The Senate Finance Committee voted 5-0 last week to recommend the plan be passed by the Senate this week. The House amendment is a combination of two plans presented by House Finance Committee Chair Mary Jane Wallner, D-Concord, and Deputy Minority Leader David Hess, R-Hooksett.

The Wallner proposal clarifies lawmakers’ findings and intent when the tax was first imposed in 1991 and reiterates why hospital in-patient and out-patient services are unique.

In- and out-patient services are among the 19 classes of health care the federal government allows states to tax in order to match federal money through the Medicaid program.

Hess’s amendment would add four more of the allowable classes to the MET: ambulatory surgical centers, therapists, laboratory and radiation, and emergency ambulance services.

Those four services were mentioned in Superior Court Judge Philip Mangones’s ruling.

Hess said his plan would be revenue neutral by dropping the rate from 5.5 to 5 percent. The plan exempts home health agencies, private duty nursing, hospice, personal care services, college health centers and nursing home and congregate living facilities from the tax.

The House Ways and Means Committee voted 14-4 for the combined amendment.

The House and Senate are expected to approve their own plans and have a joint conference committee on the two bills in an attempt to reach a compromise by the end of the month.

Lawmakers are under pressure to address the loss of state revenue by two Wall Street bond rating agencies that did not put the state on watch of lowering its bond rating but did urge lawmakers to address the problem.