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NH Senate president: Short-term fix needed after Medicaid Enhancement Tax ruling

State House Bureau

April 29. 2014 10:11PM

CONCORD — Senate President Chuck Morse says a short-term fix is needed to address a recent court ruling that the state's tax on hospitals is unconstitutional

Speaking Tuesday at a Senate Ways and Means Committee meeting, the Salem Republican said lawmakers need a long-term solution that phases out the Medicaid Enhancement Tax assessed on hospitals' patient services.

"Avoiding major disruptions to the state budget is in the state's best interests and in the hospitals' best interest," Morse said. "I also believe that responding to the recent court decisions will require changing the MET in the short-term and phasing it out in the long-term."

Morse suggested hospitals and state tax officials need to agree what services are subject to the tax. He said hospitals' uncompensated care will be reduced when more state residents are insured under Medicaid expansion, which will reduce the state's need for the tax.

And Morse said rehabilitation hospitals should not be subject to the tax, something the Senate has supported but the House has not.

The MET raises $185 annually, with $72 million going into the state's general fund. The remaining money is used to pay Medicaid providers and to reimburse hospitals for charity care and Medicaid rates, which pay about 50 cents on the dollar.

Gov. Maggie Hassan said she looks forward to hearing more about Morse's ideas, and will continue to work with hospitals, providers, lawmakers and state officials to find a solution as quickly as possible.

"The governor continues to believe that by working with all stakeholders, we can resolve these challenges in a responsible way that is fair to all parties and that protects the state's budget and the health of Granite Staters," Hassan press secretary William Hinkle said.

The New Hampshire Hospital Association said Morse's comments were important, and the organization will continue to participate in negotiations.

"Hospitals remain committed to working collaboratively to ensure a sustainable Medicaid program for our patients and their caregivers," New Hampshire Hospital Association President Steve Ahnen said. "It is essential that all parties, including policymakers and hospitals, continue to work together to resolve the many fundamental issues and challenges posed by the MET and these recent court decisions in a timely manner."

At the committee meeting Tuesday, Rep. David Hess, R-Hooksett, said there is a simple solution to the court's decision — broaden the base to all health care providers and lower the rate.

"There is a considerable amount of concern and discussion bordering on hysteria, which I think is unwarranted and unfounded because a simple solution is very obtainable, Hess said.

Hess sponsored a bill to require hospitals and private higher education institutions to pay the business enterprise tax, while lowering the rate. The bill was killed by the House on a 173-163 vote.

The court ruled April 10 the tax violated the federal and state constitution's equal protection provision because it did not apply to other entities providing identical or nearly identical services. A February court decision had a similar conclusion for rehabilitation hospitals.

"It is very clear from the court decisions that the time has come to eliminate rehabilitation hospitals from the MET," Morse said. "The Senate has voted to do that in the past. The House did not agree with us. Maybe now they will."

Morse supports casino gambling and continues to urge lawmakers to use the money to fix roads and bridges, for higher education and economic development. On Monday, gambling supporters in the House said casino revenues would help fill the gap left by the court's MET decision. The House votes on another casino gambling bill today.

The committee will meet again in a week after the hospitals, lawmakers, the governor's office and state officials continue to negotiate.

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