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Health Provider and Industry State Taxes and Fees

Health Provider and Industry State Taxes and Fees

7/10/2014

State provider taxes generate billions of dollars in revenue each year. In almost all states, the policy decisions tied to these 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 and on overall state budgets.  Many recent legislative proposals for state health  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 in understanding and evaluating both areas.

For FY 2013-2014, the number of states with some type of Medicaid-related provider taxes or fees has increased to 49 states and D.C.  Delaware and Hawaii were the latest additions to this total. The single state not using provider taxes is Alaska.  Also, view 2014 updated federal limitations.
Previous year state changes:  In FY 2012 there were provider taxes or fees in 47 states plus D.C. Wyoming was added while the three states without such taxes in operation that year were: Alaska, Delaware, Hawaii.

For both  FY 2009 and FY 2010, 44 states and DC had at least one Medicaid provider tax, with Virginia added mid-year to bring the total to 45.  By comparison, just 21 states used these in FY 2003; 41 states in FY 2006, and 43 states and DC by the end of FY 2007.3,4  NCSL's Fiscal Affairs staff released survey results in 2009-2013 that provided helpful snapshots of changes in tax and fees related to health care.  These changes are listed in Table 1.

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 paid back to providers through an increase in the Medicaid reimbursement rate for their patient treatment and services.  Beyond Medicaid, states have the policy option to tax most types of providers and services and to designate or earmark the revenue for any state purpose. For example several states used similar taxes to fund a state-run high risk pool.

Under federal law and regulations, a state’s ability to use provider-specific taxes to fund their state share of Medicaid expenditures has limits. 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 aided by a federally-defined "hold harmless" rule — if the taxes returned to a provider are less than 6 percent of the provider’s net patient  revenues, the prohibition on guaranteeing the return of tax funds is not violated.1  As a result, a state may be able to impose a provider tax (up to 5.5% of revenues between January 2008 through September 2011), return some or all of those revenues directly or indirectly back to those providers in the form of a Medicaid ‘payment’ and receive a federal match for those amounts.2B  States can use that revenue to increase payments to providers for services to Medicaid patients but those payments must be consistent with the hold harmless rules at 1903(w) which state that payments can not guarantee repayment of a tax directly or indirectly.  This maximum federally allowable amount increased back to 6 percent of net patient revenues as of October 2011 (for tax periods after 10/1/2011) 2 unless it is altered by Congress in the future.  Note that the actual percentage of federal matching funds (FMAP) varies annually, by state and by Medicaid expenditure category.

For 2012 legislative sessions, at least eight states enacted legislation to establish or change provider taxes and fees.   As of late 2012 this meant a net decrease of $394 million caused by changed laws. A Tennessee enacted measure that extends an earlier tax was projected to bring in an additional $449.8 million in FY 2013.  For details, also see State Tax Actions Database, online at www.ncsl.org/issues-research/budget/state-tax-actions-database.aspx.

  • Alabama increased the temporary Medicaid and nursing facility surcharge over 2 years.  The charge increased to $31.25 per bed until Sept. 20, 2012; starting that date it increases to $4.75 per bed.
  • Arizona enacted a new bed tax of 3.5% on nursing facilities. Revenue will provide state matching funds for some supplemental funding of nursing facilities.
  • Delaware passed new "quality assessment fees" for nursing homes and long-term care providers.  The rate is equal to a maximum of $14 to $16 per non-Medicare resident day prior to June 1, 2013. On June 1, 2013 the maximum rate reduces to $9.35 to $12.00 per non-Medicare resident per day.
  • Louisiana began collecting taxes on certain health care premiums paid to Medicaid-enrolled managed-care organizations.
  • Maine established a temporary 0,39% hospital assessment. This measure was projected to bring in an additional $14.2 million in FY 2013.
  • Vermont modified its hospital provide tax to exclude bad debt from gross revenues.
  • Tennessee extended the hospital assessment fee for another year. This measure was projected to bring in an additional $449.8 million in FY 2013. No change in taxpayer liability.
  • California discontinued the tax on Medi-Cal managed care plans effective July 1, 2012, for a revenue loss of $436 million. The change conformd the state tax law with CMS's ruling that such a tax must apply to all managed care plans, not just those serving Medicaid enrollees.

For 2011 legislative sessions, 15 states enacted legislation and regulations to establish or expand provider taxes and fees.  These new or increases taxes and fees result in more than $1.8 billion, while only one state reduced these taxes, giving this state tax revenue category the second largest increase in 2011.  Some examples --

  • Connecticut expects to generate nearly $400 million by imposing a new tax on hospital net revenue and a new resident day user fee for certain intermediate care facilities. Lawmakers also increased the cap on nursing home resident user fees.
  • Idaho raised assessments on hospitals and nursing homes for three years.
  • Indiana’s 2011 budget, Act No. 1001, created a new 2.7 percent hospital assessment fee. The fee will be paid by Indiana’s approximately 120 hospitals for two years (= an estimated revenue of $200 million a year); the state also raised the health facility quality assessment from 4 percent to 5.5 percent for three years. These two measures are projected to bring in more than $450 million in FY 2012.
  • Maryland’s Fiscal Year 2012 budget creates a hospital provider tax on Maryland’s hospitals. The hospital provider tax is expected to raise an anticipated $280 million in additional revenue; another report noted $315 million for FY 2012.
  • North Carolina Governor Bev Perdue signed SB 32, on March 25, 2011 authorizing the creation of a hospital provider fee. The fee will produce approximately $215 million in revenue
  • Oklahoma Governor Mary Fallin signed into law HB 1381, creating the Supplemental Hospital Offset Payment Program (SHOPP). HB 1381 creates a 2 percent assessment on 77 Oklahoma hospital’s net patient revenues, and is expected to raise $325 million for Fiscal Year 2012.
  • Maine, Nebraska, Ohio, Oregon, Rhode Island, Utah, Vermont, Virginia and West Virginia also raised hospital and health care taxes.

