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Issues & Research » Health » Health Provider and Industry State Fees and Taxes
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Health Care Provider, Industry and Tobacco Taxes and Fees
Updated: August 15; reposted November 16, 2009
Both state tobacco taxes and state provider taxes generate billions of dollars in revenue each year. In almost all states, the policy decisions tied to these two taxes affect health policy as well as fiscal policy. In particular, the rate of taxation and the allocation or earmarking of the revenue can have far-reaching impacts on state health programs. Many recent legislative proposals for coverage expansion or reforms may rely on or reference use of these taxes. The information below integrates fiscal statutes and revenue figures with health program information to assist state policymakers understand and evaluate both areas.
In general, a "provider tax,” sometimes termed a "fee" or "assessment," is a state law that authorizes collecting revenue from specified categories of providers. In most states it is used as a mechanism to generate new in-state funds and match them with federal funds so that the state gets additional federal Medicaid dollars. In a majority of cases, the cost of the tax is promised back to providers through an increase in the Medicaid reimbursement rate. Beyond Medicaid, states have the policy option to tax most types of providers and services, including health care, and to designate or earmark the revenue for any state purpose.
Under federal law and regulations, a state’s ability to use provider-specific taxes to fund their state share of Medicaid expenditures is limited. Those taxes cannot generally exceed 25% of the state (or non-federal) share of Medicaid expenditures, and the state cannot provide a guarantee to the providers that the taxes will be returned to them. Despite these federal limitations, many states are now using or considering use of provider taxes, sometimes to supplement static or declining provider reimbursement rates. In part this is because of a federal "safe harbor" — if the taxes returned to a provider are less than 6% of the provider’s revenues, the prohibition on guaranteeing the return of tax funds is not violated. (1a) As a result, a state can impose a provider tax of 6% of revenues (5.5% of revenues as of January 2008 through September 2011), return those revenues directly back to those providers in the form of a Medicaid ‘payment’ and receive a federal match for those amounts. (1b)
For both FY 2009 and FY 2010, 44 states and DC had at least one Medicaid provider tax. (1c) By comparison 41 state used these in FY 2006 and 43 states and DC by the end of FY 2007. (2)(3)
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In 2007 and 2008, NCSL's Fiscal Affairs staff released survey results that provide a helpful snapshot of changes in tax and fees related to health care. For 2007 four states—Indiana, Oregon and Rhode Island—increased health care provider and industry taxes by amounts ranging from $97 million to $109 million. New Hampshire and West Virginia reduced similar taxes, each by less than $2 million. The net increase across the 45 states surveyed was $305.4 million. For FY 2008, Rhode Island is eliminating its ICF/MR-DD tax and Washington is discontinuing its nursing facility tax. West Virginia cut provider taxes by $1.9 million.
 LATEST NEWS:
For 2009 sessions, several states, including Arkansas,Colorado, Iowa, Oregon and West Virginia enacted legislation to establish or expand provider taxes and fees.
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Eight states face a federal change in Oct. 2009: California, Georgia, Kentucky, Michigan, Missouri, Ohio, Oregon, and Pennsylvania. See: NASMD letter to Chairman Baucus re: extension of Managed Care Organization provider tax [6/16/09]
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Colorado became the first state in 2009 to create a new provider fee when HB 1293 was signed into law on April 21. The money collected from each hospital will be pooled and used to draw down matching funds from the federal Medicaid program. The resulting money — as much as $1.2 billion, by some projections — will be used to expand health coverage for the state’s uninsured. [Point - Counterpoint news articcle-2009]
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Arkansas: A tax on Arkansas hospitals will "bring an estimated $105 million in new revenue to the state annually by drawing in more federal matching money for Medicaid." Under Senate Bill 582 (Signed into law as Act 562, 3/25/09), the Arkansas Department of Human Services would collect an "assessment fee" of up to 1 percent of some hospitals' annual net patient revenue. The state would use the fees to increase its federal match for Medicaid and then divide the matching funds it gets back out to Arkansas hospitals based on how many Medicaid patients they treat. NWA News article 3/8/09.
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Oregon passed a new provider tax that will bring in $700 million and is intended extend health insurance to "nearly all of Oregon’s uninsured children and add an additional 35,000 uninsured adults to the Oregon Health Plan." More
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Iowa enacted an amendment to the terms and conditions of the IowaCare waiver to eliminate the provision in which the state agrees to refrain from imposing any provider tax during the pendency of the demonstration waiver for IowaCare. No actual tax was created by the law.
S 476 signed 5/26/09.
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West Virginia amended an annual broad-based health care-related tax on providers of physicians' services; expanding the definition of physicians' services to mean those services furnished by a physician within the scope of the practice of medicine or osteopathy,whether furnished in the physician's office, the recipient's home, a hospital, a skilled nursing facility or any other location. S 724 was signed into law as Chapter 215 of 2009 on 6/9/09.
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Michigan House speaker: Doctor tax may stall in Senate - Specter of Medicaid cuts not swaying votes. News Article, Crains Business, 10/19/09
In 2007-08 the Centers for Medicare and Medicaid Services (CMS) promulgated multiple rules which could have potentially adversely affected state Medicaid programs. The rules which have prompted congressional legislative activity as well as litigation by several states include Health Care-Related Taxes (originally scheduled to be effective April 22, 2008). In April 2008 a major change in federal interpretation and requirements delayed the change in the state provider taxes for Medicaid. As of mid-2009, the final rule on provider taxes and related Medicaid issues extended the moratorium until June 30, 2010.
