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Under tentative MET agreement, hospitals would drop lawsuits

Twenty five hospitals have agreed not to pursue lawsuits against the state regarding the Medicaid Enhancement Tax under a tentative agreement that maintains the tax but sends more money back to hospitals. St. Joseph’s Hospital in Nashua is the only hospital not going along with the agreement.

Gov. Maggie Hassan announced the terms of the agreement yesterday afternoon, and lawmakers will agree on legislative language today. If the legislative language meets the terms of the agreement, it will go before the House and Senate next week.

Lawmakers, hospitals and the governor have been working to revamp the tax since two lower courts deemed it unconstitutional earlier this year. Since 1991, the state has been taxing hospitals for inpatient and outpatient services. The hospitals were reimbursed in full and, through use of federal matching funds, the state also pocketed some money through a system often referred to as “Mediscam.” But in 2011, the Legislature reduced payments to the hospitals, causing them to take a closer look at the tax and challenge its constitutionality.

Hospitals were seeking a refund from previous payments and were threatening not to pay the tax when it comes due in October, both of which would have created major holes in the current budget and future budgets. This tentative plan aims to stop the lawsuits from going forward and halt the refund requests, and it stipulates that all money collected from the tax be used only to support Medicaid services and provider payments.

“I am pleased that we have reached a settlement with hospitals that is fair to them and fair to other New Hampshire taxpayers. This settlement agreement will provide critical stability to our state budget while bringing us nearly all the way back to the situation that existed before funding to hospitals was cut in 2011,” Hassan said.

Going forward, the tax will stay in place but hospitals will receive more money back in payments for charity and uncompensated care. Critical access hospitals will be guaranteed a reimbursement of 75 percent of those costs, while the remaining hospitals will get up to 50 percent back in the next biennium. Rehabilitation hospitals will no longer be taxed, but aside from that there are no changes in what services are taxed. The legislation presented today will also include language clarifying why the Legislature believes the tax is constitutional.

It was unclear yesterday whether the legislation will lower the tax rate from the current 5.5 percent. Senate President Chuck Morse, a Salem Republican, sought a solution that would phase out the tax over time.

Based on estimates of uncompensated care, which could change as more people receive health insurance under Medicaid expansion, this plan will cost the state between $45 million and $95 million next biennium, which is less than the $145 million the state stood to lose if the lawsuits went forward. Payments to the hospitals will also depend on whether the tax revenue meets estimates.

Hospitals have agreed not to challenge the constitutionality of the tax as long as the Legislature meets the terms of the agreement, and they retain the right to relaunch lawsuits if future legislatures cut funding.

(Kathleen Ronayne can be reached at 369-3309 or or on Twitter @kronayne.)

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