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Senate, House Committees to Hear Possible Medicaid Tax Amendments Today

Concord — After weeks of working on solutions to the possible loss of billions in state revenue from a controversial hospital tax, House and Senate lawmakers are set to share their plans today. But lawmakers from the two chambers will bring different plans to the table.

Both the House and Senate Ways and Means committees will hold hearings on the plans today, with House members hearing at least two plans and senators at least one. The House amendments were released yesterday, and a Senate amendment will be presented to the committee this morning.

Two lower court rulings declaring the state’s Medicaid Enhancement Tax into question are jeopardizing millions of dollars in state revenue. In this biennium, for example, the state is expected to bring in $145.9 million from the tax. The courts deemed it unconstitutional, in part, because it’s only levied on services provided by inpatient and outpatient hospitals. A hospital providing physical therapy, for example, would be taxed on the service, while a nonhospital physical therapy facility wouldn’t be.

Hospitals have been paying the tax since 1991 but used to receive all of the money back through the state’s rigging of a federal reimbursement system that sent dollars back to hospitals and into the state’s general fund. The federal government recently began tightening the reimbursement rules, however, and the state cut back on the return payments to hospitals in 2011, causing some hospitals to look closer at the tax and challenge it in court.

The state likely is going to appeal the rulings to the state Supreme Court. But in the meantime, the rulings are forcing lawmakers to deal with what’s long been an ignored issue.

An amendment from Rep. Cindy Rosenwald, D-Nashua, seeks to clarify why the state believes it’s fair to tax inpatient and outpatient hospital services and nothing else. (Under federal law, state’s can levy hospital taxes in 19 categories, including physician services, dental services, chiropractic services and more.) Her amendment changes some language in state law to distinguish the tax as being on “hospital services,” not “patient care.”

“We think the court’s got it wrong,” Rosenwald said.

The money collected through the tax goes into an uncompensated care fund. Rosenwald’s amendment says any money in that fund must be used for public assistance programs and none of it can go into the general fund. Her amendment does not change who is being taxed or at what rate, so there is no net impact on the budget, she said.

An amendment by Rep. David Hess, a Hooksett Republican, is also revenue neutral, but it taxes more people at a lower rate. Right now, the tax is 5.5 percent on inpatient and outpatient services. His amendment would broaden the tax to include more of those 19 categories and drop the rate to 5 percent. It still exempts some services such as mental health care, nursing homes and providers of private-duty nursing services.

The House Ways and Means Committee will hear both of these amendments at 2 p.m. The Senate will hear an amendment from Senate President Chuck Morse, a Salem Republican, at 9 a.m.

The deadline to act on bills from the other chamber is May 15. If House and Senate members can’t agree on a bill by that date, they will go to a committee of conference.