As background see:
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NCSL Federal Alert: NCSL has supported a delay of several Medicaid rules promulgated by the Center for Medicare and Medicaid Services (CMS) over the last couple of years which would affect intergovernmental transfers and select services and benefits within state Medicaid programs. The Administration has been asked several times the impact of implementing two Medicaid rules when an existing moratorium expires May 25, 2008. --
Cost limit for Providers Operated by Units of Government and Provisions to Ensure the Integrity of Federal-State Financial Partnership -- CMS 2259-FC -- final rule with comment period, published on May 29, 2007.
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On May 23 United States District Court for the District of Columbia, Judge James Robertson, granted a motion for summary judgment to Alameda County Medical Center, the National Association of Public Hospitals and Systems, the American Hospital Association, and the Association of Medical Colleges in their action against Secretary Leavitt, Secretary, DHHS and Kerry Weems, Acting Administrator, CMS regarding the final rule issued on May 29, 2007 regarding "Cost Limit for Providers Operated by Units of Government and Provisions to Ensure the Integrity of the Federal-State Financial Partnership." This rule would have placed additional restrictions on how states can use money from units of local government (intergovernmental transfers) toward the state contribution of the Medicaid match. The judges action vacates the rule.
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On May 22 the Senate approved an amendment, 75 yeas to 22 nays, to the Iraq Supplemental containing a number of domestic spending provisions including the moratorium on the seven Medicaid regulations and the August 17th Directive related to SCHIP.
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Secretary Leavitt made the following statement May 21, 2008 concerning two of these rules: “I reiterate the Administration’s willingness to work with Congress and Governors to discuss their concerns before the rules go into effect,” Secretary Leavitt said. “We will voluntarily refrain from making these rules effective until August 1, 2008, more than 60 days after the moratorium expires. I invite interested parties to sit down with me and my staff in the coming weeks to ensure that we meet our mutual commitments to protect health care for low-income individuals.” NCSL staff is making every effort to keep you informed on the activities surrounding these rules. We post updated information on these actions on the Health Policy-Federal Issues webpage. Legislators and staff with questions please contact Rachel Morgan or Joy Wilson at NCSL's DC office. (5/22/08) Countdown to Medicaid Rule Update on May 25, 2008.
“Can a Sales Tax on Medical Services Help Fund State Coverage Expansions?” This brief encourages states to consider a medical sales tax—or provider tax—as one financing mechanism for expanding coverage. Because provider tax revenue grows with medical spending, it is more stable and less susceptible to changes in the business cycle. In addition, it is less likely to decrease demand for services than other sales taxes might, and it has the potential to recapture savings from uncompensated care that are no longer being provided in a more comprehensive coverage environment. By Health Management Associates for Academy Health/State Coverage Initiatives 7/08. [8 pages  ]
Health Provider and Health Industry Fees & Taxes (2007 net increase: $307.4 million)
Four states increased health-related taxes in 2007, and two cut them. (3)
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These are some specific examples of changes from 2005-2007:
- Indiana legislation (SB 169 of 2006; effective 7/1/06) extends an expiring levy upon nursing facilities’ non-Medicare total annual patient days. The extension of the $10 per non-Medicare patient day Quality Assessment is estimated to result in total additional payments to nursing facilities of approximately $215.8 million. The extension of the authority would authorize an estimated total annual collection of $102.5 million for FY 2007.
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Maryland is implementing a new nursing facility tax for FY 2008.
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Massachusetts established a new tax on intermediate care facilities for the developmentally disabled (ICF/MR-DD) in FY 2007.
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Oregon legislation extends existing levies, in this case on long-term care providers and hospitals, to raise $109.4 million from hospital and long-term care providers.
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Rhode Island’s FY 2007 increase is due largely to hospital licensing fees.
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South Dakota created a new ICF/MR-DD tax for FY 2008.
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District of Columbia created a tax on nursing facilities effective FY 2007.
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Health Reform and Provider Taxes
Three states that have recently enacted comprehensive health reforms and coverage expansions each rely on use of provider taxes or assessments to help fund the purchase of insurance coverage and health services.
Maine's Dirigo Health reform law counts on Medicaid funding and enrollment as an element to the overall plan. The legislature increased its hospital tax from 0.74% to 2.23% of net operating revenue in 2004.
[law details]
Massachusetts' 2006 universal health reform enhances outreach and enrollment for Medicaid eligibles by providing support to community-based agencies. An additional $80 million is provided to increase Medicaid hospital rates, while keeping within the budget neutrality limits of federal financing under the new Medicaid waiver. The provider tax, matched by federal funds, makes these arrangements work. [law details]
Vermont's Catamount Health, includes projected new Medicaid enrollment, an increase in provider reimbursement rates as well as a separate increase in the tobacco tax in 2006 and 2008. [law details]
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State Provider Taxes and Medicaid
The data below is summarized from three sources.
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The Health Management Associates (HMA) Medicaid Budget Survey as reported October 2006, 2007 and 2009. The latest report shows 26 states taxing hospitals, 11 states taxing managed care organizations, 31 states/district taxing Intermediate Care Facilities/Mental Retardation-DD, 37 states/district taxing nursing homes, 4 taxing pharmacies and 2 taxing Residential care and day rehabilitation providers.
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A separate compilation by Commerce Clearinghouse (CCH) in 2005, noted as "**" below, includes additional taxes or fees not reported by Medicaid agencies.