For 2010 sessions, at least ten states enacted legislation to establish, expand or change provider taxes and fees. For 2010, new or expanded health provider or hospital fees or taxes were considered in Arkansas, Michigan, Oklahoma, Vermont, and Washington. The full list is in Table 1 below.

  • Oklahoma Supreme Court rules fee on health insurance plans unconstitutional. On 8/24/2010 the court ruled the measure violated a ban on the passage of revenue bills during the last five days of the legislative session. The court also held that the bill failed to secure three-fourths legislative approval or be submitted to a vote of the people. The measure would have imposed an annual 1 percent fee or tax on payments made by health carriers for health and medical services for Oklahoma residents. The 1 percent would have also applied to the self-insured.  
  • Oregon passed a provider tax that will bring in $700 million and is intended to extend health insurance to "nearly all of Oregon’s uninsured children and add an additional 35,000 uninsured adults to the Oregon Health Plan." 
  • 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.
  • 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.  
  • Michigan House speaker: Doctor tax may stall in Senate - Specter of Medicaid cuts not swaying votes. News Article, Crains Business, 10/19/09

For 2009 sessions, at least nine states, including Arkansas, Colorado, Iowa, Oregon and West Virginia enacted legislation to establish or expand provider taxes and fees.  California, Missouri, Ohio  and Wisconsin also made changes.

  • Eight states faced a federal change regarding managed care taxes  in Oct. 2009: California, Georgia, Kentucky, Michigan, Missouri, Ohio, Oregon, and Pennsylvania. 
  • 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 article-2009]
  • 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.

Variable Federal Matching Funds:  Medicaid has been financed at both the federal and state levels for more than 40 years, with the federal "match rate" varing based on the state’s poverty level and unemployment rate.  In February 2009, the U.S. Congress passed and the President signed the American Recovery and Reinvestment Act of 2009 (ARRA), which included a significant increase (at least 6.2%, and averaging at least 8.7%) in the Medicaid FMAP matching funds rate, providing temporary increases to all 50 states and territories from October 1, 2008 through December 31, 2010, totaling an additional $87 billion in federal funding, giving states an added incentive to tax hospitals and health care providers. This increase meant added revenue from many of the existing Medicaid-related provider taxes, listed below. The end of ARRA funds required budget readjustments in many states. [See FMAP chart online]-posted 2013.

Allowable and unallowable use of provider-related donations.  

July 25, 2014 - The Centers for Medicare & Medicaid Services (CMS) released a State Medicaid Director Letter #14-001. This letter provides states with information regarding the treatment of health care-related taxes (provider taxes) and their effect on Federal matching funding under Medicaid and the Children’s Health Insurance Program (CHIP). The letter, by Director Cindy Mann, states:

      "CMS understands that some states may have continued to tax only Medicaid MCO services by incorporating only Medicaid MCOs into larger (often existing) state and local taxes.  (See, for example, the May 2014 report from the HHS Office of the Inspector General, available at http://oig.hhs.gov/oas/reports/region3/31300201.pdf ) Such taxes could include, but are not limited to, gross receipt taxes, tangible personal property taxes, general use taxes and insurance premium taxes which are otherwise non-health care-related.  For the reasons we explain below, CMS is concerned that such taxes are not consistent with applicable statutory and regulatory requirements because they target Medicaid providers and treat such providers differently for purposes of the tax from other individuals or entities.  We are also concerned because this targeting is directly related to the underlying health care items or services. 

On May 9, 2014 The Centers for Medicare & Medicaid Services (CMS) issued guidance to states regarding fiscal accountability in administering the Medicaid program. This letter provides guidance to states concerning federal statute and regulations related to the use of provider-related donations to fund the non-federal share of Medicaid payments under the state plan. The guidance is available here as general inormation to states; it may have no effect on existing provider taxes and fees detailed in this report.

TABLE 1A & 1B:   State Health Care Provider Tax Changes

2010 Health Care Provider Tax Changes
State FY 2011 Amount (in millions)§ FY 2012 Amount (in millions)§ Description
Alabama $20.9 $20.9

Raised the nursing home bed tax.

Georgia

$229

 N/A

Created a 1.45% hospital provider payment (law signed and effective 5/12/2010)

Idaho $18 $18

Approved the Idaho Hospital Assessment Act, which calls for calls for private hospitals to pay an extra hospital tax for Idaho’s Medicaid program for two years.

Kansas $15.3 $15.3

Created a new assessment on skilled nursing facilities.

Maine $4.2 $15.6

Approved a one-time hospital assessment.

Maine $11.4 N/A

Updated hospital tax base year from 2006 to 2008. 

New Jersey $45.2 $45.2

Lifted the cap on hospital and ambulatory facilities assessments.

Ohio $32.4 $32.4

Raised the tax assessed on hospitals for one year from 1.52 percent to 1.61 percent.

Tennessee $286 $286

Adopted a new hospital assessment fee of 3.52 percent.

Utah $30.9 $30.9

Imposed new assessments on hospitals.

Washington $352 $352

Increased the hospital safety net assessment.

