MNCARE PROVIDER TAX GOES UP: Much of increase used to balance state budget

(St. Paul, Minnesota) - Minnesota's tax on health care services will increase by 0.5 percent on January 1, 2004. More than $1.6 billion has been collected since the MinnesotaCare provider tax began in 1993.

"The provider tax is a tax on patients. Patients pay through higher costs for care or less access to care. The provider tax has increased the cost of health care in Minnesota and made doctors less interested in coming to or staying in Minnesota," says Twila Brase, president of the Citizens' Council on Health Care (CCHC).

TAX INCREASE: The tax is paid to the State primarily by hospitals and practitioners. Expected increases in provider tax revenue as a result of returning the tax to 2 percent are as follows according to the MN Department of Finance:

2004: $23.8 million 2005: $82.2 million 2006: $90.1 million TOTAL: $196.1 million

FUND TRANSFER: The increase will not necessarily be used for health care. At the end of the 2003 session, Minnesota legislators used the provider tax to balance the State budget. Provider tax revenues are held in the Health Care Access Fund (HCAF), which will also receive an additional $82.9 million from reinstatement of the 1 percent premium tax on HMOs. The Department of Finance November 2003 Forecast explains the transfer of tax dollars out of the HCAF: "At the end of each of fiscal years 2005, 2006, and 2007, HCAF balances will be transferred to the general fund in a dollar amount not to exceed the figures noted here":

2005: $192.4 million 2006: $ 52.9 million 2007: $ 59.1 million TOTAL: $304.4 million

"The provider tax is feeding a slush fund. Do patients really want a tax on health care to be used to fund K-12 education, higher education, and construction?" asks Brase.

HISTORY OF TAX: The MinnesotaCare provider tax became law in 1992 as a funding mechanism to transition Minnesotans to managed care and to expand Medicaid (the MinnesotaCare program). The tax was first collected in 1993, starting with hospitals. Physicians, dentists, and other health care professionals began to pay the tax in 1994. Originally at 2 percent, the tax was reduced to 1.5 percent in 1997 when legislators found it to be collecting more than necessary for the HCAF's dedicated programs. The tax was originally devised as a pass-through tax - the cost of the tax was to be be passed through to insurers, and their policyholders - but the legislature failed to create a mechanism to assure insurer payment of the bill. The tax is called a provider tax because health care providers (practitioners and facilities) are required to pay it whether or not they collect it from insurance companies and patients.

"Taxing patients is a bad idea. If the initiatives funded by the provider tax are supported by the general public, funds to pay for these programs should come out of the general fund, not out of the pockets of patients," Brase says.



Media Contact:

Twila Brase, President and Co-founder
Office: 651-646-8935