Two courts have ruled New Hampshire’s Medicaid enhancement tax (MET) unconstitutional, and House and Senate negotiators have only days left to decide on a fix. Here are a few guideposts for the negotiators.
1. A short-term deal is better than no deal. Given the state’s financial situation, a special legislative session later this year would be an expensive indulgence. A short-term deal is preferable to hauling legislators back to Concord to make a deal that is almost certain to be remade, or at least adjusted, in the next legislative session anyway.
2. Make the lawsuits go away. The tax was ruled unconstitutional because it applies to some medical providers but not others who provide the same services. It has always done that since it was created in 1991, but hospitals did not sue until 20 years later, after legislators kept a big chunk of the MET revenue to balance the state budget. A deal that satisfies the plaintiffs is not as good as one that makes the tax entirely constitutional, but it would be good enough for now.
3. Resist the temptation to profit. That is what got the state into this mess. Everyone has known for years that the MET was a short-term scheme to pocket federal dollars. It was not meant to last forever. But when those dollars started to dry up, legislators turned the scheme into a real tax that took money from New Hampshire hospitals. Now that the secondary source of money has dried up, one House plan proposes to expand the tax to more medical providers. A plan to bring in “free” federal money would become a permanent state tax on local medical providers. That is exactly the progression that should be avoided.