Wisconsin $10.6 $10.6

Created a 1.6 percent assessment on gross inpatient revenues of critical access hospitals.

* SOURCE: NCSL State Tax Update: July 2010 (Preliminary Report)
§ "Fiscal Year (FY) Amount" indicates the net changes or impact in state revenue estimated as a result of the new tax change.  As a result usually it is not a gross tax receipt amount.

2009 Health Care Provider Tax Changes
State FY 2010 Amount (in millions) FY 2011 Amount (in millions) Effective Date Description
Alabama $200 $200 10/1/2009

Establishes a hospital tax.

Arizona $0 $0  

Adds insurance providers to the existing corporate income tax credit for contributions made to school tuition organizations.

Colorado $336.5 $389.8 4/21/2009

Authorizes collection of provider fees from hospitals to obtain federal financial participation for the state's medical assistance programs.

Florida $8 $12.1  

Provides for a quality assessment to be imposed upon privately operated intermediate care facilities for the developmentally disabled.

Indiana $101 $99.9 7/1/2009

Extends the Medicaid health facility quality assessment fee.

Iowa $33 $33 TY 2009

Creates a nursing facility quality assurance fee (requires federal approval before implementation).

Mississippi $60 $60 7/1/2009

Provides a hospital assessment tax.

New Mexico -$11** -$16.1**  

Phases in the hospital gross receipts tax credit (phased in completely in FY 2012, from 2007 session).

New York $124.3 $135.6 4/1/2009

Changes the hospital assessment tax.

  $14.2 $16 4/1/2009

Changes the home care assessment.

  $99 $108 4/1/2009

Raises the hospital surcharge.

  $240 $120 10/1/2008

Adjusts a covered lives assessment (insurance surcharge).

  $5 $5 4/7/2009

Changes an out-of-state covered lives assessment.

Ohio $100 $100 7/1/2009

Raises the franchise fee for nursing facilities.

  $338.5 $370.9 10/1/2009

Changes the hospital assessment.

  $3 $3 8/1/2009

Increases the franchise fee for intermediate care facilities for the mentally retarded

Oregon $102 $204 10/1/2009

Raises the hospital assessment tax.

  $85 $78 10/1/2009

Changes to insurance premium for Medicaid managed care.

Pennsylvania $528 $529  

Changes the gross receipts tax on managed care to draw additional federal matching funds for medical assistance.

Rhode Island -$12.7 $0  

Changes the Medicaid global waiver and eliminates the group home tax.

  $13.6 $0 1/1/2009

Increases health industry gross premiums tax and base expansion to managed care health plans.

  $0 $0  

Sets the recurring hospital license fee for FY 2010.

Wisconsin $31.8 $40 7/1/2009

Raises the nursing home bed assessment.

  $103.2 $139.1 7/1/2009

Imposes a hospital assessment.

  $22 $22 7/1/2009

Imposes a tax on ambulatory surgical centers.


TABLE 2

State Provider Taxes or Fees Affecting Medicaid and State Budgets (updated July 2010, 2011 and December 2012) 

This table summarizes each state's current provider tax, fee or assessment, including recent history. The data below is summarized from several primary sources. 

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 "base" rate, currently back to 50% FFP while the least well-off state (Mississippi) receives 73.43% for FY 2013.  All SCHIP Medicaid expenditures (for children) receive an "enhanced" match rate between 65% (minimum) to 81.40% (Mississippi).  See Medicaid FMAP Table for FY 2010-2014.
 

The code (M) below indicates taxes or fees that are used to obtain Medicaid Federal Financial Participation (FFP) or matching funds.

State              Tax Applies to:                               Description and Notes

AL

Hospital (M)

Nursing Home (M)

Other: Pharmacy (M)

Hospitals: A Hospital privilage tax was added for FY 2010. Privately owned hospitals must pay $5.14% of their net patient revenue for FY 2012 and FY 2013.  The tax sunsets in mid-2013.

Nursing Home: Levies a privilege tax on nursing facilities, at an annual rate of $1,899.96, imposes a new supplemental tax of $1,063.08 for the period September 1, 2010 through August 31, 2011, to reduce the percentage of total nursing facility revenues used when considering a reduction of the tax and to provide for the prepayment of the supplemental privilege tax through an increase in the Medicaid per diem rate beginning in January 2011. Signed as Law chapter 520. This tax is expected to generate $200 million.

Pharmacy: A pharmacy tax of 0.10 per prescription exists except for prescriptions below $3.00.  This has been in place since approximately 1990. Tax is valid only if allowed for FFP under federal Medicaid.

Provider tax revenue was $58 million in FY 2006-07, $58.9 million in FY 2007-08 and $58.8 million in FY 2008-09. With the addition of hospitals (worth $211 million), this increased  to $269.6 million in FY 2009-10, $302.6 million in FY 2010-11 and $341 million in FY 2011-12.
Statute authority, 1991-2013:  Sections 40-26B ~ 40-26B-27.

AZ

Managed Care Org. (M)

Managed Care Org.: 2% of net premiums, for hospital and medical service corporations, health care service organizations, health care providers of Medicaid services.

Note: From 2003 through 2008, the premium tax on Arizona’s Medicaid health insurers generated $575 million.
Analysis: "A Review of Health Care Provider Taxes and Their Potential Fiscal Impact to Arizona" Arizona ACCCS, November 2009. [link updated 7/2011]

AR 

Hospital (M)

ICF/MR-DD (M)

Nursing Home (M)

Hospitals: "Assessment fee" of up to 1 percent of some hospitals' annual net patient revenue added for FY 2010 (Act 562 of 2009).