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NCSL survey, State Budget & Tax Actions 2007: Preliminary Report and additional statutory research, especially focused on recent laws and changes, 2005-2007.
Notes: Many laws imposing an annual tax or fee provide formulas for prorated payments as well as exemption for designated public or private providers; these details are not listed in this table. "FFP" means "Federal Financial Participation" or Medicaid federal matching funds granted to the state. The match rates vary by state according to 1) relative wealth or poverty of the state and 2) the aspect of the Medicaid program being funded. About half the states receive a 50% FFP while the least well-off state receives 76.29% (Mississippi) for FY 2008. All SCHIP Medicaid expenditures (for children) receive an "enhanced" match rate. See Medicaid FMAP Table for FY 2008 and FY 2009.
The code "M" below indicates taxes or fees that are used to obtain Medicaid Federal Financial Participation (FFP) or matching funds.
STATE
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Tax applies to: |
M/ |
Notes and Comments
"M" = used for Medicaid matching funds |
| AL |
Nursing Home
Pharmacy
Hospitals
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M |
Privilege tax of $1,900 per bed; capped at 6% of gross revenue (Ala Code Sec. 40-26B-21, by Act 2004-532).
Tax is valid only if allowed for FFP under federal Medicaid.
Hospitals were added for FY 2010.
Provider tax revenue was $58 million in FY 2006, $58 million in FY 2007 and $59 million in FY 2008.6 |
| AZ |
Managed Care Org. |
M |
2% of net premiums, for hospital and medical service corporations, health care service organizations, health care providers of Medicaid services. |
| AR |
Nursing Home
Intermediate Care Nursing
Hospitals
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M
M
M
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Quality assurance fee of 6% of the aggregate annual Arkansas gross receipts (Act 635, §2 (H.B. 1274), Laws of 2001).
Establishes a provider fee for intermediate care facilities for individuals with developmental disabilities added for FY 2010 (Act 433 of 2009)
"assessment fee" of up to 1 percent of some hospitals' annual net patient revenue added for FY 2010. (Act 562 of 2009)
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| CA |
Managed Care Org.
ICF/MR-DD
Nursing Home |
M |
New for 2006; will be dropped for FY 2010.
Quality assurance fee up to 6% of gross revenue on skilled nursing facilities (CA Health and Safety §1324.21, signed as Law chapter 875 (AB 1629), Sept. 2004)
New for 2006 |
| CO |
ICF/MR-DD
Hospitals (2009 law) |
M
M |
Service fee up to 5% of the costs incurred by each intermediate care facility, effective 2003-04. (Co. Rev. Stat. 25.5-6-204(c)). Fee is valid only if allowed for FFP under federal Medicaid.
HB 1293: Most hospitals in the state will be assessed a fee. Fee amount has yet to be determined, by a 13-member oversight committee. CMS approval is pending. (Signed as Chapter 152 of 2009) [update 5/28/09] |
| CT |
Nursing Home |
M |
"Resident day user fee" on nursing homes of 6% on each Medicaid nursing home bed. (CT Sec. 17b-321, enacted as P.A. 05-251, effective for 2006. Fee amount is subject to federal Medicaid waiver approval. |
| DC |
Nursing Home
ICF/MR-DD |
M
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Assessment on nursing homes of $3,600 per licensed bed annually; may be increased up to 6% of net resident revenue (Sec. 47-1263, signed as Law 15-205).
ICF/MR-DD: 1.5% per annum of gross revenue. (Sec. 47-1273, signed as D.C. Law 16-68, March 2006, effective for FY 2008)
Hospital assessment of 0.45% of net patient services revenue. (Sec. 47-1242- Repealed by Law 15-205) |
| FL |
Hospitals
other health providers (**)
ICF/MR-DD
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M |
Hospitals are assessed 1.5% of the annual net operating revenues; funds administerd by the "Public Medical Assistance Trust Fund." (§ 395.701, F.S. amended by Chapter 2007-230.)
Other health care entities (including clinical labs, ambulatory surgical centers, diagnostic imaging) are assessed 1% of annual net operating revenues (§ 395.7015, F.S.). This revenue is used for administrative expenses, not matching funds..
ICF/MR-DD were added, effective FY 2010.
IGT payments were phased out as of June 2006, based on an 1115 waiver approved by CMS 10/19/05. The waiver affects Broward and Duval counties initially and will be statewide by 2010. See note 4 below.
For fiscal 2007-08, provider assessments revenue was $416 million, cigarette taxes was $112 million, tobacco settlement funds of $83 million.6 |
| GA |
Managed Care Org.
Nursing Home |
M |
New for 2006; is being dropped for FY 2010
Reduced for 2006 |
| ID |
Hospitals
|
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| IL |
Hospitals
ICF/MR-DD
Nursing Home |
M |
. |
| IN |
ICF/MR-DD
Nursing Home |
M |
New for 2006 |
| IA |
ICF/MR-DD |
M |
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| KS |
Hospital
Managed Care Org.
|
M |
Annual assessment on hospital inpatient services of 1.83% of net inpatient operating revenue.
Assessment fee of 5.9% of non-Medicare premiums collected by HMO. All assessments are valid only if allowed for FFP under federal Medicaid. (Ch. 89 (HB 2912), Laws of 2004). |
| KY |
Hospital
Health Provider (**); Managed Care Org.
