Medicaid Enhancement Tax (DSH)

Net Medicaid Enhancement Revenues (MET) – RSA Chapter 84-A

Since 1991, the state has levied a tax on hospitals known as the Medicaid Enhancement Tax, (a.k.a. “bed tax”).

    • It’s a tax the state collects on what hospitals earn for treating patients.
    • The purpose was to leverage more federal Medicaid money under the Disproportionate Share Hospital, or DSH, program.
    • Half the MET revenues were used to get federal matching dollars which were then used to provide hospitals with some financial relief for uncompensated care – losses related to care for the uninsured and for Medicaid patients.
    • The other half of the MET money went into the General Fund for the legislature to spend in other areas.
    • Originally, the DSH payments reimbursed hospitals every cent they had paid under the MET.
    • The 2011-12 legislature departed from this arrangement and used only about 15 percent of the MET revenue to bring in matching federal funds for uncompensated care.  The remaining 85 percent of the MET money went unmatched and was used for provider payments and other General Fund expenses. 
    • The reduced amount of MET and matching funds went only to small rural hospitals, known as Critical Access Hospitals. The state’s other thirteen hospitals received none of this money.
    •  Instead the legislature let tHospitals argue this is not sustainable.
    • Since then, hospitals have dramatically lowered what they owe under the tax by $20 million or more a year.
    • The FY 2014-15 budget maintains the MET, (estimating it to be $72.2 million), but  also uses $20 million from the general fund to make additional DSH payments to hospitals, which means they’ll receive an extra $40 million with the federal match.
    • The Hospitals filed two lawsuits which lower courts ruled in their favor.
    • A commission studied ways to reform the MET tax.
    • In 2014 a settlement was reached with all but one of the hospitals.
    • The settlement was contingent upon legislation being passed (2014 SB 369).

 NH Center for Public Policy 2012 presentation, explains how the DSH program collects and distributes money, and the program changed over time.

More recently, Center Director Steve Norton and Kevin Landrigan of the Nashua Telegraph spoke on NHPR’s The Exchange to bring the conversation up to date. An audio file of the show can be found here. (The segment on the MET begins at 33:36.)


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