ICF/MR-DD: Establishes a provider fee for intermediate care facilities for individuals with developmental disabilities added for FY 2010 (Act 433 of 2009). From July 31, 2009, to June 30, 2010, the multiplier shall be set at $15.15 per patient day.

Nursing Home: Quality assurance fee of 6% of the aggregate annual Arkansas gross receipts (Act 635, §2 (H.B. 1274), Laws of 2001).

CA 

Hospital

ICF/MR-DD (M)

Nursing Home

Hospital: As of 2009, establishes an unspecified “coverage dividend fee” on private hospitals  with the purpose of increasing payments to Medi-Cal managed care plans, hospitals, and expanding health coverage to children. Sunset: December 31, 2013, signed as Law chapter 627 (AB  1383). Awaiting CMS approval.

ICF/MR-DD: Quality assurance fee up to 5.5% of gross revenue on skilled nursing facilities (CA Health and Safety §1324.21, signed as Law chapter 875 (AB 1629), Sept. 2004).

Nursing Home: Began in 2006. As of 2009, expansion of Quality Assurance Fee for AB 1629 Nursing Homes. AB 1629 nursing homes presently pay a quality assurance fee. Expanded this fee to include Medicare revenues, as well as Medi-Cal and private pay revenues. Signed as Law chapter 5 (AB 5 d).  For assessment on SNFs see Cal Health & Saf. Code §§ 1324.20 to 1324.30 (2009). California has a waiver exempting some types of SNFs, such as continuing care retirement communities and SNFs operated by the state or another public entity.

Notes: Discontinued Managed Care Org. fee in 2010.

Article: California Hospitals to Begin Taxing Themselves, released October 7, 2010.

CO

Hospital (M)

ICF/MR-DD (M)

Nursing Home

Hospitals: Fee was determined by a 13-member oversight committee. Managed care days are taxed at $60.47 per inpatient hospital day. Non-managed care days are taxed at $270.26 per inpatient bed day. Discounts are applied to high volume Medicaid and indigent care providers and essential access hospitals. Mental disease, rehabilitation, and long term care hospitals are excluded (Signed as Chapter 152 of 2009).

ICF/MR-DD: 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.

Article: Gov. Ritter Announces Colorado Healthcare Affordability Act, released February 26, 2009.

CT

Nursing Home (M)

Nursing Home: "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

ICF/MR-DD

Nursing Home (M)

ICF/MR-DD: 1.5% per annum of gross revenue.  FY 2011 Budget reflects $1.7 million from a 1.5 percent tax on the gross revenue of intermediate care facilities that was adopted in 2006 but has not been implemented.

Nursing Home: Assessment on nursing homes of $3,600 per licensed bed annually; may be increased up to 6% of net resident revenue. The tax is estimated to generate $11 million in revenue annually from FY 2010 through FY 2014.

Note: Hospital assessment of 0.45% of net patient services revenue was discontinued (Sec. 47-1242- Repealed by Law 15-205).

DE Nursing Facilities Nursing Facilities: added for FY 2012-2013

FLA

Hospital (M)

ICF/MR-DD (M)

Nursing Home (M)

Other: Clinical Labs,
Ambulatory Surgical Centers,
Diagnostic Imaging

Hospital: Hospitals are assessed 1.5% of the annual inpatient net operating revenues, and 1 percent of the annual outpatient net operating revenues; funds administered by the "Public Medical Assistance Trust Fund".

ICF/MR-DD:  ICF/MR-DD taxes were added, effective FY 2010. Sunset date of the assessment is October 1, 2011.

Nursing Home: Created a quality assessment on nursing home facility providers and required the assessment to be imposed beginning April 1, 2009. The assessment may not exceed the federal ceiling of 5.5 percent of the total aggregate net patient service revenue. Signed as Law chapter 4.

Note: Florida no longer taxes health care entities (including clinical labs, ambulatory surgical centers, diagnostic imaging) at an assessed 1% rate of annual net operating revenues (§ 395.7015, F.S.).  This revenue is used for administrative expenses, not matching funds.

GA

Nursing Home (M)

Hospital (M)

Nursing Home: Reduced for 2006.

Hospital provider payment of 1.45% of net payment revenue.  Estimated to increase revenue by a net of $229 million in 2011
(Added by HB 1055 of 2010; signed as Act 360 effective 5/12/10 )

Note: Managed Care Organization fee was dropped for FY 2010.

HI Hospital (M)

Nursing Facilities (M)
Hospital tax added in FY 2013

Nursing Facilities tax added in FY 2013

ID

Hospital (M)

Nursing Home

Hospital: Began in 2008. Not greater than 1.5 percent of the assessment base. Original sunset/repeal as of July 1, 2012.  In 2011, Idaho raised assessments on hospitals and nursing homes for three years.

IL

Hospital (M)

 

 

ICF/MR-DD (M)

 

Nursing Home (M)

Hospital: Occupied beds less Medicare occupied beds from hospital’s fiscal year Medicare cost report. The tax rate is $218.38 per occupied bed and is based on Fiscal Year 2005. The annual tax is $900.0 million.

ICF/MR-DD: Adjusted gross revenues reported on HFS tax report. The tax rate is 5.5 percent  and is based on the previous state fiscal year. The annual tax is $19.1 million.

Nursing Home: Licensed beds multiplied by number of days in the current quarter. The tax rate is $1.50 per licensed bed day and is based on the current state fiscal year. The annual tax is $55.2 million. In 2011, the legislature passed a bill to increase the bed tax bringing in an estimated $145 million next year. Article- Chicago Tribune, 1/12/11.

