JEFFERSON CITY, Mo. – As budget talks advance, the Missouri Hospital Association (MHA) is pivoting from recent budget success to the renewal of the federal reimbursement allowance (FRA) – the same sunset renewal that barely made it through in last year’s senate shutdown.
SB 1080, sponsored by Senate Appropriations Chairman Sen. Kurt Schaefer, R-Columbia, and companion bill HB 1534 extend the sunset three additional years – from September 30, 2016 to September 30, 2019 – for the FRA.
“Missouri’s provider tax programs, including the hospital federal reimbursement allowance, have a sunset that requires they be reauthorized by state lawmakers periodically,” said Dave Dillon at the MHA. “Although lawmakers have consistently reaffirmed the value of the program, they have, on different occasions, changed the sunset from a single year to multiple years. Generally this is done in a single bill for all provider tax programs.”
The allowance is the third largest source of tax revenue, annually bringing in almost $1 billion – twice as much as corporate and franchise taxes combined. Only income tax and sales and use taxes bring in more revenue to the state. Further, due to federal match, the renewal will bring in close to $2 billion. The $847.2 million in FRA funds in fiscal year 2009 generated $1.522 billion in federal funds, producing a total of $2.415 billion to support the state’s Medicaid spending.
Without renewing the allowance and extending the sunset on the fund, a budget hole of $3 billion would be left in the state budget. The additional billion would be caused by ancillary services being shut down due to reliance on FRA. Medicaid and Medicare would not be able to reimburse costs, causing an increase in insurance charges. Additionally, if reimbursement fees disappear, many say there would be hidden tax increases.
The MHA says the FRA is also essential to funding schools, highways, veterans’ services and other state priorities because it saves the state more than $1 billion in general revenue that can be directed to other, non-Medicaid spending.
“The use of provider taxes allows the state to receive the federal share of Medicaid funding with very limited use of general revenue,” Dillon explained. “Missouri has been very effective in maximizing the value of the FRA program. The state is currently at the federal cap for use of FRA revenue as a state match.”
The FRA program began in 1991 under then-Gov. John Ashcroft, but has now evolved into a program that maximized federal match and further reduces burden on MO HealthNet’s state general revenue impact. The program is a true public-private partnership, which the MHA says directly benefits the state’s economic and health care infrastructure. When the FRA was adopted, 39.5 percent of the Medicaid budget was funded by general revenue. Today, Medicaid’s share of the general revenue budget is 15.4 percent.
In essence, healthcare providers provide funds to the state, then HealthNet uses the funds to earn the needed federal match.
Right-to-work and voter ID prioritization caused a shutdown in the Senate when a traditionally unused motion to previous question (PQ) was moved to force a vote on right-to-work. Last year’s SB 210, also sponsored by Schaefer, extended the sunset one year, was the only bill to make it out after the PQ.
FRA only received 13 votes against in the House last session.
Rachael Herndon is the editor at The Missouri Times, and also produces This Week in Missouri Politics, publishes Missouri Times Magazine, and co-hosts the #moleg podcast. She joined the Missouri Times in 2014, returning to political reporting after working as a campaign and legislative staffer.
Rachael studied at the University of Missouri – Columbia. She lives in Jefferson City with her husband, Brandon, and their two children.
To contact Rachael, email firstname.lastname@example.org, or via Twitter @TheRachDunn.