Published on Monday, July 06, 2015

A tax we don’t like funding programs we do

Another legislative session has come and gone and the repeal of the Provider Tax remains intact. That's the good news. At the end of December 2019, the 2 percent gross revenues tax on medical services provided by physicians, hospitals, dentists, chiropractors and other health care providers will cease to exist. At least, that's the plan that lawmakers and Gov. Mark Dayton agreed to in 2011. They did so primarily because of the expected decreased need for state dollars that would follow the ACA's Medicaid expansion provision and new federal tax credits to purchase insurance for individuals with incomes between 138 and 400 percent of poverty.

As background, funds from the provider tax go into the Health Care Access Fund (HCAF), which is also fed by revenues from a 1 percent gross premium tax and premium payments from enrollees. These funds were intended to be used primarily for the MinnesotaCare subsidized insurance program, but a meaningful shift occurred in 2013. The Medicaid expansion provision included in the ACA, and enacted by the Minnesota Legislature in 2013, meant that many individuals who would otherwise have been eligible for MinnesotaCare would now be eligible for Medical Assistance (MA). While such a move should have dramatically reduced spending from the HCAF as MinnesotaCare enrollment dropped, lawmakers decided to continue to use HCAF dollars for individuals now on MA who would otherwise have been eligible for MinnesotaCare. This, despite the fact that MA has historically been financed by the state’s General Fund. 

So, here's where the bad news comes in. Legislators, once again, tinkered with the HCAF during this past session. They increased the amount of money from the HCAF used to pay for costs of MA to the tune of nearly $80 million.

Sadly, this is not a new trick. Since 2004, more than $1.6 billion from the HCAF has been transferred out of the HCAF and into the General Fund. And in 2014, nearly half of the HCAF total uses were spent on the MA program.  

In addition, the Legislature chose to retain MinnesotaCare as the state’s Basic Health Program (BHP) in lieu of shifting this population to MNsure where Minnesotans would have purchased private insurance with state and federal tax credits. While the MMA supported this decision, the federal financing for the BHP has been lower than original state projections, further straining the HCAF resources.

In the next few weeks, a 29-member Task Force on Health Care Financing will begin discussing strategies to increase access to and improve the quality of health care for Minnesotans. These strategies will include options for sustainable health care financing, coverage, purchasing and delivery for subsidized insurance programs, including MNsure, MA, MinnesotaCare, and individuals eligible to purchase coverage with federal advanced premium tax credits and cost-sharing subsidies. Ultimately, the task force will make recommendations on future funding of health care programming - including the role of the provider tax - to the governor and the Legislature by Jan. 15, 2016.

It’s hard to predict what the task force will decide. But, I can certainly tell you how they should decide. The provider tax MUST go. The MMA has long opposed it as a regressive and inappropriate tax for programs that have such broad social benefit. The effects of the tax can be particularly acute for physicians in small, independent practices where that 2 percent might threaten the viability of their business.

Minnesota is faced with a dilemma. The provider tax is the wrong way to fund MinnesotaCare and MA. In some instances the tax risks threatening the very access to care that these programs are intended to ensure. But replacing the $600 million generated by the tax will be very challenging to the next Legislature.

Is this issue important to you and your practice? Are you willing to do the hard work, one-on-one with your legislators and with the MMA, to ensure that the provider tax sunsets as planned in 2019 and these critical programs find adequate funding?

What do you think? We'd love to hear your opinion.
Donald Jacobs, MD, a former executive with Hennepin Healthcare System, is the current president of the MMA.

Comments (4)Number of views (3301)

Author: Mary Canada


4 comments on article "A tax we don't like funding programs we do"

Deborah Pollak Boughton

7/7/2015 5:41 PM

I have been trying for years to get people interested in eliminating provider tax. There has to be a better way

Lisa Erickson, MD

7/8/2015 2:35 PM

Yes, I am. The tax must go.

John Parkn M.D.

7/10/2015 7:31 AM

The current governor and legislature show little interest in eliminating the provider tax. Dayton's budgetary decision to reduce primary care MA reimbursement to 2012 levels also illustrates their general scorn toward providers and misunderstanding of reimbursement issues. The MMA was very silent on this during the last session. Why ?

Eric Dick

7/10/2015 9:04 AM

Thank you for your comments, Dr. Parkn. By way of clarification, the MMA made ensuring repeal of the provider tax a priority in the 2015 session. If the MMA seemed less vocal on the issue it's because we were successful in preventing any bills that would rescind the repeal from being introduced. And while MMA efforts to increase primary care reimbursement were not succesful this year, there were no cuts to reimbursment, either.

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