Lawrence Massa, Minnesota Hospital Association president and CEO, speaks during a press conference about the state provider tax at the State Capitol on Thursday, May 2. Brad Burris, Pipestone County Medical Center CEO (fourth from the left), was among hospital CEOs and leaders from across the state who met with Gov. Tim Walz and participated in the press conference. Contributed photo
Pipestone County Medical Center (PCMC) CEO Brad Burris was among more than 20 CEOs and leaders from hospitals and health systems around the state who met with Gov. Tim Walz and Lieutenant Gov. Peggy Flanagan, May 2, to ask lawmakers to extend the 2 percent tax on health care providers.
Minnesota imposes the tax on health care providers, hospitals, surgical centers and wholesale drug distributors. The tax generates revenue for the state’s Health Care Access Fund that supports health care services and public health initiatives, including health care coverage through MinnesotaCare and Minnesota’s Medicaid program.
The provider tax was enacted in 1992 and will expire at the end of this year unless extended by legislators.
In fiscal year 2018, the most recent year for which figures are available, the 2 percent provider tax generated $658 million for the Health Care Access Fund, comprising 80.1 percent of the fund’s revenue for the year. The remainder of the revenue came from a 1 percent gross premium tax, MinnesotaCare enrollee premiums, investment income and a federal match on administrative costs, according to the Minnesota Management and Budget (MMB) Office.
During fiscal year 2018 the majority of expenditures, or 76.5 percent from the Health Care Access Fund — $385 million — were spent on Medicaid. The rest was spent on MinnesotaCare, Department of Health, Department of Human Services (DHS) and other expenses, according to MMB.
The Health Care Access Fund does contribute to MinnesotaCare and Minnesota Medicaid, but those programs receive the majority of their funding from federal and other sources, according to DHS. The money the Health Care Access Fund contributes ––$385 million to Minnesota Medicaid program and $397 million to MinnesotaCare –– represents about 3 percent of the monies expended in each of those funds.
If the provider tax expires, MMB forecasts that revenues in the Health Care Access Fund will fall from $819 million in 2020-21 to $363 million in 2022-23. By 2023, the fund is forecast to have a deficit of $969 million.
The governor’s proposed budget continues the 2 percent provider tax that provides most of the funding for the Health Care Access Fund. The senate’s budget allows the tax to expire.
Burris said he supports continuing the tax because providing the needed care costs money and if the funding doesn’t come from the provider tax, it could lead to raising other taxes, increased health insurance premiums or increased charity care and bad debt incurred by hospitals.
“Without the tax’s dedicated funding, health care coverage would be jeopardized, potentially creating uncertainty and instability for enrollees,” Burris said. “For PCMC, it increases the possibility of providing more uncompensated care.”
PCMC paid $260,342 in provider tax last year.
Sen. Bill Weber (R-Luverne) said in an email that he has been opposed to the tax since its inception when he was the city council representative on the Luverne Hospital Board.
“To complain about the high cost of health care and then add a tax to it is disingenuous in my opinion,” Weber said.
He said that if the fund would be used only for MinnesotaCare, he “could be persuaded differently,” but that he opposes its use for non-health insurance purposes.
According to MMB, there were transfers out of the Health Care Access Fund in 2018 in the amounts of $200 million to the Premium Security Plan Account, $122 million to the state’s General Fund and $13 million to the Special Revenue Fund.
Weber said large hospital systems seem to be able to withstand the tax, but that it creates more of a hardship for private providers, dentists, chiropractors and others.
“Insurance companies do not reimburse it, Medicare and Medicaid do not reimburse it, and the requirement of being involved in those programs is that you have to accept their payments without billing the patient,” he said. “ At the end of the day, our small providers are being forced to pay this tax, and then we wonder why we are losing services in rural Minnesota.”