IN 

ICF/MR-DD (M)

Nursing Home

ICF/MR-DD: Revised 2008. "Each facility's assessment shall be based on a formula set forth in regulations promulgated by the Department of Mental Health;" effective June 29, 2009.

Nursing Home: SB 169 of 2006; effective July 1, 2006, extends an expiring levy on 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. Estimated total annual collection of $102.5 million for FY 2007.

IA 

ICF/MR-DD (M)

Nursing Home

ICF/MR-DD: The assessment fee equals 5.5 percent of the total revenue of the facility for the facility’s preceding fiscal year.

Nursing Home: Imposes a quality assurance assessment on nursing facilities for each patient day. The assessment rate is 3.0%. The quality assurance fee is expected to generate roughly $33 million. Signed as Law chapter 160 (S 476).

KS

Hospital (M)

Nursing Home

Hospital: Annual assessment on hospital inpatient services of 1.83% of net inpatient operating revenue.

Nursing Home: Imposed annual quality care assessment per licensed bed on each skilled nursing care facility. The assessment on all facilities in the aggregate shall not exceed $1,950 annually per licensed bed, and shall be imposed uniformly on all skilled nursing care facilities. Excludes skilled nursing care facilities that are part of a continuing care retirement facility, small skilled nursing care facilities and high Medicaid volume skilled nursing care facilities. Signed as Law chapter 159 (H 2320). Pending CMS approval.

Note: All assessments are valid only if allowed for FFP under federal Medicaid. Former Managed Care Org. Fee: Assessment fee of 5.9% of non-Medicare premiums collected by HMO. Fee is no longer waived for Medicaid MCOs. 

KY

Hospital (M)

ICF/MR-DD

Nursing Home

Other: Home Health Care (M)

Hospital:  Hospital Services Tax of 2.5% on gross revenues (KRS Sec. 142.303, as amended by Ch. 9, Laws of 2007).

ICF/MR-DD: Intermediate Facility Services Assessment of 5.5% on the gross revenues; effective July 1, 2004 (KRS Sec. 142.363-1).

Nursing Home: 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).

Other- Home Health Care: 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).

Note: Managed Care Org. fee discontinued in 2010. A Pharmacy Tax of 15¢ per prescription ended in 1999 (see KRS Sec. 142.311).

LA

ICF/MR-DD (M)

Nursing Home (M)

Other: Pharmacy (M),

Medical Transportation Providers (M)
Managed Care Organizations (M)
 

ICF/MR-DD: "Health Care Providers’ Medicaid Fees" are $30 per occupied bed per day for intermediate care facilities. Actual fee collected is $14.30 per day. 

Nursing Home: $10 per occupied bed per day for nursing facilities. Actual fee collected is $8.02 per day.

Other- Pharmacy: 10¢ per out-patient prescription.

Other- Medical Transportation Providers: $7.50 per medical service trip for medical transportation providers (Sec. 46:2625, La R.S.). No fee collected.  This is the amount authorized by state law, but not implemented.  
Managed Care Organizations enrolled in Medicaid added in 2012

Note: All fees are valid only if allowed for FFP under federal Medicaid.

ME

Hospital (M)

ICF/MR-DD

Nursing Home

Other: Private Non-Medical Institutions (PNMI), Residential Care & Day Hab.

Hospital: "Health Care Provider Tax"- Hospitals subject to 2.23% tax of net operating revenue (36 M.R.S.A. Sec. 2892 as enacted by Act 513 (H.B. 1351), Laws of 2004). The hospital assessment has an updated tax base year of 2008 (changed from 2006).  In 2012 Maine established a temporary 0,39% hospital assessment, raising more than $14 mllion.

Nursing Home: Nursing homes tax is 5.5% of annual net operating revenue.

Other- Residential Care & Day Hab.: 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).

Note: All taxes are valid only if allowed for FFP under federal Medicaid  (Sec. HH-6, Ch.673, 2004).

MD

Hospital

ICF/MR-DD

Managed Care Org.

Nursing Home (M)

Hospital: HB1587/SB 974 passed during the 2008 Legislative Session. By the end of FY 09, the Department estimated that it will receive $41 million in hospital assessment funds. Chapter 7.

Nursing Homes: Added in FY 2008.The aggregate amount of the quality assessment necessary to support the Medicaid nursing facility reimbursement system in the FY 2009 was equivalent to the statutory cap of 2% of operating revenue. (SB 101 - Chapter 503 of the Acts of 2007).

MA

Hospital

ICF/MR-DD (M)

Nursing Home (M)

Hospital: 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).

ICF/MR-DD: Provider donations from hospitals or health centers. Massachusetts established a new tax on intermediate care facilities for the developmentally disabled in FY 2007.

Nursing Home: Began in FY 2007. Extended to 4/4/10.

MI

Hospital (M)

Nursing Home

Health Insurers (claims assessment)




 


 

Other: Community Mental Health

 

Hospital: Increased in 2006.

Nursing Home: Increased in 2006.

Health Insurers:  The Michigan Health Insurance Claims Assessment (HICA) Act imposes a 1-percent tax on “paid claims” for health-related services of employer-sponsored health and welfare plans. The HICA tax affects insurance carriers (including HMOs and stop loss insurers), TPAs and group health plan sponsors.  Certain plans are exempt from the tax, including Medicare Advantage plans, Medicare prescription drug plans and plans covering federal employees, but Medicare supplemental insurance is not exempt. 

