Hospital Tax (No, Assessment!) Central to Budget Dispute At Special Session

I doubt many not directly involved in the ongoing struggle over Medicaid expansion in Virginia have actually read the budget language that is the heart of the argument.  So I have set it out below in full.  This is language included in the House version but previously rejected by the Senate, creating more than $300 million of the revenue discrepancy between the two plans.  The Senate Finance Committee considers it again Monday.

There is the major policy debate over whether Virginia should do as Congress allowed and expand service to hundreds of thousands of additional people. (I think it should.)  Then there is the argument over whether to try to squeeze the state cost share out of existing state revenue, or to create a new revenue source – which the Governor and the House have done with this language.  Set those aside for a second.

The third debate is procedural, because traditionally a new tax would be created by its own bill and enshrined as a general law, and not buried inside the budget bill. Keeping revenue issues out of the budget is a practice which has been ignored in the past, especially for fees, but on previous occasions any tax changes were formatted within the budget as amendments to Title 58. The big showdown in 2004 ended with two separate bills – the budget and an omnibus tax bill.

Creating an entirely new $226 million per year revenue stream with a budget provision is unprecedented.   As you can read for yourself the level of spending going forward may increase the tax rate in future years, without any Assembly action. The final paragraph vests discretionary authority with a federal agency, something else you seldom see in Acts of the Assembly.

Here is the text as it stands right now:


A. Private acute care hospitals operating in Virginia shall pay an assessment beginning on October 1, 2018. The definition of private acute care hospitals shall exclude public hospitals, freestanding psychiatric and rehabilitation hospitals, children’s hospitals, long stay hospitals, long-term acute care hospitals and critical access hospitals. The assessment shall be used to cover the full costs of the non-federal share of enhanced Medicaid coverage for newly eligible individuals pursuant to 42 U.S.C. § 1396d(y)(1)[2010] of the federal Patient Protection and Affordable Care Act.

B.1. The Department of Medical Assistance Services (DMAS) shall calculate each hospital’s “assessment” annually by multiplying the “assessment percentage” times “net patient service revenue” as defined below.

2. The “assessment percentage” shall be calculated as (i) 1.08 times the non-federal share of the “full cost of expanded Medicaid coverage” for newly eligible individuals under the Patient Protection and Affordable Care Act (42 U.S.C. § 1396d(y)(1)[2010]) divided by (ii) the total “net patient service revenue” for hospitals subject to the assessment. By June 1, 2018, DMAS shall report the estimated assessment payments by hospital and all assessment percentage calculations for the upcoming fiscal year to the Director, Department of Planning and Budget and Chairmen of the House Appropriations and Senate Finance Committees.

3. The “full cost of expanded Medicaid coverage” shall equal the amount estimated in the official Medicaid forecast due by November 1 of each year as required by paragraph A.1. of Item 310 of this Act. This Act estimates the cost of coverage for FY 2019 as $80,823,953 and FY 2020 as $226,123,826.

4. Each hospital’s “net patient service revenue” equals the amount reported in the most recent Virginia Health Information (VHI) “Hospital Detail Report” as of December 15 of each year. In the first year, net patient service revenue shall be prorated by the portion of the year subject to the tax.

5. Any estimated excess or shortfall of revenue from the previous year shall be deducted from or added to the “full cost of expanded Medicaid coverage” for the next year prior to the calculation of the “assessment percentage.”

C. DMAS shall be responsible for collecting the assessment. Hospitals subject to the assessment shall make quarterly payments to the department equal to 25 percent of the annual “assessment” amount. In the first year of the assessment payment, quarterly amounts for the remainder of the state fiscal year shall equal one-third of the assessment. The payments are due not later than the first day of each quarter. In the first year, the first assessment payment shall be due by October 1, 2018. Hospitals that fail to make the assessment payments within 30 days of the due date shall incur a five percent penalty. Any unpaid assessment or penalty will be considered a debt to the Commonwealth and DMAS is authorized to recover it as such.

D. DMAS shall submit a report due September 1 of each year to the Director, Department of Planning and Budget and Chairmen of the House Appropriations and Senate Finance Committees. The report shall include, for the most recently completed fiscal year, the revenue collected from the assessment, expenditures for purposes authorized by this item, and the year-end assessment balance in the Virginia Health Care Fund.

E. All revenue from the assessment including penalties shall be deposited into the Virginia Health Care Fund. DMAS shall account for any revenue associated with the provider assessment separately within the Fund. Proceeds from the assessment, including penalties, shall not be used for any other purpose than to cover the full cost of enhanced Medicaid coverage for newly eligible individuals, pursuant to 42 U.S.S. § 1396d(y)(1)[2010] of the federal Patient Protection and Affordable Care Act.

F. Any provision of this item is contingent upon approval by the Centers for Medicare and Medicaid Services if necessary.

