Brownback to seek increase in hospital tax to restore Medicaid cuts

Hospitals expected to fight proposal and force debate on Medicaid expansion initiative

By Jim McLean, August 17, 2016

Facing increasing criticism from health care providers about recent cuts in Medicaid reimbursement rates, Gov. Sam Brownback said Wednesday that he will attempt to restore the cuts by increasing a tax on hospitals.

In a statement issued Wednesday afternoon, Brownback said he was forced in May to order a 4 percent cut in provider reimbursement rates after efforts to negotiate an increase in the surcharge failed. The cuts took effect in July. 

“We will continue those efforts in the next legislative session,” he said. “I look forward to working with the Legislature to restore the 4 percent cut in reimbursement rates and will call on them to pass an increase in the provider tax.”

The $56.3 million reduction in Medicaid reimbursements was part of nearly $100 million in cuts that Brownback ordered to cover a projected deficit in the fiscal year 2017 budget.

Kansas is one of 49 states that levy provider assessments. The money generated by the assessments on hospitals, managed care organizations and nursing homes is used to draw down additional federal funds, which are used to increase reimbursements to providers who participate in KanCare, the state’s privatized Medicaid program.

Brownback is proposing to increase only the assessment on hospitals, which currently stands at 1.83 percent of their in-patient revenues. The tax now generates approximately $40 million, which is used to leverage another $60 million in federal matching funds. Federal law limits state assessments to 6 percent of revenue. Brownback didn’t specify how much of an increase he plans to propose.

The Brownback administration has attempted to negotiate provider tax increases to address budget problems twice before. In May 2015, State Budget Director Shawn Sullivan proposed an increase to help cover what was then a projected budget deficit of $400 million. That effort failed in the face of strong opposition from Kansas hospital administrators who said they only would be willing to discuss an increase if the money was used to fund Medicaid expansion.

The administration tried again the final weeks of the 2016 session. When those negotiations also failed to produce an agreement, Brownback said he had no choice but to order reductions in reimbursements paid to hospitals, nursing homes, doctors, pharmacists and mental health providers.

Tom Bell, president and chief executive of the Kansas Hospital Association, said his board seriously considered the proposal but rejected it because of Brownback’s refusal to consider KanCare expansion.

“Our board felt that at a time when we have seen one hospital close and others reducing services and staff it was inappropriate and unfair to balance the (state) budget on the backs of those providers and the people they serve,” Bell said, referring to the 2015 closure of Mercy Hospital in Independence in part because of the state’s rejection of Medicaid expansion.

A 2014 study commissioned by the hospital association found that expanding KanCare to cover more low-income adults would generate an additional $2.2 billion in federal funding, more than enough to cover the state’s share of the cost of expansion for the first five years.

A series of victories by moderate Republicans in the recent primary election have Medicaid expansion advocates hopeful they can get a plan through the Legislature and to Brownback’s desk.

Kansas is one of 19 states that have not expanded eligibility for Medicaid, according to the Kaiser Family Foundation. The state’s rejection of expansion has so far cost the state more than $1.3 billion, according to the KHA.

Rep. Dan Hawkins, the Wichita Republican who chairs the House Health and Human Services Committee, doesn’t support KanCare expansion but has made restoring the cuts to reimbursement rates a top priority.

“My first job when I come back will be to roll back those provider cuts,” Hawkins said. “We have to.”

But Hawkins disagrees with Brownback on how to do it. He’s focused instead on two alternatives to Brownback’s proposal:

Brownback is opposed to rolling back any portion of the tax cuts because he believes they are spurring small-business growth. But Hawkins said he thinks the business exemption is “fair game.”

“If we can get that (repeal) passed, that’s money we could also put toward this problem,” he said. 

The nonprofit KHI News Service is an editorially independent initiative of the Kansas Health Institute and a partner in the Heartland Health Monitor reporting collaboration. All stories and photos may be republished at no cost with proper attribution and a link back to when a story is reposted online.

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