Provider Tax Reduced but Sunset is Gone

With time in the 2019 session quickly fading and the threat of a budget impasse and government shutdown building, Republican Senate leadership agreed to the repeal of the provider tax sunset strongly supported by the DFL House and Gov. Tim Walz. While the tax will be indefinitely extended, the rate will be lowered to 1.8 percent, a 10 percent reduction from the current levy.

“We’re disappointed that policy makers did not adopt the provider tax alternative that the MMA put forward,” said MMA President Doug Wood, MD. “We put in a lot of work into our claim expenditure assessment (CEA) proposal and believe it is a good way to fund important public health programs while modernizing the funding mechanism. In the end, it appears the governor and the House and Senate leaders wanted to keep it simple.

"We're glad that Senate leaders agreed to maintain coverage for Minnesota's more vulnerable residents," Wood continued. "The MMA will continue to advocate for funding for important public health programs like MinnesotaCare and Medical Assistance." 

The proposed CEA would have been applied to paid claims processed by health plans and third-party administrators (TPAs). 

Passed in 1992 as the mechanism to fund MinnesotaCare, the provider tax is a levy on the gross revenue generated by various types of providers of health care goods and services. In addition to physician services, revenue from services provided by dentists, chiropractors, physical therapists, optometrists, psychologists, and most other health care providers is subject to the tax, as is revenue for health care services provided at hospitals and ambulatory surgery centers.  

In response to changes in federal health care financing under the Affordable Care Act, the GOP-controlled Legislature and DFL Gov. Mark Dayton, in a 2011 agreement, set the provider tax’s repeal for Dec. 31, 2019.

In addition to the reduction in the tax, the governor and the House and Senate leadership also agreed to form a blue-ribbon commission that will look for ways to save $100 million from the state’s Health and Human Services budget.