Thursday, July 21, 2011

How Minnesota Repealed Its Provider Tax

Patricia Lindholm, MD,
2010-2011 MMA President
An unexpected but satisfying item was tucked in the final Health and Human Services Budget Bill passed by the Legislature and signed by Gov. Mark Dayton this week.

Lawmakers have agreed to phase out the 2 percent provider tax and repeal it altogether in 2019.

I am relieved by this unexpectedly positive development not because it is a pocketbook issue – though it should help reduce health care costs – but because lawmakers are redressing a breach of trust with Minnesota’s medical community that has soured the relationship between physicians and state government, since this law was passed in 1992.

To doctors, it has always felt particularly unfair that the state decided to make those who must seek medical services – which is already a hardship – also pay a selective tax. Then when lawmakers rolled out the tax, they weren’t transparent about it. They explicitly prevented providers from telling patients about the tax by itemizing it on bills.

The courts ultimately overturned this provision, but the feeling of distrust toward lawmakers remained. Finally, after saying the funds would only go to MinnesotaCare, lawmakers broke that promise time and time again by using hundreds of millions of these dollars to balance the general budget. Once again doctors were left feeling distrust and disillusionment.

So I want to thank lawmakers for taking this step to repeal this law and repair the relationship. I must admit that after many years of the MMA working to repeal this regressive, selective tax, this victory seemed to come out of nowhere.

The person who deserves the most credit for this is probably House Majority Leader Matt Dean (R-Dellwood).  Rep. Dean saw early on that as the Affordable Care Act is fully implemented, there will no longer be a need for MinnesotaCare and the provider tax. The MMA worked with Rep. Dean early in the 2011 Session to help him draft a bill that would reduce the size of the provider tax as the need for it went down.  This bill passed a few House committees but did not move in the Senate. Then during the final budget negotiations Rep. Dean, with the support of Senate leadership and Gov. Dayton saw an opportunity to replace the provider tax with the new federal subsidies that will come online in 2014 for Minnesotans earning up to 400 percent of the federal poverty level.

I am convinced that the MMA helped lay the ground work for this breakthrough by working hard since the tax was adopted’s adoption to remind law makers that it is regressive, hits sick people harder than healthy, and adds to the overall cost of health care. Many legislators over the years, both Republicans and Democrats, agreed with us that this was a bad tax, yet there was never enough support to find the $450-$500 million it raises each year to replace it.
Now, our challenge over the next eight years will be to continuously remind legislators of their commitment to repeal the “sick tax” and ensure that this unfair tax eventually goes away.

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