Opposition Emerges To Proposed Kansas Hospital Tax Hike

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By John Celock

A proposal to hike an assessment on Kansas hospitals to cover the cost of Medicaid payments is gaining opposition.

As part of a series of budget amendments to plug a growing multimillion-dollar hole in the state budget, Gov. Sam Brownback (R) proposed Thursday hiking the assessment rate on net inpatient operating revenue in state hospitals from 1.83 percent to 2.55 percent. In a memo to state lawmakers Thursday, Brownback wrote that the Healthcare Access Improvement Fund – created in 2004 – had grown to subsidize Medicaid payment for medical providers and the current assessment rate was not covering costs. He wrote that the state’s general fund has been covering the difference in the fund.

“The Healthcare Access Improvement Program makes an annual assessment on inpatient services provided by hospitals in order to provide higher Medicaid reimbursement rates for hospital, pharmacy, doctor, and dentist services, as well as other various activities that improve access to healthcare,” Brownback wrote in the memo. “The assessment rate of 1.83% of net inpatient operating revenue is set in statute and has not been increased since the program’s inception in 2004. The cost of the reimbursement rate increases has been higher than the program revenue in recent years and the program has been subsidized by the State General Fund.”

State Budget Director Shawn Sullivan made similar remarks to the House Appropriations Committee on Thursday. The proposal is part of a series of budget amendments Brownback advanced Thursday to cover what has turned into an $800 million shortfall in the proposed state budget. House budget writers were told Thursday that the proposals from Brownback –which include cuts, a proposed hike in tobacco and alcohol taxes and moving funds from the state Transportation Trust Fund to the general fund – would still leave the budget $131 million short.

The assessment program helps cover reimbursements under Medicaid for medical providers.

The proposal on the hospital assessment is being greeted with opposition from hospitals, who say they were not consulted by the governor before the proposal was made.

“We are extremely disappointed that the governor’s office has put forth this recommendation without any discussions with us or the representatives serving on the health care access improvement panel,” Chad Austin, chief lobbyist for the Kansas Hospital Association, told The Celock Report. “The hospital provider assessment program is an important program for healthcare providers across the state and has supported access to care for many Medicaid beneficiaries. Unfortunately, the governor’s recommendation is putting this long-standing program at risk.”

Austin noted that lawmakers had created the panel to provide oversight to the assessment program and to make sure it was sustainable in the long term. He said that he hopes that any plan developed for a hike in the assessment fee will be discussed with the panel.

Rep. Jim Ward (D-Wichita), the top Democrat on the House Health and Human Services Committee, told The Celock Report that he had concerns that hospitals were not consulted during the process and said that he wants to see hospitals weigh in on the proposal going forward.

“The governor kind of sprung it on them,” Ward said. “We haven’t had time to get feedback from them.”

Ward noted that he is concerned this will hurt hospitals in the state long term. The Legislature’s leading proponent of Medicaid expansion, Ward noted that with the number of uninsured growing in the state, along with less federal grants coming in for health care and no Medicaid expansion, the proposal is another strike against hospitals. Several of the federal programs have been cut under assumptions from the federal government that the Affordable Care Act would shift the costs to Medicaid from the other grants. The Medicaid expansion legislation has been pending in the Kansas Legislature.

Ward has been pressing for the Medicaid expansion during this year’s legislative session, including a surprise floor amendment earlier this year to attach the expansion to legislation allowing for donor breast milk reimbursements under Medicaid. Ward withdrew the amendment in exchange for two days of hearings on the expansion by the Health and Human Services Committee. The health panel has not moved forward with legislation since the hearings in March.

Ward said that he does not see why the assessment needs to be raised.

“It is an ill advised way,” Ward said. “First it doesn’t generate much income and it puts much stress on a critical component of our health system that already has much stress.”

Regardless of the potential opposition, Ward believes the proposal will pass in the final budget package proposed by lawmakers. He said that he believes the Republican majority will not want to address a repeal of the tax cuts that were enacted in 2012.

“I think it will pass because those folks are desperate for money and don’t want to address the 500 pound gorilla in the room, the irresponsible tax cuts passed a few years ago,” he said.


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