Provider tax plan ill-advised, says CCHC

St. Paul, Minnesota---Governor Ventura's plans to institute a permanent tax on health care services did not sit well St. Paul-based Citizens' Council on Health Care (CCHC)---a health care policy group that authored an extensive report last year on the tax.

"The Governor claims the tax is a mechanism for making health insurance more available, but increasing the cost of health care decreases access to health care services. Since it began in 1993, the provider tax has increased the cost of health care in Minnesota by over $907 million," says Twila Brase, president of CCHC.

Governor Ventura in his State of the State address proposed to permanently set the MinnesotaCare provider tax at 1.5 percent, even as he proposed to eliminate the 1 percent premium tax paid by HMOs, and the 1.5 percent tax on wholesale prescription drugs.

"Eliminating any tax on health care is a good idea. But relatively speaking, the HMOs pay very little in health care taxes. They've paid only $46 million over three years compared to the more than $150 million paid by hospitals, doctors, and dentists," Brase says.

Because the HMO tax is passed on directly to small businesses, the business community has pressured the Ventura administration to eliminate this tax burden which has added to the rapidly rising cost of health insurance premiums. As a result of lobbying, the HMO tax was suspended in 1999 and no revenue was collected in 2000.

Brase also takes issue with Ventura's rationale: "Only in Minnesota are patients required to pay the state whenever they get sick or injured. Governor Ventura said that he did not intend to tax essential services, but in most cases, health care is an essential service. This policy should be reconsidered if Governor Ventura seriously intends to cut the cost of health care and expand access to services."

In 1992, the state legislature enacted a 2 percent tax on health care services and supplies, called the MinnesotaCare provider tax. Revenues were collected to pay for the MinnesotaCare subsidy program for the uninsured who were not income-eligible for Medical Assistance. In 1993 hospitals began to pay the tax, and by 1994 health care practitioners were required to pay 2 percent of their gross receipts to the Minnesota Department of Revenue. Wholesale drug distributors, pharmacies, and surgical centers were also taxed. Since January 1, 1998, the provider tax has been temporarily reduced to 1.5 percent.

Since 1995, the federal government has paid for one-half of most MinnesotaCare expenses, freeing funds for other initiatives such as medical education, transfers to the General Fund, policy research, data collection systems, public health initiatives, and a "rainy day" fund, now holding $135 million--a point that Brase finds particularly concerning.

"The Minnesota legislature has accumulated dollars gained through sickness in a dedicated slush fund," says Brase. "If the tax is to be retained, we believe more accountability and better decisions would be made by placing the subsidy program and provider tax revenues into the General Fund."

Media Contact:

Twila Brase, President
Phone: 651-646-8935 (office)
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