ICF/MR-DD
Nursing Home
Home Health Care
|
M
M |
Hospital Services Tax of 2.5% on gross revenues (KRS Sec. 142.303, as amended by Ch. 9, Laws of 2007).
Health Care Provider Tax of 2% on gross revenues of licensed home-health-care services and HMO services. (KRS Sec. 142.307 as amended by Ch.. 73, Laws of 2005).
Intermediate Facility Services Assessment of 5.5% on the gross revenues (eff. 7/1/04) (KRS Sec. 142.363-1)
Nursing Facility Services Assessment of 2% of gross revenues for non-Medicare patients, with variations. (KRS Sec. 142.361, as created by Ch. 142, Laws 2004).
Note: A Pharmacy Tax of 15¢ per prescription ended in 1999. (see KRS Sec. 142.311).
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| LA |
ICF/MR-DD
Nursing Home
Pharmacy
Medical transportation providers
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M |
"Health Care Providers’ Medicaid Fees": $30 per occupied bed per day for intermediate care facilities.
$10 per occupied bed per day for nursing facilities.
10¢ per out-patient prescription.
$7.50 per medical service trip for medical transportation providers (Sec. 46:2625, La R.S.)
All fees are valid only if allowed for FFP under federal Medicaid. Revenue increased for 2006
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| ME |
Hospital
ICF/MR-DD
Private non-medical institutions (PNMI)
Residential Care & Day Hab. |
M |
"Health Care Provider Tax:" Hospitals subject to 2.23% tax of net operating revenue (increased from 0.74% for 2003) (36 M.R.S.A. Sec. 2892 as enacted by Act 513 (H.B. 1351), Laws of 2004)
Nursing homes tax is 6% of annual net operating revenue.
Residential treatment facilities is 6% of annual gross patient services revenue (36 M.R.S.A. Sec. 2872, as amended by Act 467 (S.B. 424), Laws of 2003)
All taxes are valid only if allowed for FFP under federal Medicaid. (Sec. HH-6, Ch.673, 2004)
New revenue for 2006
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| MD |
Nursing Home
Managed Care Org. |
M |
Nursing homes added for FY 2008. |
| MA |
Hospital
ICF/MR-DD
Nursing Home
|
M
M |
Assessment; payment of expenses for Health Policy office and health safety net office by acute hospitals. (MGL Ch. 118, §5 as amended by Ch. 58 "health reform" law of 2006)
Provider donations from hospitals or health centers.
New for FY 2007. |
| MI |
Hospital
Managed Care Org.
Nursing Home
Community Mental Health |
M |
Increased for 2006
Increased for 2006
Provider tax revenue was $674.0 million for fiscal 2006; $856.0 million for fiscal 2007 and $1,008.0 million for fiscal 2008. 6
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| MN |
Hospital
ICF/MR-DD
Managed Care Org.
Nursing Home |
M |
"MinnesotaCare Tax:" Hospitals, surgical centers, health care providers, and surgical centers wholesale drug distributors pay 2% of estimated tax gross revenues. (Sec. 295.52(4a)).
"Hospital Surcharge" is 1.56% of net patient revenues. (Sec. 256.9657).
HMO and Integrated Network surcharge is 0.6% of total premium revenues.
"Nursing Home License Surcharge:" Licensed non-state-operated nursing homes pay an annual surcharge of $2,815 per licensed bed. (Increased from $625 in 2002 & 2003.) (Sec. 256.9657). |
| MS |
Hospital
ICF/MR-DD
Nursing Home
Psychiatric Residential Treatment Facilities |
M |
Increased for 2006
Nursing home & ICF/MR-DD assessment, not to exceed $2 per patient bed per day. (Miss. Code Sec. 43-13-145, as amended by ch. 470, Laws of 2005) |
| MO |
Hospital
Managed Care Org.
Nursing Home
Pharmacy |
M |
Increased for 2006
New for 2006
"Nursing facility reimbursement allowance" for the privilege of engaging in the business of providing nursing facility services. Amount is set by regulations (Sec. 198.401; Sec. 198-409) |
| MT |
Hospital
ICF/MR-DD
Nursing Home |
M
M
M |
Increased for 2006
FY 2007 set at 6% of revenue (15-67-102, MCA)FY 2007 it was increased to $8.30 /bed day (15-60-102, MCA).
| MT Report on provider facilities fees -2009 budget
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| NE |
ICF/MR-DD |
M |
In effect 2007-2008 |
| NV |
Nursing Home |
M |
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| NJ |
ICF/MR-DD
Managed Care Org.
Nursing Home |
M |
Increased for 2006 |
| NM |
Managed Care Org. |
M |
NM has a broad-based "gross receipts sales tax"; in 2004 the state exempted all managed care providers from this sales tax [see explanation 4A]
Discontinued ICF/MR-DD in 2006; Discontinued Nursing Home in 2006 |
| NY |
Hospital
ICF/MR-DD
Nursing Home |
M |
New for 2006 |
| NC |
ICF/MR-DD
Nursing Home
Managed Care Org. (***) |
M
M
-- |
HMO taxes measured by 1.9% of gross premiums. (NC § 105-228.5, effective 1/1/07) |
| ND |
ICF/MR-DD |
M |
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| OH |
Hospital
Managed Care Org.
ICF/MR-DD;
Nursing Home |
M |
Hospitals assessment on total facility costs not to exceed 2%, determined annually. (Ohio Rev. Code Sec. 5112.01 et seq.).