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10 responses to “Hospital Tax (No, Assessment!) Central to Budget Dispute At Special Session”

  1. TooManyTaxes Avatar

    This is no different than the Commercial and Industrial property tax that the General Assembly authorized localities to impose to fund transportation improvements or the taxes levied by Fairfax County on landowners in Tysons to fund non-heavy rail transit, road, pedestrian and bike improvements in Tysons.

    Special interests, including the health care industry and real estate developers, clamber for more public revenues to support their businesses. Well either we tax them to fund these extra public appropriations or the rest of us transfer wealth to them. As my Dad used to say “Put your money where your mouth is Mr. Big Shot.”

    1. Steve Haner Avatar
      Steve Haner

      But what is different is my main point. That enhanced real estate tax was imposed in HB 3202, the 2007 transportation tax and bond package, and was not buried as a provision in the budget.

      1. TooManyTaxes Avatar

        Point well made, Steve.

  2. Steve, Thanks for illuminating the three strands of Medicare-expansion debate. I’m astonished that the proposed hospital tax has gotten so little attention. It’s all the more astonishing when one considers, as you point out, that the tax is not broken out in a separate bill but embedded in the budget.

    So much for transparency and open debate.

  3. LarrytheG Avatar

    Looks like the two alternatives are to pay as you go by collecting revenues on a continuous basis or deal with it at budget time like we already do with basic MedicAid.

    I favor the pre-pay path but the Federal aspect of it is the same for both as the deal with the Feds is we pay 1/2 of regular Medicaid and 10% of the expansion.

    We’ve been doing the 1/2 all along and we wait until budget time to figure out how much more we have to add…

    What is a better nexus? Collecting from transactions at the hospitals or doing a GA budget deal for all taxpayers?

    In terms of “transparency and open debate” – this issue is really no different than others – that’s the way the GA operates – it’s not a Medicaid-only issue.

    I bet there are a crap-load of “gee I didn’t know that” parts of other bills including the so-called “Grid Transformation poobah”.

    Personally, I think the Senate is being a bunch of Pissants as I’ve heard no real alternative from them… per the usual when it comes to health care…

  4. LarrytheG Avatar

    re: ” I’m astonished that the proposed hospital tax has gotten so little attention.”

    Well…. a bunch of folks these days say that you can’t trust lame-stream media reporting and that they “trust” Facebook and blog sites for their news.

    So how many “Conservative” (you know – the ones who SAY they want to keep the government transparent and accountable – as opposed to tax and spend liberals and “elites” ) …. are actually reporting this stuff for people . especially those who don’t believe or trust mainstream media anymore?

    I’ve watch the tea party and other allied talk the talk now for a few years and basically they’re AWOL on sustainable, reliable, reporting of govt Instead they choose to amp up the culture wars… and blame liberals for all that they don’t like.

    I’d venture to say that BR is one of the few sites in Va that delve in to some issue but by no means in depth issues like following the bills in the GA – on substance.

    So.. it’s not like a lot of the info is not available. For instance, those lobbyists that Steve talks about – they all seem to know chapter and verse of the substance of the bills – to the point – they are sometimes able to convince legislators to make changes in the wording – and substance.

    So….. bottom line – Who are you gonna blame for this “lack” of “reporting” and WHO would you SUPPORT to do that reporting?

    Looks like another case of having your cake and wanting to eat it too!!!

  5. Steve Haner Avatar
    Steve Haner

    Haven’t you figured out yet, Larry, that is many cases the lobbyists actually write the first drafts of the bills? And the later amendments? But it is not the task of the lobbyist to fully explain to the public what is going on – and sometimes that would not be helpful to their cause. 🙂

  6. LarrytheG Avatar

    Steve – I’m well aware of that and ALEC AND the direct interests of the lobbyists.

    But I AM ASKING – who among us is responsible for following the process and informing the public about it if not the lame stream Media?

    We got all this blather about leftist rags and all… even Bacon seems fairly clueless and he’s supposed to be about the Blog leaders in Va.

    It’s not like the info is not available … perhaps not all of it right away and some only at the time of the vote – but a significant amount IS available and yet many commenters here diss the Sierra Club and other groups.. for their participation and at the same time – condemn the “press”…

    Perhaps… the inclusion of you on the BR team will fill that role ? Only problem
    is that sometimes I sense you do have a horse on some of the issues.. and always appreciated when you do identify that horse.

    I’m also not sure how virtually EVERY ONE of your posts gets “highlighted”. I thought that was only for particularly exemplary posts… All of your are? geeze….

  7. Steve Haner Avatar
    Steve Haner

    I am now on the same elevated plane as the Bacon Master himself. I can edit your posts! I could delete them! Be afraid….bwahhhh.

  8. LarrytheG Avatar

    Oh.. I’m sure from time to time you’ll get the urge! That’s okay. I think you do probably bring a lot of inside baseball knowledge to the blog… and perhaps
    help some develop a wider perspective oh how things “really work” in Richmond! I look forward to more “insights”.

    I don’t fear deletes or edits… life is full of them.. we deal with them.

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