An agreement was negotiated by Department of Revenue Administration and the Attorney General’s office, contingent on legislative approval which was granted by 2014 SB 369. passed to address the settlement between the state and the hospitals on two lawsuits.
- It is likely that hospitals would not make their FY 2015 tax payments, and the State would be responsible for $190 million in FY 2015 of MET payments and the federal match money to bring it to a total of $380 million to be paid by the State.
- Some Critical Access Hospitals would likely close.
- If SB 369 had not passed by July 1, the State would still be at risk for the MET paid by the hospitals in FY 2014.
- Strengthens the State’s constitutionality argument
- Makes statutory changes to implement the financial aspects of the settlement.
- Has the potential to help stabilize insurance premium costs.
- The participating hospitals agree to drop their claims for tax refunds in 2014 and 2015 and drop their participation in lawsuits challenging the constitutionality and application of the Medicaid Enhancement Tax.
- They also agree to drop claims in state and federal court cases challenging rate reductions made beginning in 2008.
- The agreement covers four years.
- The agreement will bring consistency to the state budget process.
- Bond rating agencies issued a warning following the court decisions. Passing this legislation and the settlement should satisfy the bond agencies’ concerns.
- The legislation will be effective for the next two biennium.
- The plan will stabilize New Hampshire’s healthcare system.
- It resolves the constitutionality issue.
- The settlement exempts the rehab hospitals from the tax.
- The legislation’s cost to the State between the “floor” and the “ceiling” is predicted to be between $67 and $101 million in the FY 2016/2017 two year budget.
- The cost is most likely to be $69 million in each of the next two biennium budgets according to DHHS and their expert consultants.
- There is a small reduction in the rate of the Medicaid Enhancement Tax to the hospitals from 5.5 percent to 5.45 percent in FY 2016 and to 5.4 percent in FY 2017. Beginning in FY2018, if total aggregate uncompensated care costs fall below $375 million, the tax rate will be further reduced to 5.25 percent.
- Hospitals are paying 85% of the cost of the rate reduction.
- There are substantial penalties for any underpayment of the MET or an understatement of the tax.
- All money raised from the Medicaid Enhancement Tax is placed in a trust fund and will be used exclusively to support Medicaid services.
- The cost of NH’s uncompensated care is expected to decrease because of Medicaid Expansion and the ACA.
The only hospital to not agree with the settlement is St. Joseph’s Hospital in Nashua, which traditionally has provided little uncompensated care. The other hospitals have agreed to assume financial risk for St. Joseph’s non-participation.
- Critical access hospitals are small mostly rural hospitals and comprise one half of all the hospitals in NH.
- Noncritical access hospitals are larger hospitals in larger communities.
- Uncompensated care is care given by hospitals mostly to Medicaid patients for which hospitals are underpaid or to people without insurance who cannot afford to pay.
- DSH – Disproportionate Share Hospital payments are the payments made to hospitals by the State to compensate for their uncompensated care that is matched by federal funds.
Critical Access Hospitals
Governor Hassan Announces Agreement with 25 Hospitals to Settle Court Cases Challenging MET, Medicaid Rate Reductions
CONCORD – Governor Maggie Hassan today announced an agreement in principle to settle 25 New Hampshire hospitals’ outstanding challenges to: the constitutionality of the Medicaid Enhancement Tax, to claims that the hospitals had filed for refunds on their 2014 tax payments, and to Medicaid rate reductions made in previous years. The legislature must approve the agreement in order for it to move forward.
The agreement will provide stability for New Hampshire’s budget while ensuring that revenues driven by hospitals are used to fund critical health care services including uncompensated care. Only St. Joseph’s Hospital in Nashua, which traditionally has provided little uncompensated care, has refused to participate in the agreement.
“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,” Governor Hassan said. “I am hopeful this settlement, combined with our efforts to expand access to health insurance coverage, will allow us to resume the important and productive partnership that existed between the state and our hospitals for so many years. Our joint efforts will help improve health care for all of our citizens and help reduce the cost shifting that increases costs for both consumers and businesses.”
Under the agreement, the state would agree to provide “disproportionate share” (DSH) payments to critical and noncritical access hospitals. Critical access hospitals would be reimbursed 75 percent of their uncompensated care costs, and noncritical care access hospitals would receive no more than 50 percent of their individual uncompensated care costs in Fiscal Years 2016 and 2017. The state’s liability would be capped at $224 million in total payments that are shared with the federal government. Based on aggregate uncompensated care estimates, the state’s liability is expected to range between approximately $45 and $95 million for the biennium, depending on actual levels of uncompensated care.
In Fiscal Years 2018 and 2019, critical access hospitals would continue to be reimbursed 75 percent of their uncompensated care costs. Other acute care hospitals would receive no more than 55 percent of their uncompensated care costs, up to a cap of $241 million. The state’s liability for FY 18 and 19 is expected to range between approximately $35 million and $80 million, as compared to FY 15. The hospitals are guaranteed at least $175 million a year in DSH payments.
Payments to hospitals would be contingent on Medicaid Enhancement Tax revenues reaching agreed upon estimates. If revenues fall short of the estimates, state payments to the disproportionate share pool for noncritical access hospitals will be reduced.
“The terms of this settlement build on the thoughtful work and ideas of a number of people, including Senate President Chuck Morse, Senator Bob Odell, Representatives Cindy Rosenwald and David Hess, and the entire leadership of the House and Senate,” Governor Hassan said. “This agreement was also only possible because of the bipartisan steps we are taking together to improve health care and reduce the uncompensated care burden on hospitals, including the New Hampshire Health Protection Plan, the mental health settlement, and the proposed 1115 waiver that we are submitting to the federal government. We will need to continue our bipartisan cooperation in order to make this settlement a reality and to manage future budget decisions in a way that continues to protect the health and financial security of New Hampshire citizens.”
The state agrees to put all money raised from the Medicaid Enhancement Tax in a trust fund and use those funds exclusively to support Medicaid services, including funding DSH payments, hospital provider payments, and other Medicaid costs.
The agreement also eliminates certain freestanding rehabilitation hospitals from the Medicaid Enhancement Tax base, and also precludes them from receiving uncompensated care payments.
The agreement is contingent on legislative approval. Though the settlement is agreed to in principle, the hospitals acknowledge that the state is taking legislative steps intended to further clarify that the state has a rational basis for the Medicaid Enhancement Tax and that the tax also complies with federal law. Through the agreement, the participating hospitals agree they will not challenge the MET on constitutional grounds as long as the terms of the agreement are met. If the legislature does not approve the agreement, or future legislatures choose to cut funding, the hospitals retain the right to re-launch their litigation and the state retains all of its defenses.
Through the agreement, the participating hospitals agree to drop their claims for tax refunds in 2014 and 15 and drop their participation – and claims – in lawsuits challenging the constitutionality and application of the Medicaid Enhancement Tax. They also agree to drop claims in state and federal court cases challenging rate reductions made beginning in 2008.