New for 2006
Nursing home and hospital bed annual franchise permit fee at $1.25 per day per bed. (Ohio Rev. Code Sec. 3721.51 as increased from $1 by HB 199 of 2007).
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| OK |
Nursing Home |
M |
|
| OR |
Hospital
Managed Care Org.
Nursing Home |
M |
Increased for 2007
Increased for 2007 |
| PA |
Managed Care Org.
ICF/MR-DD
Nursing Home |
M |
|
| RI |
Hospital
ICF/MR-DD
Nursing Home |
M |
Health Care Provider Assessments: Hospital licensing fee of of 3.14% for 2003. (RI Gen Laws Sec. 23-17-38.1)
Residential facility for mentally retarded rate of 25% of the gross patient revenue. (RI Gen Laws Sec. 44-50-3)
Nursing facilities rate of 6% fee gross patient revenue Increased for 2006 (RI Gen Laws Sec. 44-51-3)
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| SC |
Hospital
ICF/MR-DD |
M |
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| SD |
ICF/MR-DD |
M |
New for FY 2008 |
| TN |
Managed Care Org.
ICF/MR-DD
Nursing Home |
M |
Premium tax
Nursing home tax, uniformly applied at the rate of $2,225 per licensed bed, effective 2003-08. (Tenn. Sec. 68-11-216; will sunset 6/30/2009).
Premium tax revenue for fiscal 2008 totaled $64 million. Nursing Home Tax revenue for fiscal 2008 totaled $85 million. 6 |
| TX |
ICF/MR-DD
Managed Care Org. |
M |
|
| UT |
ICF/MR-DD
Nursing Home |
M |
New for 2006 |
| VT |
Hospital
ICF/MR-DD
Nursing Home
Pharmacy
Residential Care & Day Hab. |
M |
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| WA |
Nursing Home |
M |
Nursing Home Quality Maintenance Fee is $6.50 per patient day. The fee is valid only if allowed for FFP under federal Medicaid. (Ch. 16 (S.B. 5341), 1st Sp. Sess., Laws of 2003).
Revenue reported as reduced for 2006 & 2007. The tax was scheduled to terminate in FY 2008. |
| WV |
Hospital
ICF/MR-DD
Emergency Ambulance
Independent Lab/X-ray
Practitioner; physicians |
M |
Inpatient and outpatient hospital services are taxed at 2.5%. (W.Va. Code Sec. 11-27-9; §11-27-15)
Nursing facility services, increased from 5.5% to 5.95% of gross receipts in 2005.
Emergency ambulance service providers are taxed at the rate of 5.5%. Reduced for 2006 & 2007
Laboratory or x-ray services are taxed at 5%; MD offices are exempt. (W.Va. Code Sec. 11-27-8).
Physicians’ services were taxed at 2% until 2001 but have been reduced annually; for 2007-08 the rate is 0.8% and will be phased out to 0% by 2010. (W.Va. Code Sec. 11-27-36)
> In June 2009 West Virginia amended an annual broad-based health care-related tax on providers of physicians' services; expanding the definition of physicians' services to mean those services furnished by a physician within the scope of the practice of medicine or osteopathy,whether furnished in the physician's office, the recipient's home, a hospital, a skilled nursing facility or any other location. S 724 was signed into law as Chapter 215 of 2009.
> Ambulatory surgical centers, chiropractic (§11-27-5); dental; nursing; opticians & optometric; podiatry; psychological and therapists’ services are taxed at 1.75% of gross receipts. |
| WI |
Hospitals
ICF/MR-DD (**)
Nursing Home |
M |
Hospitals in effect 2007-2008
Intermediate care facility assessment of $445 per month for fiscal year 2004-2005
Nursing home assessment of $75 per month per licensed bed. Increased from $32 in 2003.
(Sec. 50.14, Wis. Stats. as amended by Act 33 (S.B. 44), Laws of 2003). |
| State |
Tax applies to: |
M/ |
Notes and Comments |
NOTES:
(4) FLORIDA was the first state to establish a provider tax program in 1984. Hospitals have been assessed 1.5% of the annual net operating revenues (§ 395.701, F.S.) which are deposited into the Public Medical Assistance Trust Fund (PMATF). As of 2006 the PMATF revenue is used as state match for hospital inpatient services.
(4A) New Mexico State. §7-9-93.A. "Receipts from payments by a managed health care provider or health care insurer for commercial contract services or medicare part C services provided by a health care practitioner that are not otherwise deductible pursuant to another provision of the Gross Receipts and Compensating Tax Act may be deducted from gross receipts, provided that the services are within the scope of practice of the person providing the service. Receipts from fee-for-service payments by a health care insurer may not be deducted from gross receipts."
(5) According to a new federal statute (PL 109-432), from January 1, 2008 through September 30, 2011, the safe harbor provider tax rate that ensures that a state does not violate the indirect guarantee component of the hold harmless provision will be temporarily reduced to 5.5 percent. On October 1, 2011, the cap on tax rates is scheduled to revert back to 6 percent.
(6) Revenue figures were collected in a survey of state budget officials by National Association of State Budget Officers; published December 2008.
Colorado provider tax for 2009: Gov. Ritter Announces Colorado Healthcare Affordability Act, release 2/26/09.
