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N.H. lawmakers consider competing hospital tax plans


By Associated Press
Posted: May 11, 2014 - 10:30 am ET
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New Hampshire's House and Senate are acting this week on competing plans to address a court ruling that found the state's tax on hospitals unconstitutional.

The Senate votes Thursday on a plan to phase down a tax on hospitals that was the subject of two lawsuits. Senate President Chuck Morse says he believes the tax eventually should be phased out, but his plan would start by reducing the tax from 5.5% next year to 4.5% by 2019. It also would clarify and narrow what is taxed and eliminate the tax on the state's two rehabilitation hospitals.

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The House plan incorporates two approaches as a first step toward addressing the court finding. One approach clarifies existing law; the other broadens the tax and lowers the rate.

The tax produces about $185 million annually for Medicaid and other state spending.

The federal government allows states to apply their hospital taxes to 19 categories. New Hampshire applies the tax to two categories: inpatient and outpatient hospital net revenues. The state also taxes two other categories--nursing homes and intermediate-care facilities--under a different law.

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

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 Legislature cut Medicaid funding to the hospitals by more than $130 million, but retained the tax. That prompted hospitals to sue.


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