MN

Hospital (M)

ICF/MR-DD (M)

Managed Care Org. (M)

Nursing Home (M)

Other: Providers (M), Ambulatory Surgical Centers (M), and Wholesale Drugs (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: "Hospital Surcharge" is 1.56% of net patient revenues.

ICF/MR-DD: Tax is $1040 per licensed bed annually.

Managed Care Org.: HMO and Integrated Network surcharge is 1.6% of total premium revenues.

Nursing Home: "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.Other- Providers, ambulatory surgical centers, and wholesale drugs have a tax of 2%. 

MS

Hospital

ICF/MR-DD

Nursing Home

Other: Psychiatric Residential Treatment Facilities

ICF/MR-DD and Nursing Home: 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 (M)

ICF/MR-DD (M)

Nursing Home (M)

Other: Pharmacy (M)

Hospital: Began in FY1992. Amount is set by regulations (13 CSR70-15.110). For FY2011, the rate is set at 5.45% of inpatient and outpatient adjusted net revenues.

ICF/MR-DD: Began in FY2009. For FY2011, the rate is set at 5.49% of net operating revenues.

Nursing Home: Began in FY1995. Amount is set by regulations (13 CSR70-10.110). For FY 2011, the NFRA is $9.27 per patient occupancy day.

Other- Pharmacy: Began in 2002. For FY2011, the rate is set at 1.97% of Gross Retail Prescription Sales.

Note: Ambulance: This provider tax is pending CMS approval. The rate is anticipated to be 5.45% of gross receipts. Managed Care Org.: Tax was discontinued in FY2010. Certification Fee for providers of health benefit services for home and community based waiver services for persons with developmental disabilities: Authorized by General Assembly in 2009. Fee is pending CMS approval.  

MT

Hospital (M)

ICF/MR-DD (M)

Nursing Home (M)

Hospital: Each hospital in the state pays a utilization fee beginning January 1, 2010, in the amount of $50 for each inpatient bed day.

ICF/MR-DD: FY 2007 set at 6% of revenue; currently 5.5% of revenue  (15-67-102, MCA).

Nursing Home: FY 2007 it was increased to $8.30/bed day (15-60-102, MCA).

Report: MT Report on provider facilities fees -2009 budget.

NE

ICF/MR-DD (M)

ICF/MR-DD: In effect 2007-2008.

NH

Hospital

Nursing Home

Nursing Home: Senate Bill 376 passed in 2004, established the Nursing Facility Quality Assessment which imposes an assessment of 6% on net patient services revenue on all nursing facilities licensed by the State. Effective for taxable periods beginning on or after 1/1/2008 this rate is reduced to 5.5%.

NV

Nursing Home (M)

Nursing Home: In the 2003 Legislative Session, legislation was passed to impose fees on free-standing nursing facilities.  It was amended in 2005.  The title of the program is “Assessment of Fees on Nursing Facilities to Increase the Quality of Nursing Care.”  It can be found in the Nevada Revised Statutes NRS 422.3755.

NJ

ICF/MR-DD (M)

Managed Care Org. 

Nursing Home

Nursing Home: The current rate is $11.89 per non-Medicare day to applicable nursing homes. It may be up to a maximum of 6% of the aggregate amount of annual revenues received by applicable nursing homes.

NM

Managed Care Org. (M)

 

Managed Care Organizations are covered by a state premium tax.

(The state also has a gross receipts tax.  In 2004 the legislature exempted providers of health care services receiving payments from commercial and Medicare managed care companies from the gross receipts tax that previously applied to them.   The gross receipts tax from which they were exempted is not a provider tax because it applies to many types of businesses, not just health care.)B

Note:  NM Discontinued ICF/MR-DD in 2006;  Discontinued Nursing Home in 2006.

NY

Hospital  (M)

Nursing Home

Other

Hospital: Began in 2006.

NC

ICF/MR-DD (M)

Managed Care Org.

Nursing Home

ICF/MR-DD : Effective November 1, 2009, the cost assessment rate that applies to all ICF/MR enrolled providers for total non-Medicare patient days is $12.32.

Managed Care Org.: HMO taxes measured by 1.9% of gross premiums (NC § 105-228.5, effective 1/1/07).

ND

ICF/MR-DD (M)

 

OH

Hospital (M)

ICF/MR-DD

Managed Care Org. 

Nursing Home

Hospital: Hospitals assessment on total facility costs not to exceed 2%, determined annually (Ohio Rev. Code Sec. 5112.01 et seq.).

 

Managed Care Org.: Began in 2006.

Nursing Home: 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).

OK

Nursing Home (M)

Health Insurance (M)

Nursing Home: Nursing Facility Quality of Care Fee is collected from nursing facilities on a per patient day basis and placed into a revolving fund which is used to pay for a higher facility reimbursement rate, increased staffing requirements and other increased member benefits.  The facilities receive monthly invoices for fee payments based on self-reported patient census and revenues.  

Health Insurance: HB2437  applies a 1% fee on all health insurance claims to be paid by insurance companies as well as companies that self-insure their employees. It is designed to collect an estimated $52 million in the first fiscal year that would be used to obtain $135 million in federal matching money (May 2010).  This law was struck down by the state Supreme Court 8/24/2010.

ORD

Hospital (M) 

Managed Care Org. (M) 

Nursing Home (M)

Hospitals: The tax rate beginning July 1, 2009 is 2.32 percent.

Managed Care Org.: The tax rate beginning October 1, 2009 is 1.0 percent.

Nursing Home: The long term care tax is assessed based on a rate set by the Director of the Department of Human Services.

