Parties near deal for hospital tax

Officials from Indiana Medicaid and a hospital trade group are trying to craft a deal that would create a tax on hospitals that would help attract more federal funds for hospitals—thereby offsetting looming cuts in state payments.

The discussions have been ongoing between the Indiana Hospital Association and the Indiana Family and Social Services Administration, the state agency that operates the Medicaid program for low-income Hoosiers.

Indiana Senate Appropriations Committee Chairman Luke Kenley, R-Noblesville, said he’s pushing the two sides to reach an agreement by April 18, when he will introduce his budget to the Senate.

Kenley said the deal would help cushion the blow of cuts to Medicaid spending he sees as necessary to balance the state’s budget with its much-reduced level of tax revenue.

“We just feel pretty confident there are going to have to be some rate cuts,” Kenley said, adding, “We’re just trying to ease the pain a bit.”

Doug Leonard, president of the Indiana Hospital Association, is still hoping the deal can produce more revenue for hospitals.

“There are many details to be resolved, but such a program could be crafted as a win-win for all parties here in Indiana," he said in a statement.

Marcus Barlow, a spokesman for the Indiana FSSA, acknowledged that discussions are ongoing, but said there’s no concrete deal to report.

Medicaid is a federal-state program. Across all states, the feds pick up about two-thirds of Medicaid’s costs, with the states paying for the remaining 33 percent, according to data from the California-based Kaiser Family Foundation.

But Indiana, which has strict eligibility ceilings, pays only 26.5 percent of Medicaid’s costs.

States can draw more federal money by boosting how much they put into the program. Currently, Indiana Medicaid reimbursements are about 60 percent of what the federal Medicare program for seniors pays—which is roughly equivalent to the cost of providing care. That means hospitals lose money on every Medicaid patient.

So the hospital tax would pull money from the hospitals to boost Indiana Medicaid spending, thereby bringing in more federal money and giving the hospitals more funding than they paid in tax.

The trouble is, the state needs some of the Medicaid money to plug its budget holes. So the hospital tax discussions are now hung up on how much the state keeps—and whether the hospitals actually stand to get more funding, or merely avoid losing revenue.

When asked whether the hospitals might get more revenue as part of the deal, Kenley said, “Or at least not come out a loser.”

Such assessment fees have been discussed in the past, most intensely in 2007. But there has been a common sticking point between hospitals serving poorer areas—where there are many Medicaid patients—and those in wealthy suburbs, which serve few Medicaid patients. The former would stand to gain funding from a hospital tax while the latter would lose.