Oregon: Health-provider tax increase - 700 Million dollars are riding on a decision by lawmakers about whether to increase health-provider taxes to pay for expanded medical care. The insurance provider tax ultimately was passed by the Legislature. Rep. Ron Maurer was cited as opposing it, saying, "All those costs will be passed on to the people who pay for it. Ultimately, it’s not going to end up reducing the cost of health care, and will be adding $300 million to the cost.” Articles 6/29/09 & 7/8/09.
Examples of Revenue Raised from Provider Fees and Taxes:
| State |
Revenue Examples (2006 - 2008) 6 |
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AL
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Provider tax revenue was $58 million in FY2006, $58 million in FY 2007 and $59 million in FY 2008. |
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FL
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For fiscal 2005-06 provider assessments revenue was $391 million, cigarette taxes was $115 million, tobacco settlement funds of $83 million.
For fiscal 2006-07, provider assessments revenue was $362 million, cigarette taxes was $113 million, tobacco settlement funds of $83 million.
For fiscal 2007-08, provider assessments revenue was $416 million, cigarette taxes was $112 million, tobacco settlement funds of $83 million.
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MI
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Provider tax revenue was $674.0 million for fiscal 2006; $856.0 million for fiscal 2007 and $1,008.0 million for fiscal 2008.
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| MT |
Health care facility fees are forecast to decline to $16.665 million in FY 2008 and to $16.428 million in FY 2009.
[added 11/09]
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TN
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Premium revenue: fiscal 2006 totaled $71 million, fiscal 2007 totaled $64 million, and fiscal 2008 totaled $64 million.
Certified Public Expenditures—Local fund from Hospitals: fiscal 2006 totaled $251 million, fiscal 2007 totaled $416 million, and fiscal 2008 totaled $265 million.
Nursing Home Tax: fiscal 2006 totaled $85 million, fiscal 2007 totaled $85 million, and fiscal 2008 totaled $85 million.
ICF/MR 6 percent Gross Receipts Tax: fiscal 2006 totals $16 million, fiscal 2007 totals $16 million, and fiscal 2008 totals $15 million.
Intergovernmental Transfers: fiscal 2006 totals $0 million, fiscal 2007 totals $0 million, and fiscal 2008 totals $0 million.
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RI
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For FY 2009, the Health Care Provider Assessment was estimated as $49.0 million; actual collections were $35.2 million as of 3/31/09.
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State Tobacco Taxes for 2007-2008
(Includes net increases of just over $1 billion for 2007)
State tobacco excise taxes have been a central feature in some states' health policy and planning. While all 50 states apply some tax to cigarettes, cigars, chewing tobacco and related products, the goals, the rates and the designated uses vary widely. According to NCSL's Fiscal Program, tobacco taxes were increased more than any other kind of tax in 2007. In 2007, State tobacco tax collections for 2007 were $15,262,111,000 in the 50 states (not counting DC or local government).
A 2008 summary by one national group showed that 43 states and DC have enacted "76 distinct tobacco tax increases, raising the average state tax to $1.13 from 61 cents in 2002."6 An industry analysis calculated that in 2008 state taxes generated $14.5 billion in revenue, in addition to the $7.3 billion in federal revenue from the 39 cents federal excise tax.7
Such taxes may or may not be designated for prevention, health or health financing, but are listed here because of broad interest in the topic. For those states that designated use for tobacco control, increases tend to decrease tobacco consumption, at least initially and especially among young people, who are a common target for state anti-smoking educational campaigns. Eleven states increased tobacco taxes and one state will slightly reduce its collections from them.
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Delaware increased its cigarette tax by 65 cents per pack to $1.15 per pack for $48.5 million.
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Indiana enacted (HB 1678 of 2007) a cigarette tax increase by 44 cents to a new rate of 99.5 cents per pack to fund the "Indiana Check-Up Plan," including a 50% small business wellness program tax credit aimed at 103,000 businesses employing 815,000 workers and various health related expenses and other tobacco tax changes. The bill will increase cigarette tax collections by an estimated $187.2 M in FY 2008 and $206.5 M in FY 2009.
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Iowa (SF 128) raised cigarette taxes by $1.00, to a total of $1.36 per pack effective March 15, 2007, to produce $133 million in new revenue. In March 2008 state revenue officials reported that cigarette sales had dropped by 36 percent.
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Louisiana extended a wholesaler discount that will reduce its tobacco tax collections by $730,000.
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Maryland approved a $1 per-pack tax increase that raised $98 million.
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New Hampshire raised $47 million through a $0.28 per-pack increase.
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New York (S 6807, Part MM-1 & A 9807) approved increase from $1.50 per pack, adding $1.25 per pack, making it the highest in the nation at $2.75 per-pack. The State budget office said the tax would raise $265 million annually. Much of the revenue would be used for health programs including those to help smokers quit and keep youths from starting. (Signed into law as Chapter 57, 4/19/08)
> New York Tobacco Tax Increase Encourages Smokers to Quit - Robert Wood Johnson article, fron AP, 6/15/08
> "NYC smokers take a tax hike. As cigarettes in the city hit $10 a pack with a new tax, more could feel inspired to quit" Chicago Tribune, 7/16/08
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Oklahoma Department of Health officials reported that the state tobacco tax increase has helped to reduce cigarette consumption, the Associated Press reports. Under the 2005 law, cigarette taxes include a $1.03 tax stamp for nontribal stores, an 86-cent stamp for tribal stores and a 6-cent stamp for stores bordering states with lower taxes. Although the number of cigarette tax stamps sold has decreased 13 percent since fiscal year 2004, the revenue from those stamps, which fund state-sponsored health programs, has increased 242 percent.