PA

Hospital

ICF/MR-DD

Managed Care Org. (M) 

Nursing Home

Managed Care Org.: Pennsylvania enacted a gross receipts tax on the managed care plans tied to the amount of revenue they received from Medicaid. Tax of 59 mills is imposed on each dollar of gross receipts received by managed care organizations pursuant to a contract with the PA Department of Public Welfare. Effective October 1, 2009.

RI

Hospital (M)

ICF/MR-DD

Managed Care Org. 

Nursing Home

Hospital:  Hospital licensing fee of 3.14% for 2003. (RI Gen Laws Sec. 23-17-38.1).

ICF/MR-DD: Residential facility for mentally retarded rate of 25% of the gross patient revenue. (RI Gen Laws Sec. 44-50-3).

Nursing Home: Nursing facilities rate of 5.5% fee gross patient revenue Increased for 2006 (RI Gen Laws Sec. 44-51-3).

SC

Hospital (M)

ICF/MR-DD

 

SD

ICF/MR-DD (M)

ICF/MR-DD: Began in FY 2008.

TN

ICF/MR-DD

Managed Care Org. (M)

Nursing Home

Managed Care Org.: Premium tax; premium tax revenue for fiscal 2008 totaled $64 million. 

Nursing Home: Uniformly applied at the rate of $2,225 per licensed bed, effective 2003-08 (Tenn. Sec. 68-11-216; will sunset 6/30/2011). Nursing Home Tax revenue for fiscal 2008 totaled $85 million.C

TX

ICF/MR-DD (M)

Managed Care Org.

ICF/MR-DD: The Health and Human Services Commission or the department at the direction of the commission shall set the quality assurance fee for each day in the amount necessary to produce annual revenues equal to an amount that is not more than six percent of the facility's total annual gross receipts in this state.

UT

Hospital

ICF/MR-DD (M)

Nursing Home

Other: Rural Health Care Facilities

Hospital: Enacts the Hospital Provider Assessment Act. For fiscal year 2010-11 the department may generate an additional amount of $2,000,000 which shall be used by the department and the division as follows: $1,000,000 to offset Medicaid mandatory expenditures; and $1,000,000 to offset the reduction in hospital outpatient fees in the state program. Repeals in 2013. Signed as Law chapter 179.

ICF/MR-DD: Began in 2006.Other- Rural Health Care Facilities: Qualifying rural counties may adopt a rural health care facilities tax of up to 1 percent.

VT

Hospital (M)

ICF/MR-DD (M)

Nursing Home (M)

Other: Pharmacy (M), Residential Care & Day Hab. (M), Home HealthProvider (M), Health Information Technology

Other- Health Information Technology: Health insurers pay in based on claims processed; and these funds are used as match to support the HIT/HIE initiative.

VA ICF/MR-DD ICF-ID: added in 2012

WA

Hospital

ICF/MR-DD

Nursing Home (M)

Hospital: Creates hospital safety net assessment, which is an assessment on hospitals based on non-Medicare inpatient hospital days. The assessments increase periodically in four phases, and they range from six dollars to $174 depending on the phase and the type of hospital. Repeals on July 1, 2013. Signed as Law chapter 30 (H 2956). The increased hospital assessments may generate $352 million in additional revenue.

ICF/MR-DD: The rate is .06 of revenues for services provided to intellectually disabled persons.

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 (M)

ICF/MR-DD (M)

Nursing Home (M)

Other: Independent Lab/X-ray
Practitioner, Ambulatory Surgical Centers (M) 

Hospital: Inpatient and outpatient hospital services are taxed at 2.5% (W.Va. Code Sec. 11-27-9; §11-27-15).

Nursing Home: Nursing facility services, increased from 5.5% to 5.95% of gross receipts in 2005.

Other- Laboratory/ X-ray services: Laboratory or x-ray services are taxed at 5%; MD offices are exempt (W.Va. Code Sec. 11-27-8).

Other: Ambulatory surgical centers are taxed at 1.75% of gross receipts.

Note: 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. Former Emergency Ambulance Service Providers Tax: Emergency ambulance service providers are taxed at the rate of 5.5%. Reduced for 2006 & 2007. Former Physicians’ Services Tax: Physicians’ services were taxed at 2% until 2001 but have been reduced annually; for 2007-08 the rate was 0.8% and was scheduled to be phased out to 0% by 2010. (W.Va. Code Sec. 11-27-36). Also formerly taxed, chiropractic (§11-27-5); dental; nursing; opticians & optometric; podiatry; psychological  and therapists’ services. All formerly taxed entities were eliminated effective July 1, 2010.

WI

Hospitals 

ICF/MR-DD

Nursing Home (M)

Other

Hospitals: In effect 2007-2008. 

ICF/MR-DD: Intermediate care facility assessment of $445 per month for fiscal year 2004-2005. 

Nursing Home: 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).

WY Hospitals (M)
Nursing Facilities (M)
In effect 2011, 2012

TABLE NOTES:
A 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.

B NEW MEXICO- Stat. §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.  The deduction provided by this section shall be separately stated by the taxpayer...'commercial contract services' means health care services performed by a health care practitioner pursuant to a contract with a managed health care provider or health care insurer other than those health care services provided for Medicare patients pursuant to Title 18 of the federal Social Security Act or for Medicaid patients pursuant to Title 19 or Title 21 of the federal Social Security Act."

C Revenue figures were collected in a survey of state budget officials by National Association of State Budget Officers; published December 2008.

