Date Requested:February 11, 2011
Time Requested:02:01 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2011R2669 Introduced SB492
CBD Subject: HEALTH CARE PROVIDER TAXES INCREASED
FUND(S)
Dedicated Eligible Acute Care Provider Enhancement
Sources of Revenue
Special Fund
Legislation creates:
Neither Program nor Fund

Fiscal Note Summary

Effect this measure will have on costs and revenues of state government.

    The stated purpose of this bill is to maximize federal funding for Medicaid by establishing a hospital Medicaid upper payment level program for a two-year plus period. The bill increases the health care provider tax imposed on gross receipts of providers of certain eligible acute care hospitals. Imposition and collection of taxes under the bill is contingent upon federal approval of a state plan amendment establishing an appropriate hospital Medicaid upper payment level program that meets the requirements set forth in the bill. Imposition and collection of the taxes terminates prior to the end of the two-year term of the program upon the occurrence of certain events.
    
    As written, this bill would impose a tax of 0.88 percent on the gross receipts of certain eligible acute care hospitals. The bill defines “eligible acute care hospital” as any inpatient or outpatient hospital conducting operations in West Virginia that is not: (1) a state owned or designated facility; (2) a nonstate, but government owned facility such as a county or city hospital; (3) a critical access hospital, designated as a critical access hospital after meeting all federal eligibility criteria; (4) a licensed free-standing psychiatric or medical rehabilitation hospital; or (5) a licensed long-term acute care hospital. The bill provides that the tax may not be imposed until all of the following have occurred: (1) A state plan amendment is developed by the bureau of medical services, as authorized by the Secretary of the Department of Health and Human Resources; (2) the state plan amendment is approved by the Medical Fund Services Advisory Council; (3) a comment period of not less than thirty days for public comment on the state plan amendment shall have passed; and (4) the state plan amendment is approved by the federal center for Medicare and Medicaid services. All revenues attributable to the tax are to be deposited into a dedicated eligible acute care provider enhancement fund and are to be used only to support the hospital Medicaid upper payment limit program established via the bill. The bill contains provisions for the suspension of the tax. Also, the provisions of the bill are retroactive and apply on or after January 1, 2011 and expire June 30, 2013.
    
    According to our interpretation, actual imposition of the tax proposed by this bill is contingent upon U.S. Department of Health and Human Service Center for Medicare & Medicaid Services approval of the tax as an eligible tax for matching federal funds. Based upon available information, the tax on certain acute care hospitals would produce annual revenue of roughly $27.2 million. Additionally, if the acute care tax revenue is eligible to be matched with federal funds, and assuming a 3 to 1 matching ratio of federal funds to State funds, an additional $81.6 million would be available.
    
    Additional administrative costs to the State Tax Department associated with passage of the bill would be roughly $60,000.
    

Fiscal Note Detail
Over-all effect
Effect of Proposal Fiscal Year
2011
Increase/Decrease
(use"-")
2012
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 60,000 0
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 60,000 0
2. Estimated Total Revenues 0 27,200,000 27,200,000
3. Explanation of above estimates (including long-range effect):
    As written, this bill would impose a tax of 0.88 percent on the gross receipts of certain eligible acute care hospitals. The bill defines “eligible acute care hospital” as any inpatient or outpatient hospital conducting operations in West Virginia that is not: (1) a state owned or designated facility; (2) a nonstate, but government owned facility such as a county or city hospital; (3) a critical access hospital, designated as a critical access hospital after meeting all federal eligibility criteria; (4) a licensed free-standing psychiatric or medical rehabilitation hospital; or (5) a licensed long-term acute care hospital. The bill provides that the tax may not be imposed until all of the following have occurred: (1) A state plan amendment is developed by the bureau of medical services, as authorized by the Secretary of the Department of Health and Human Resources; (2) the state plan amendment is approved by the Medical Fund Services Advisory Council; (3) a comment period of not less than thirty days for public comment on the state plan amendment shall have passed; and (4) the state plan amendment is approved by the federal center for Medicare and Medicaid services. All revenue attributable to the tax is to be deposited into a dedicated eligible acute care provider enhancement fund and are to be used only to support the hospital Medicaid upper payment limit program established via the bill. The bill contains provisions for the suspension of the tax. Also, the provisions of the bill are retroactive and apply on or after January 1, 2011 and expire June 30, 2013.
    
    According to our interpretation, actual imposition of the tax proposed by this bill is contingent upon U.S. Department of Health and Human Service Center for Medicare & Medicaid Services approval of the tax as an eligible tax for matching federal funds. Based upon available information, the tax on certain acute care hospitals would produce annual revenue of roughly $27.2 million. Additionally, if the acute care tax revenue is eligible to be matched with federal funds, and assuming a 3 to 1 matching ratio of federal funds to State funds, an additional $81.6 million would be available. The tax would only apply to the 28 eligible acute care hospitals in West Virginia.
    
    Additional administrative costs to the State Tax Department associated with passage of the bill would be roughly $60,000. The additional costs would be for forms development and the revision of computer programs.
    


Memorandum
Person submitting Fiscal Note:
Mark Muchow
Email Address:
kerri.r.petry@wv.gov