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Hospital tax ruled invalid a second time
In a ruling issued Thursday, Judge Philip Mangones found the Medicaid Enhancement Tax violates the equal protection clause in the state and federal constitutions because its treats hospitals and non-hospitals that provide nearly if not identical services differently.
"This tax has had a huge impact and continues to have a significant impact on New Hampshire hospitals, our patients and the programs we can deliver," said Alex Walker, senior vice president of operations for Catholic Medical Center, one of three hospitals who sued the state. "It's a broken system and we are gratified that Judge Mangones ruled in the manner he did."
The state constitution requires that all taxes be reasonable and proportional, and hospitals argued that is not the case with the MET.
Gov. Maggie Hassan, and the House and Senate all increased money going back to hospitals for uncompensated care in the current two-year operating budget. The prior 2011-2012 Legislature ended the uncompensated care program for the state largest hospitals and drastically reduced the money the smaller hospitals had been receiving.
The state had returned most of the money the state collected from the MET to the hospitals through the uncompensated care program, which helps repay hospitals for services they provide but are not paid for or for the low reimbursement rates for Medicaid patients.
The ruling will affect the tax hospitals paid in the current fiscal year and in the next fiscal year, said Walker.
Hassan noted her administration and lawmakers have talked to hospitals and other providers to try to address the issues and included more money in the current budget to help with uncompensated care costs. And she said the recently approved Medicaid expansion law will further help hospitals because it will reduce the free health services they will have to provide.
Attorney General Joseph Foster said "We are in the process of reviewing and assessing the decision and will make a decision on next steps to take after we have done that."
"This is a major decision with major ramifications for hospitals and the state health care system and the state budget," Walker said. "This is an opportunity for hospitals and for policy makers to try and find a way to deal with these significant issues."
"Today's ruling in the case brought by Catholic Medical Center, Exeter Hospital and St. Joseph Hospital is a significant legal development – and one that builds on another Superior Court ruling in a case involving Northeast Rehabilitation Hospital: a finding that the Medicaid Enhancement Tax is unconstitutional," said Steve Ahnen, president of the NH Hospital Association. "This ruling points yet again to the continuing need for all of us, state officials and hospital leaders, to work together ensure a vibrant, sustainable Medicaid program for our patients and their caregivers."
The state then returned the hospitals' MET money through the Disproportional Share Hospital program to help hospitals that treat large numbers of Medicaid patients and then used the federal money to help balance the state's budget which faced about a $200 million deficit.
At the same time, lawmakers stopped reimbursing the state's largest hospitals for uncompensated care, although the program continued for small rural hospitals.
Ten of the state's largest hospitals sued the state over changes to its Medicaid program. The federal suit is pending.
In his ruling he found that hospitals and non-hospitals do in fact provide similar services and taxing only hospitals treats the entities differently.
The hospitals said the reason for the tax has changed over time and the original intent is no longer needed so the state's interest no longer relevant.
But Mangones said the state's claims ignore legislative history, which indicates the tax was used to balance the state budget.
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