Democrats Rescue Rural Hospitals
Colorado’s struggling rural hospitals won’t be killed by budget cuts mandated by TABOR. On Tuesday, May 30, Governor Hickenlooper signed into law a bill that will keep Colorado’s rural hospitals open and functioning. The new law, “Sustainability of Rural Colorado” repeals the existing Hospital Provider Fee program effective July 1, 2017. A new Colorado Enterprise, called CHASE (for Colorado Healthcare Affordability and Sustainability Enterprise) replaces it.
This simple restructuring of the Hospital Provider Fee, which doesn’t affect costs to patients or hospitals, was introduced in January. Despite its being co-sponsored by the Senate’s powerful Republican President Pro Tem, Jerry Sonnenberg, Republicans strenuously opposed it. Negotiations over the Sustainability Bill were a continuing drama throughout the entire 2017 legislative session. Ironically, the hospitals that benefit most from CHASE reside in deeply Republican districts.
Here is a little background
The Hospital Provider Fee was enacted in 2009 to allow Colorado to expand Medicaid and bail out hospitals experiencing high losses due to uninsured people using Emergency Rooms as primary care. Hospitals pay Provider Fees for each night of paid patient care, and for paid outpatient services. Colorado uses the resulting funds to reimburse hospitals for non-compensated care. Nearly all Provider Fee revenues are federally matched through Medicaid.
The 2009 bill was sponsored and supported by Democrats. Widely opposed by Republicans, it became a major campaign issue in 2010. As originally structured, the Provider Fee was a tax in one sense: the revenue it brought in was subject to the state’s TABOR cap. And it was a redistributive tax, both raising the price of healthcare for patients with insurance, and moving revenue from profitable hospitals to struggling ones.
The Provider Fee proved essential during the Great Recession, as state tax revenues fell and people lost insurance as they lost their jobs. But Colorado has recovered. Since 2015, the Fee has pushed state revenues over the TABOR cap, triggering income tax rebates. This put pressure on the entire state budget, forcing cuts to other programs to gain maximum Medicaid matching funds. Colorado already ranks low among the states in funding for programs like education and transportation.
CHASE exempts the revenue raised by provider fees from the TABOR cap, so this particular problem will not occur again. In the 2015–16 fiscal year, provider fee collections were over $660 million. With Federal matching funds, this would have amounted to almost a billion dollars in cash, providing needed support for hospitals without cutting transportation or education.
What happened?
“Sustainability of Rural Colorado” reached the Senate with no Republican support except Sonnenberg’s. Sonnenberg, who represents Eastern Plains counties like Phillips, Prowers, Sedgwick, Washington, and Yuma, and some of CD4’s poorest hospitals, chose to represent his constituency by sponsoring this bill. His caucus placed TABOR restrictions first, threatening to let the rural subsidies die unless budget caps were further tightened to make up for the re-classification of the hospital fee.
In the end, a compromise was reached: the Small Business Exemption for personal property tax was raised to $18,000 and the TABOR cap for fiscal 2017–18 was set back by $200M. As passed, the Sustainability bill makes up the budget shortfall for the hospitals, putting them on a sound footing, although further Federal cuts could put them back in risky territory. But the compromise eliminated a potential budget surplus that could have funded the Democratic proposals for education, electrical infrastructure, and transportation that were killed by the conservative Senate majority.
In the final vote on the Sustainability of Rural Colorado, Senators Cooke, Hill, Holbert, Lambert, Lundberg, Marble, Martinez-Humenik, Neville, Scott, and Smallwood still voted NO. Remember their names.
To learn more
http://www.denverpost.com/2017/04/23/how-colorado-hospital-provider-fee-works/
http://www.coloradoindependent.com/157054/hospital-provider-fee-explained
Originally published in The Weathervane No 2 on June 1, 2017. [Subscribe]