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Oregon voters rejected a proposed tobacco tax increase to pay for children's health care.
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South Dakota increased tobacco taxes by $40 million.
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Tennessee tripled its tax on cigarettes to produce $239 million in new revenue for FY 2008.
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Vermont (H861, signed as Act 191 of 2006) increased the cigarette tax by 60 cents on July 1, 2006 and an additional 20 cents on July 1, 2008; taxes “little cigars” and roll-your-own tobacco as cigarettes and changes method of taxing moist snuff to a per-ounce basis and increases tax on July 1, 2008 by 17 cents. The funds were earmarked primarily for the Catamount and Healthy Vermonters reform plan
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Wisconsin added $1 to its per-pack tax to raise $152.5 million.
2008 Tobacco Tax Legislation
In 2008 legislative sessions, at least 20 other states have proposals to increase tobacco taxes or cigarette taxes, including:
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Alabama (HB 361) Would increase from $.26 to $0.75 per pack. (Assigned to Government Appropriations Committee 2/7/08).
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California (AB 1a, AB x7) proposed a $1.50 per pack increase to fund universal health reform. (Did not pass the Senate in January 2008.)
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District of Columbia (B 700) Would increase by $1.00 to $2.00 total. (No further action recorded after public hearing held in May 2008)
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Florida (S 2790; H 299) S 2790 would increase by $1.00 per pack. (Pending in Senate, 4/17/2008); House would increase by $0.661 per pack.
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Georgia (H 1197, H 1264) Would increase from 37 cents to $1.37 per pack. (Did not pass)
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Illinois (S 2545). Would increase by $0.90 (Pending in committee 4/18/08)
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Kansas (H 2737 & S 542) would increase by $0.50; 4 cent increases in later years earmarked for health reform 7/1/08. (Held in committee 4/08)
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Kentucky (H 443) Would increase by $0.40 up to $0.70. (Did not pass)
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Maine. (H.790; H 1608) Would increase by $0.50 to $2.50 per pack. (Did not pass)
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Massachusetts. (S 2526, H 2685, H 4645, H 4672, H4899) would increase tax by $1.00 effective 7/1/08, with new revenues dedicated to the state's health care reform laws. (Passed House and Senate; 07/01/08; Signed by the Governor as Chapter 168 of the Acts of 2008 7/1/08, effective immediately)
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Minnesota (H 3390, H 3391) Would increase by $0.25 to $1.74 per pack. (Tobacco tax deleted & did not pass in committee 3/3/08)
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Mississippi (H 209, HB 1564, SB 2439) (Did not pass).
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Nebraska (L 1149) Would increase by $0.10 to $0.74 per pack. (Withdrawn; did not pass 2/21/08)
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New York (S 6807, Part MM-1 & A 9807) an increase by $1.25 from $1.50 per pack, making it the highest in the nation at $2.75 per-pack. The State budget office said the tax would raise $265 million annually. Much of the revenue would be used for health programs including those to help smokers quit and keep youths from starting. (Passed Senate and Assembly 4/9/08; signed into law as Chapter 57, 4/19/08))
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Pennsylvania.
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North Carolina (H 1026, H 1565, H 2034, etc.) Would increase tax various amounts from $0.05 to $0.40. (Held in committees)
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Rhode Island (S 2461, S 2860) Would increase tax by $0.14 to $2.60 per pack. (in committee 4/22/08)
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South Carolina (H 3567 & S 975) Would increase by $0.10 or $0.43. (H 3438) Would increase by $1.00, to $1.07 per pack (in commmittees). A final bill passed House and Senate to raise tax by $0.50; it was vetoed and sustained 5/27/08)
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Utah. (H 355, H 356) Would increase by $0.50. (Did not pass 3/5/08)
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West Virginia (H 3123, S 181 would increase to $1.35. (Did not pass).
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Wyoming (HB 41) Would increase wholesale tax, for a $1.023 million annual revenue increase. (Did not pass)
OTHER APPROACHES:
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Arizona: In March the legislature passed a change in the appropriation to the Arizona Health Care Cost Containment System (AHCCCS) in fiscal year 2007-2008 reducing it "by $3,547,600 from the tobacco products tax fund - emergency health services account to account for a shortfall in tobacco tax revenues. " It was vetoed by the Govenor on 3//11/08.
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Virginia proposed allowing local counties to tax cigarettes up to $.05. (This did not pass in 2008; in may be reconsidered in 2009)
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Taxing smokeless tobacco and snuff products are proposed in a number of additional states, for example, Florida (H 681 & S 2328), Mississippi (HB 1630) and Washington (S 6092).
NCSL 2009 map and chart of Cigarette Taxes in the 50 states (online link) -
State Legislated Actions on Tobacco Issues: 2007 Foundation-Supported Report by the American Lung Association Shows More States Took Strong Action Against Tobacco During the Year. Now in its 20th year, the annual update of State Legislated Actions on Tobacco Issues—SLATI, for short—showed an increasing number of states taking strong action against tobacco during the year. Published 4/28/08. [334 pages, PDF]
Cigarette taxes sorted by amount and state name, compiled by the American Lung Association, updated 3/18/2008. [2 pages] .
Addicted to Tobacco Taxes - Op-Ed article in Dallas Morning News, 9/7/08.
The Cigarette Tax Increase to Finance SCHIP: CRS Report to Congress - Related to Congressional reauthorization of SCHIP, 6/07, posted by NCSL Federal Affairs staff.
