Ahead of negotiations, Walz renews push for health care tax

A tax that funds health care programs is set to expire at the end of the year — and a deal to pass a state budget hinges on its fate.

Gov. Tim Walz enlisted the aid of hospital CEOs from around the state on Thursday to help him make his case to continue what’s called the provider tax, a 2 percent fee on doctors, hospitals and other health care providers. That tax will sunset on Jan. 1, 2020 without action this year.

Walz and hospital leaders said at a Capitol news conference that undoing the tax will leave a $700 million hole in the state’s heath care budget each year, leaving more than one million vulnerable Minnesotans without care. 

“It’s a mechanism that provides high quality care to Minnesotans regardless of economic background or geography,” Walz said.

The tax was conceived 27 years ago by a bipartisan group of legislators trying to find a funding source to help cover health care costs for working Minnesotans who earn too much to qualify for Medical Assistance, the state’s version of Medicaid, but not enough to buy health insurance. Initially, the provider tax paid for the program to cover those individuals, known as MinnesotaCare, which still exists today.

Money from the tax goes into the state’s Health Care Access Fund, which also pays for a portion of Medical Assistance.

Lorry Massa is president of the Minnesota Hospital Association, which represents 141 hospitals and systems around the state. He admitted his group was initially resistant to the provider tax.

“[We] forcefully opposed it. After it went into effect, we actively tried to repeal it,” Massa said. “Then, as time went on, we begrudgingly accepted it, and over time we saw how it enabled working families, people who couldn’t get health insurance through their employers or couldn’t afford to buy it on their own, to get coverage through MinnesotaCare. Our view on the tax has changed.”

During the 2011 state government shutdown, Republican legislative leaders and Gov. Mark Dayton agreed to sunset the tax, in part because of an infusion of federal money that came with the Affordable Care Act helped pay for MinnesotaCare.

Republicans have affectionately dubbed the provider tax the “sick tax,” arguing it trickles down to Minnesotans in their medical bills. They also question whether the fund has strayed too far from its initial purpose of paying for MinnesotaCare because federal money helps support that now. The provider tax is now used, in part, to help cover a growing number of people on Medical Assistance.

“Let’s pass the two-year budget with the resources we have, we have a billion dollars in surplus, and we can absolutely do it,” Republican Senate Majority Leader Paul Gazelka said. “But that will be the big discussion over the next three weeks.”

Walz and other Democrats note that there is uncertainty about the ACA. Just this week the Trump Administration argued in a federal appeals court filing that the signature Obama-era legislation was unconstitutional and should be struck down.

The Legislature is required to adjourn its session by May 20.  Lawmakers still need to find agreement on a two-year, roughly $48 billion state budget, and continuing the tax has become one of the biggest sticking points in negotiations.

“We have two and a half weeks left, we can’t go forward and begin negotiating with this big question mark,” Department of Human Services Commissioner Tony Lourey said. “Is this funding stream going to continue or not? It needs to continue and we have to get over this hurdle.”

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