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Legislators reach agreement on NH hospital tax settlement

State House Bureau

May 30. 2014 5:58PM

CONCORD — House and Senate negotiators reached agreement Friday on a bill to formalize a settlement with all but one of the state’s 26 hospitals to end litigation over the constitutionality of the Medicaid Enhancement Tax and reimbursement rates for the Medicaid program.

Under the agreement, hospitals would double the money they receive for uncompensated care over the next five years, while agreeing to abide by state tax guidelines and speed up payments which would increase their tax liability.

The state agrees to use all the MET money for health care, more than half of it returned to hospitals as the state’s match for federal money for the uncompensated care they provide through charity care and less than full payment for Medicaid patient services.

The state will guarantee small rural hospitals receive at least 75 percent of their uncompensated care costs and up to 50 to 55 percent for large hospitals.

The agreement reached by House and Senate negotiators about an hour before Friday’s 4 p.m. deadline, incorporates a reduction in the MET tax rate sought by the Senate and shores up the state’s claim the tax is constitutional, which both the Senate and House advocated.

The bill redefines several classes of taxpayers and requires all MET money to go into a special fund used only for health care services and not the state’s general fund, which address the two superior court rulings.

After the conference committee agreed on the legislation reflecting the settlement, Gov. Maggie Hassan, who announced the agreement Thursday, urged lawmakers to pass the bill.

“This agreement is fair to the hospitals and to New Hampshire taxpayers, bringing stability to our budget while ensuring that our hospitals and the state can continue to provide critical health services to our people,” Hassan said. “I encourage the full Legislature to vote in favor of this important measure to protect our budget and the health and well-being of Granite Staters.”

But Senate President Chuck Morse, R-Salem, voiced skepticism about the agreement, saying while it addresses some of his concerns about the MET tax in light of the court decisions, it makes unsustainable promises going forward.

“I am very concerned that this settlement increases the state’s reliance on the MET tax and, as a result, raises questions as to whether the agreement will be sustainable in the long-term,” Morse said. “Over the next few days, as legislators have the opportunity to review this conference report and discuss it with constituents and stakeholders, I would encourage them to fully consider the bill’s implications for our next budget.”

The president of the NH Hospitals Association praised the agreement, saying it will provide stability for the Medicaid program.

“An agreement to move forward to resolve the outstanding matters related to the Medicaid Enhancement Tax and related litigation is welcome news for our patients and New Hampshire’s hospitals,” said NHHA president Steve Ahnen. “This agreement will require legislative enactment, but we look forward to working together to implement the provisions of today’s agreement to create a vibrant and sustainable Medicaid program for the patients and communities we serve.”

Hospitals are taxed on net in-patient and out-patient services under the MET that was used to match federal money and then returned to the hospitals, until the last biennium.

In 2011, state budget writers decided to keep about $250 million of tax revenue and use it for other purposes. Ten of the state’s largest hospitals sued in federal court over Medicaid reimbursement rates going back to 2008.

Two rehabilitation hospitals and four medical hospitals sued the state in separate cases claiming the tax was illegal because it does not apply to other health care providers offering the same services, like ambulatory surgical centers, and private physician practices and laboratories.

In both cases, judges found the tax was unconstitutional which puts about $185 million in revenue this fiscal year at risk if hospitals sought refunds and $190 million next fiscal year.

The agreement removes rehabilitation hospitals from the tax and hospitals agree not to seek refunds.

The agreement could cost the state up to $100 million in the next biennium and up to $87 million in the 2018-2019 biennium.

The House and Senate will vote on the agreement when they met Wednesday.

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