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February 20, 2019

Hospitals decry proposed tax shift

HBJ File Photo Connecticut Hospital Association CEO Jennifer Jackson.

The relationship between Gov. Ned Lamont and the state’s hospital sector isn’t off to a healthy start.  

On Wednesday, Lamont’s proposed budget cancels a scheduled decrease in the state’s complex and long-controversial tax on hospitals, and the industry isn’t happy about it.

Connecticut Hospital Association CEO Jennifer Jackson said Wednesday afternoon that the association is “strongly opposed” to Lamont’s proposed budget.

“The [Lamont administration] is not honoring the bipartisan agreement for this year or next year, and the budget makes additional cuts to hospitals,” Jackson said in a statement. “Hospitals and health systems are key to the state’s economic recovery and employ more than 100,000 people in Connecticut. We continue to be willing partners to find a sustainable solution, but this is not it.”

Hospitals pay the state the so-called “hospital user fee” and the state is able to leverage related reimbursements from the federal government, which it then uses to partially repay the hospitals.

Specifically, Lamont’s budget would tax hospitals $900 million in fiscal year 2020, which is the same amount the state taxed hospitals this fiscal year.  Hospitals were set to receive $496 million in reimbursements (called “supplemental payments”) this year.

A 2017 law scheduled a decrease in the tax for fiscal year 2020, from $900 million to $384 million, while supplemental payments were to drop to $166.5 million.

However, Lamont’s budget effectively keeps the current structure in place, continuing to tax $900 million while also reimbursing approximately $40 million less than the $496 million in supplemental payments this year.

If the scheduled 2017 changes were to take effect next year, the impact on the state’s bottom line would be $406 million in lost revenue, Lamont’s budget director, Melissa McCaw, said Wednesday.

The Hospital Association and many of its members sued the state in 2016, challenging the tax.

That suit remained ongoing on Wednesday.

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