’Not a lot of good news’ for CT health care industry, says hospitals chief

Unresolved issues at both the state and federal level have left John Murphy, the president and CEO of the Western Connecticut Health Network, feeling a bit flustered.

“I don’t see a lot of good news out there, truthfully,” he told the Business Journal.

connecticut hospitals health care
John Murphy

Chief among Murphy’s concerns is the ongoing legal battle between most of the state’s hospitals under the Connecticut Hospital Association umbrella and Connecticut regarding the highly controversial hospital tax.

While the state has requested the CHA lawsuit filed in 2016 be dismissed, the organization has asked for a trial date to be set.

At issue is the fact that the biennial state budget passed last year increases taxes on hospitals by nearly double, from $556 million to $900 million per year. The hospitals paid approximately $438 million more in taxes last year than it received back from the state; that figure is expected to decrease to about $228 million this year.

Every state but Alaska imposes some kind of health provider tax. In Connecticut’s case, the state collects taxes from hospitals and nursing homes and then redistributes a portion of those funds to those industries. The latter then triggers a federal Medicaid reimbursement.

But while the CHA applauded the measure last fall, it still maintains that the hospital tax violates the U.S. and Connecticut Constitutions, as well as a number of federal and state statutes, and that the state’s reimbursement and tax scheme violates the federal Medicaid Act. The group further maintains that the tax exceeds by nearly 30 times the corporate tax rate that was in place before the recent rewriting of the federal tax code under the Tax Cuts & Jobs Act.

“The level of reimbursement is so low that access to adequate care can be a problem,” Murphy said, “as it becomes difficult to find insurance providers willing to accept these rates.”

Murphy said that WCHN’s hospitals – Danbury, Norwalk and New Milford – collectively lost $80 million last year in Medicaid benefits that were not reimbursed, and that WCHN pays about $180 million a year in state taxes.

He further noted that the state has regularly applied its hospital tax receipts to help balance the state budget.

“We are not trying to bankrupt the state of Connecticut,” Murphy said. “What we’re asking the state to do is what every other state has done – use the tax to leverage federal matching funds to assist hospitals.”

Murphy said he hoped a court date would be set during this calendar year.

Meanwhile, the U.S. Centers for Medicare and Medicaid Services has not ruled on the state’s changes.

Also on the state front is the legislature’s promised override of Malloy’s veto earlier this month of a plan that would restore $54 million for the Medicare Savings Program, which serves as many as 113,000 citizens. The governor argued that the math behind the plan would result in “pushing problems off into the future,” but both Senate Democrat President Pro Tempore Martin Looney and Senate Republican President Pro Tempore Len Fasano, among others, have indicated they have the votes to overturn the veto.

Murphy expressed satisfaction that the legislators would prove good on their word, dismissing opponents’ viewpoints as “misinformation or gamesmanship.

“If for some reason there is no funding,” he continued, “it will once again be the frail in our society who are left without appropriate coverage.”

That concern also formed the bedrock of Murphy’s objections to the new federal tax law’s elimination of the individual health care mandate established by the Affordable Care Act, and the repeated efforts at repealing that same act.

“The average person in their 20s, 30s or even older may feel they’re healthy enough that they don’t want to be bothered with buying health insurance,” he said of the mandate. “And now there’s no penalty. But that population can still suffer a serious accident or severe injury, where the costs can be staggering.”

Even discounting that eventuality, Murphy said that it will be older and/or sicker patients who will be seeking to purchase health insurance, “and their costs will inexorably rise because they’re a riskier population.”

Murphy noted that in November the Congressional Budget Office and the Joint Committee on Taxation estimated that repealing the mandate would reduce federal deficits by about $338 billion over the 2018–2027 period and increase the number of uninsured people by 4 million in 2019 and 13 million in 2027.

The two bodies have since said they expect to revise the uninsured number downwards, though they did not say when such a figure might be made available.

Murphy further decried the federal government’s ending of the ACA’s cost-sharing reduction program, which reduced individuals’ health insurance outlays if they met certain criteria. The end result, again, will be more people going without insurance, Murphy said.

“We’re looking at tens of millions of dollars” lost by providing essentially free care to uninsured patients, Murphy said. “All of this is a step backwards from where we were even in 2010,” when the ACA went into effect, he added.

As for repealing the ACA entirely, Murphy doubted that Republicans still have the political ammunition and/or will necessary to mount yet another such effort in the wake of three major failures last year. Replacing the ACA with something else is also “unlikely,” he said.

Should the midterm elections later this year put Democrats in charge of either the House or Senate – or both – Murphy said that “it’s going to get really complicated for Republicans, as I don’t see any legitimate replacement strategy on their side.”

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