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Senate tax panel to meet on N.H. hospital tax ruling


By Associated Press
Posted: May 4, 2014 - 4:30 pm ET
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The Senate's tax committee is meeting to discuss a recent court ruling that found New Hampshire's tax on hospitals unconstitutional.

Senate President Chuck Morse told the Ways and Means Committee last week he hopes negotiations among legislative leaders, the governor and the hospitals produce a short-term fix to avoid a major impact on the budget. The committee is hoping to have a proposal to attach to a House bill when the panel meets Tuesday.

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The Superior Court ruling applies to the 2014 tax year and future tax years. If upheld, the hospitals could ask the state to refund $100 million or more in tax payments for 2014. It also means lawmakers would have to plug a similar hole in next year's budget.

The tax produces about $185 million annually for Medicaid and other state spending. The state kept $72 million this year for general state spending, used $82 million for payments to healthcare providers and returned $31 million to the hospitals in aid to help offset the cost of uncompensated care.

In 1991, hospitals began paying the tax so the state could gain matching Medicaid funds to pay for healthcare for the poor. For many years, they got all their taxes refunded dollar-for-dollar from the state.

In 2011, the federal government said states could no longer refund all the money and, instead, had to apply a formula that reimbursed the funds according to hospitals' Medicaid costs. Three years ago, the Republican-controlled Legislature cut Medicaid funding to the hospitals more than $130 million, but retained the tax. Ten of the state's largest hospitals later sued the state in federal court over changes in Medicaid policies and reimbursements.

The state lost a separate lawsuit by Northeast Rehabilitation Hospital, which is on appeal.


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