D 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


Other Resources and Sources

Introduction Sources

1 Federal Public Law 102-234 Medicaid Voluntary Contribution and Provider Specific Tax Amendment of 1991.

2 On August 16, 2011, CMS/CMCS Financial Management Group provided a clarification of the hold harmless rules as stated above, and confirmed the increase from 5.5% to 6% forthe limit of net patient revenues.

2B "Medicaid Topics: Financing: Intergovernmental Transfers and Other Special Financing Mechanisms"  - Report by Tim Henderson for American Association of Family Physicians, 10/05.

3 "Low Medicaid Spending Growth Amid Rebounding State Revenues: Results from a 50-State Medicaid Budget Survey State Fiscal Years 2006 and 2007" data from unpublished supplemental results - Prepared by Vern Smith, Health Management Associates (HMA) For Kaiser Commission, 10/06.

4 "As Tough Times Wane, States Act to Improve Medicaid Coverage and Quality: Results from a 50-State Medicaid Budget Survey State Fiscal Years 2007 and 2008" - Prepared by Vern Smith, Health Management Associates (HMA) For Kaiser Commission, 10/07.

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 ]

 

Examples of Revenue Raised from Provider Fees and Taxes 2006-2011

In mid-2011 NCSL conducted a search for state tax revenue obtained from provider fees and taxes.  The results for 15 states are tallied below.  Note that fiscal years and state calculation methods vary, making state-to-state comparisons difficult.  Use web links provided within individual states to obtain details on sources.  Note that the actual percentage of federal matching funds (FMAP) varies annually, by state and by Medicaid expenditure category.  Special, varied, ARRA enhanced rates applied for parts of 2009-2011.

A second alphabetical table provides examples from 2006-2008.

State

Revenue Examples (2008 – 2011)

Arizona

Health insurance premium tax revenue for FY2008: $217,635,290; FY2009: $222,895,534 *estimated; FY2010: $232,187,000 *estimated.

Arkansas

Health Department fees total revenue for FY2009: $7,096,596

Illinois

Provider assessment tax of $900 million, per fiscal year 2009 through 2013.

Indiana

2011 budget, Act No. 1001, creates a hospital assessment fee. The assessment fee will be paid by Indiana’s approximately 120 hospitals, producing an estimated revenue of $200 million a year.

Kansas

Nursing home provider tax revenue of $23,128,500 for fiscal year 2010.

Maryland

Fiscal year 2012 budget creates a hospital provider tax on Maryland’s hospitals. The hospital provider tax is expected to raise $315 million in FY 2012.

Michigan

Hospital tax revenue for fiscal year 2009 was just over $500 million

Minnesota

Provider tax revenue for fiscal year 2011 is estimated at $498.4 million.

North Carolina

Governor Perdue signed SB 32, on March 25, 2011 authorizing the creation of a hospital provider fee. The fee will produce approximately $215 million in revenue

Oklahoma

Governor Fallin signed into law HB 1381, creating the Supplemental Hospital Offset Payment Program (SHOPP). HB 1381 creates a 2 percent assessment on 77 Oklahoma hospital’s net patient revenues, and is expected to raise $325 million for fiscal year 2012

Pennsylvania

Hospital assessment will raise approximately $500 million through 2013

Rhode Island

Health care provider tax revenue for FY2008: $53,400,000; FY2009: $46,000,000; FY2010: $40,300,000; FY2011: $40,500,000

Tennessee

The Tennessee legislature raised the states hospital provider tax from 3.52 percent to 4.52 percent. The increased tax is expected to raise $449 million from Tennessee hospitals.

Vermont

Hospital provider tax revenue for 2010: $94 million.

 

Examples of Revenue Raised from Provider Fees and Taxes 2006-2008

State   
 
Revenue Examples (2006 - 2008)
Alabama Provider tax revenue was $58 million in FY2006, $58 million in FY 2007 and $59 million in FY 2008.
Michigan

Provider tax revenue was $674.0 million for fiscal 2006; $856.0 million for fiscal 2007 and $1,008.0 million for fiscal 2008.

Montana

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]

Oregon

In the 2007-2009 bienniums, Oregon is expected to collect $215 million in provider taxes from hospitals and Managed Care Organizations (MCOs) to generate another $343 million in federal matching funds. After the tax is assessed and collected, the monies are matched with $1.66 in federal Medicaid funds.

Pennsylvania

In FY08, nursing home assessments raised approximately $300 million in Pennsylvania.
In FY08, Managed care organizations (MCOs) that provide services to assessments generated approximately $384 million in Pennsylvania. [added 1/10]

Tennessee

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.

Rhode Island 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.

 Sources: NCSL research, 2011; published reports, linked above. 

State Health Reform and Provider Taxes

Three states that have enacted comprehensive health reforms and coverage expansions  (2003-2006) 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]

Archive Information, 2006-2008

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 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: 

  • NCSL Federal Alert: NCSL supported the 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 was asked several times about 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.
  • On May 23, 2008, 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 judge's action vacates the rule.
  • On May 22, 2008, 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.
  • 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.” 

METHODOLOGY:  The NCSL surveys referenced above cover state fiscal years.  Federal matching funds (FMAP) apply to federal fiscal years (10/1 to 9/30) or to other special time periods, with details and examples noted online.

NCSL STAFF & RESEARCH:  This report was compiled by Richard Cauchi, with additional research by Kara Hinkley, Katherine Mason and Steve Landess of the NCSL Health Program.  Fiscal survey data was provded in collaboration with Arturo Perez (Program Director) and Amanda Rafool of the NCSL Fiscal Program.

Additional Resources

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