CT legislators to hospitals: Trust us on taxes, again
Shahrzad Rasekh / CT Mirror
A sign points to the entrance to the Hartford Hospital emergency department.
Legislators on Wednesday asked Connecticut’s hospitals, which sued the state over escalating taxes 10 years ago, to trust them with their money one more time.
House Speaker Matt Ritter, D-Hartford, said Wednesday that legislators, due to a lack of time, couldn’t shrink an approved $375 million hospital tax hike down to $285 million before the General Assembly’s mandatory adjournment deadline at midnight.
But the tax increase, part of a complex plan to help hospitals and the state financially, doesn’t take effect until July 2026. The speaker offered assurances that the industry wouldn’t be harmed.
“If there’s any concern in hospital land that the state is somehow going to do them wrong, I just don’t see that happening,” Ritter said. “We’re going to want to get to a fair deal for everybody.”
Connecticut has been levying a providers tax on hospitals since 2011. But for some of that history, it was a tax in name only, designed chiefly to increase federal aid.
As originally conceived, the industry would pay $350 million per year to the state, which redistributed those funds, plus more, back to hospitals. That exchange, legally, counted as public health spending and entitled Connecticut to extra Medicaid reimbursements from Washington.
Hospitals and the state came out ahead, and both sides were happy — but not for long.
As Connecticut struggled with budget deficits for much of the 2010s, it gradually took more from hospitals and returned less.
The industry, which sued the state in federal court in 2015, was losing $436 million under this modified taxing scheme by 2017.
Lamont settled the lawsuit upon taking office in January 2019, and he and lawmakers approved a plan to gradually move the tax back to its original win-win format.
But when President Donald J. Trump and Congress targeted Medicaid earlier this year for cuts worth hundreds of billions over the next decade, Connecticut officials feared the provider tax arrangement — which most states follow — might be capped, reduced or eliminated altogether.
Still, state officials hoped to boost the tax, and federal aid, one more time this year.
Lamont proposed increasing the hospital tax, which currently collects $820 million from facilities, by another $140 million. The Democratic-controlled legislature upped the ante, pitching a $375 million increase. The hope is this will trigger at least $94 million in extra federal Medicaid reimbursements.
That projection and the $375 million tax increase were built into the new $55.8 billion two-year state budget the General Assembly adopted Tuesday.
But hospital officials had warned Lamont Tuesday morning that they believe any hike beyond $285 million would surpass existing federal limits on the provider tax system. Any state increase needs approval by federal Medicaid administrators before it can be applied.
Both Ritter and Lamont’s budget spokesman, Chris Collibee, said the state still could negotiate a $285 million tax increase with federal Medicaid officials this summer, regardless of the increase listed in the adopted state budget, and simply have state legislators adjust it in statute later.
“We have assured [the Connecticut Hospital Association] that the hospitals will be treated equitably,” Collibee said.
Connecticut legislators are expected to return in special session this summer or fall to adjust the state budget to compensate for likely cuts in federal aid. And since the hospital tax increase wouldn’t begin for 13 more months, legislators could adjust the tax then, or even during the regular 2026 session, which starts in early February.
“The provider tax is very important to everybody,” Ritter added.
But House Minority Leader Vincent J. Candelora, R-North Branford, said Lamont and the legislature’s Democratic majority handled the hospital tax in disorganized manner.
“I am puzzled by the fact that the administration has never prioritized that [tax issue] to get it done before the budget was passed,” he said.
The hospital association wrote in a brief statement Wednesday that “Making the tax adjustment in the budget remains important to Connecticut hospitals. We are meeting with legislators and staff to discuss further.”
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