OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

http://www.cga.ct.gov/ofa

sHB-5588

AN ACT CONCERNING THE TIMING OF PAYMENTS FROM SUPPLEMENTAL INPATIENT PAYMENT POOLS FOR SHORT-TERM GENERAL HOSPITALS.

OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

FY 17 $

FY 18 $

Social Services, Dept.

GF - Potential Cost

Up to $110.2 Million

Up to $110.2 Million

Social Services, Dept.

GF - Revenue Loss

Between $164.3 and $556.1 Million

Between $164.3 and $556.1 Million

Note: GF=General Fund

Municipal Impact: None

Explanation

The bill may result in a cost to the Department of Social Services (DSS) of up to $110.2 million annually in the event federal funds are delayed or never received for inpatient Medicaid supplemental hospital payments and supplemental payments for small hospitals. This amount reflects the FY 16 anticipated federal share of supplemental hospital payments ($100.6 million for the inpatient pool and $9.6 million for the small hospital pool). For FY 16, total supplemental payments to hospitals include (1) $150.2 million in inpatient supplemental payments ($100.6 million federal and $49.6 million state) and (2) $14.1 million to small hospitals ($9.6 million federal and $4.7 million state).

In addition, the bill may result in a revenue loss to the state of between $164.3 million and $556.1 million. The bill allows hospitals to deduct from their quarterly tax payments the total supplemental payments remaining, including both the state and federal share, which is $164.3 million annually. There is no mechanism in the bill to allow the state to recoup tax payments in the event the state pays a hospital their total supplemental payment by the end of a fiscal year. The deduction is tied to timely quarterly payments to hospitals.

Secondly, the bill may result in a revenue loss due to violating the federal hold harmless prohibition required for the hospital user fee/tax and making the state subject to federal penalties. The state currently taxes hospitals 6% of net inpatient and outpatient revenue, which generates $556.1 million. If the full penalty is applied, the revenue loss would be $556.1 million. The bill may be interpreted to include a hold harmless provision for taxpayer hospitals as it includes a tax offset in the event authorized supplemental payments have not been made, which is in violation of federal law. The federal law requires a reduction in the amount of revenue received by the state if there is a hold harmless provision. It is unclear if the revenue impact would be cumulative.

The Out Years

The annualized ongoing fiscal impact identified above would continue into the future subject to the amount of hospital supplemental payments, the amount of any federal funds not received at all or in a timely fashion, and the amount if any in revenue offsets due to a statutory hold harmless provision for taxpayer hospitals.