Tobacco Tax Notes:
6 - New York Times. "States Look to Tobacco Tax to Fill Their Budget Holes." April 21, 2008. 2002-2007 changes reported by the Campaign for Tobacco Free Kids.
7 - R.J. Reynolds Tobacco Company as reported by the New York Times, April 21, 2008.
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SOURCES: State Budget & Tax Actions 2007: Preliminary Report Special Fiscal Report by Corina Eckl and Ron Snell, NCSL Fiscal Affairs Program; NCSL Health Program research of state statutes, 2007; Commerce Clearinghouse (c) 2005.
Other Resources:
METHODOLOGY: The 2007 NCSL survey covers fiscal years (FY) 20071 and 2008. In most states, FY 2007 budget data are based on estimates and FY 2008 budget and tax data are based on projections. Forty-five states provided overall budget information for this survey. California, Illinois, Michigan, North Carolina and Wisconsin had not completed their budgets by the time this report was written in late July of 2007.
APPENDIX: Code of Federal Regulations -
Sec. 433.68 Permissible health care-related taxes after the transition period.
(a) General rule. Beginning on the day after a State's transition period, as defined in Sec. 433.58(b), ends, a State may receive health care-related taxes, without a reduction in FFP, only in accordance with the requirements of this section.
(b) Permissible health care-related taxes. Subject to the limitations specified in Sec. 433.70, a State may receive, without a reduction in FFP, health care-related taxes if all of the following are met:
(1) The taxes are broad based, as specified in paragraph (c) of this section;
(2) The taxes are uniformly imposed throughout a jurisdiction, as specified in paragraph (d) of this section; and
(3) The tax program does not violate the hold harmless provisions specified in paragraph (f) of this section.
(c) Broad based health care-related taxes. (1) A health care-related tax will be considered to be broad based if the tax is imposed on at least all health care items or services in the class or providers of such items or services furnished by all non-Federal, non-public providers in the State, and is imposed uniformly, as specified in paragraph (d) of this section.
(2) If a health care-related tax is imposed by a unit of local government, the tax must extend to all items or services or providers (or to all providers in a class) in the area over which the unit of government has jurisdiction.
(3) A State may request a waiver from CMS of the requirement that a tax program be broad based, in accordance with the procedures specified in Sec. 433.72. Waivers from the uniform and broad-based requirements will automatically be granted in cases of variations in licensing and certification fees for providers if the amount of such fees is not more than $1,000 annually per provider and the total amount raised by the State from the fees is used in the administration of the licensing or certification program.
(d) Uniformly imposed health care-related taxes. A health care-related tax will be considered to be imposed uniformly even if it excludes Medicaid or Medicare payments (in whole or in part), or both; or, in the case of a health care-related tax based on revenues or receipts with respect to a class of items or services (or providers of
items or services), if it excludes either Medicaid or Medicare revenues with respect to a class of items or services, or both. The exclusion of Medicaid revenues must be applied uniformly to all providers being taxed.
(1) A health care-related tax will be considered to be imposed uniformly if it meets any one of the following criteria:
(i) If the tax is a licensing fee or similar tax imposed on a class of health care services (or providers of those health care items or services), the tax is the same amount for every provider furnishing those items or services within the class.
(ii) If the tax is a licensing fee or similar tax imposed on a class of health care items or services (or providers of those items or services) on the basis of the number of beds (licensed or otherwise) of the provider, the amount of the tax is the same for each bed of each provider of those items or services in the class.
(iii) If the tax is imposed on provider revenue or receipts with respect to a class of items or services (or providers of those health care items or services), the tax is imposed at a uniform rate for all services (or providers of those items or services) in the class on all the gross revenues or receipts, or on net operating revenues relating to the provision of all items or services in the State, unit, or jurisdiction. Net operating revenue means gross charges of facilities less any deducted amounts for bad debts, charity care, and payer discounts.
(iv) The tax is imposed on items or services on a basis other than those specified in paragraphs (d)(1) (i) through (iii) of this section, e.g., an admission tax, and the State establishes to the satisfaction of the Secretary that the amount of the tax is the same for each provider of such items or services in the class.
(2) A tax imposed with respect to a class of health care items or services will not be considered to be imposed uniformly if it meets either one of the following two criteria:
(i) The tax provides for credits, exclusions, or deductions which have as its purpose, or results in, the return to providers of all, or a portion, of the tax paid, and it results, directly or indirectly, in a tax program in which--
(A) The net impact of the tax and payments is not generally redistributive, as specified in paragraph (e) of this section; and
(B) The amount of the tax is directly correlated to payments under the Medicaid program.
(ii) The tax holds taxpayers harmless for the cost of the tax, as describe in paragraph (f) of this section.
(3) If a tax does not meet the criteria specified in paragraphs (d)(1)(i) through (iv) of this section, but the State establishes that the tax is imposed uniformly in accordance with the procedures for a waiver specified in Sec. 433.72, the tax will be treated as a uniform tax.
(e) Generally redistributive. A tax will be considered to be generally redistributive if it meets the requirements of this paragraph. If the State desires waiver of only the broad-based tax requirement, it must demonstrate compliance with paragraph (e)(1) of this section. If the State desires waiver of the uniform tax requirement, whether or not the tax is broad-based, it must demonstrate compliance with paragraph (e)(2) of this section.
[et seq. -see full text ]
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