Hospital provider fee dead, or at least on life support, for 2017
An intense two-year battle between Colorado’s outgoing Senate president and the outgoing speaker of the House appears to be ending right along with the terms of both lawmakers.
The issue is whether to reclassify the hospital provider fee, a bit of bookkeeping that could free up millions of dollars for roads, schools and rural health care in an era when Colorado needs it.
The fee is charged by the state to hospitals for each night a patient stays overnight or for each time outpatient services are rendered. Revenues are then pooled by the state, matched with federal dollars and, under current law, redistributed to the hospitals to pay for Medicaid and for uninsured medical coverage.
The money generated by the fee, about $700 million per year, is counted as state revenue and has pushed the state over revenue limits set by the 1992 Taxpayer’s Bill of Rights, or TABOR, which caps just how much revenue the state is allowed to collect and spend. Anything over that revenue limit has to be refunded back to taxpayers, which has happened three times: in 2000-01, a small refund in 2004-05 and another small refund in 2014-15. If you don’t remember that most recent one, it was about $8 per individual or $30 per family and was applied to your state income taxes, if you owed them, or included in your refund, if you had one.
What Gov. John Hickenlooper, Democratic lawmakers, and virtually every major business group in the state have wanted for the past two years is to reclassify the fee to make it exempt under TABOR. That plan, championed at the statehouse by Speaker of the House Dickey Lee Hullinghorst, would reclassify the fee as an enterprise, which is defined as a government-owned business that gets less than 10 percent of its revenue directly from the government. That enterprise classification is allowed under TABOR, and already applies to revenue such as the state lottery, parks and wildlife fees and college tuition.
Those who back the reclassification say it would help rural hospitals facing cuts in their reimbursements, both from the state and the federal government. Rural hospitals bear a greater share, proportionally, of the costs of unreimbursed patient care, whether it’s from the gap between what Medicaid pays for low-income health care and what it costs a hospital to provide that care, or from the cost of providing healthcare to uninsured patients.
Hickenlooper, in his 2017-18 budget plan, suggested cutting back on revenues from the provider fee by about $195 million to keep the state from exceeding its TABOR revenue limits. It’s part of Hickenlooper’s proposal to cover a $500.1 million budget gap for 2017-18. Less revenue from the fee means less matching dollars from the federal government, and less reimbursement to rural hospitals that rely on those dollars to cover their larger share of uninsured patient costs, which aren’t going down.
There’s another financial advantage to reclassifying the fee: by taking that revenue out from under TABOR, about $300 million per year would be available to the General Assembly to spend. Democrats have insisted that the money go to K-12 education, transportation and health care. The bills they’ve introduced to codify those spending priorities have failed twice in the past two years.
This session, lawmakers most want that hospital provider fee revenues to help pay for transportation, the topic of the most chatter as the 2017 session is set to begin next week. Sandra Solin of Fix Colorado Roads told reporters Wednesday that the state hasn’t been able to cover transportation projects since 2009, when lawmakers changed the law that allows annual transfers to a highway trust fund, primarily to pay for transportation projects. It didn’t help that the state was headed into a recession, either.
Funds have been available for transportation projects in the last two fiscal years, but in a very limited way. In 2015-16, the legislature transferred just under $200 million to the Colorado Department of Transportation to cover initial costs to widen I-70 through the Globeville, Elyria and Swansea neighborhoods in Denver. Similar amounts will be available until 2019-20, but only to cover the I-70 project, setting up park-n-rides for a statewide bus service, and widening I-25 north of Denver, known as the North Corridor project.
That leaves out scores of potholes that need filling and close to 1,000 other projects on CDOT’s approved projects list. The list estimates the cost of those projects at $3 billion, but that was in 2015. In addition, 170 projects on the list did not include estimated costs. Solin estimates the real price tag at around $9 billion, which also takes into account higher construction costs. For example, costs for the North Corridor project in 2013 were estimated at $952 million. Today, it’s $1.7 billion.
This morning, Democratic Senate Minority Leader Lucia Guzman of Denver was among the four legislative leaders to speak at the Metro Denver Chamber of Commerce’s legislative preview. She told the audience that she’s working on another bill to reclassify the hospital fee, with a goal of providing at least some of the money for the transportation wish list.
But Guzman may have to go it alone, or at least with less help from House Democrats who are now urging her to “move on.”
During the past two sessions, now-outgoing Speaker of the House Dickey Lee Hullinghorst was the prime sponsor of the reclassification bill. For the 2016 version, she picked up a Republican sponsor – Sen. Larry Crowder of Alamosa – in the Senate. But, before last year’s session even began, the now-outgoing Senate President Bill Cadman, a Republican, announced he had a legal opinion from the legislature’s lawyers that said reclassifying the fee would be unconstitutional under TABOR.
The lines were drawn.
Democrats fired back with opinions from Attorney General (and Republican) Cynthia Coffman and her predecessor, Republican John Suthers, now the mayor of Colorado Springs. Both said they believed reclassifying the fee would be constitutional and fit the definition of enterprise set up under TABOR.
Hullinghorst introduced the bill in late March of 2016. It took a month for the measure to move through the House, a delay designed to see if negotiations with Senate Republicans would bear fruit. Finally, on April 29, the bill made its way to the Senate, where Republican leaders sat on it until May 10, the day before the session ended, and then killed the bill in its only committee appearance.
Both Hullinghorst and Cadman are term-limited and their leadership of the General Assembly ends next Wednesday, Jan. 11, when the new General Assembly is sworn in for the 2017 session.
That leaves the hospital provider fee battle still unresolved.
Guzman told The Colorado Independent this week that business groups who backed the provider fee change in 2016 still back it today. Kelly Brough, president and CEO of the Denver Metro Chamber of Commerce, told the audience at this morning’s legislative preview that she still wants to see the provider fee reclassified, as it could help fund badly needed transportation projects throughout the state. ‘
But Brough’s tenor changed after comments by incoming Senate President Kevin Grantham, a Republican from Cañon City, who said plans to reclassify the fee are “off the table.” Grantham hinted that he has adopted the same view as Cadman and for the same reason: the legal opinion from the General Assembly lawyers that said the change would be unconstitutional. “It’s a non-starter,” Grantham insisted. “We will side on the side of the taxpayers.”
After Grantham’s remarks, Brough tempered her enthusiasm for the policy change.
“I’m very grateful for the directness from Sen. Grantham,” Brough told The Independent. Understanding his concerns “allows us to figure out if there are other ways” to accomplish a common objective: funding transportation.
The Brough still believes that the provider fee, as it currently stands, impacts the state’s ability to effectively fund transportation,” she noted that there are “other strategies we’re working on” to come up with funding. “When there’s a hard line, we should keep talking about the strategies we share,” she said.
Incoming House Majority Leader Rep. K.C. Becker of Boulder gave a similar opinion Wednesday. Knowing that Grantham is unwilling to budge, she and other House Democrats are prepared to accept that and move on, she said.
Hickenlooper still backs changing the provider fee, according to spokesperson Kathy Green. “The governor is looking at all options but continues to believe that reclassifying the hospital provider fee is an easy and sensible way to solve some of the state’s budget issues, she told The Independent today.
As for Crowder, who took a risk backing a bill so unpopular with his fellow Republicans in the Senate, he hasn’t said no to a 2017 version. Crowder told The Independent today he has not seen Guzman’s bill and will make a decision when he does. But if her bill is like the one he sponsored last year, he’s prepared to back it. “I have to stand by my rural hospitals,” he said.
Headline photo credit: _ChrisUK via Creative Commons license, Flickr
Photos of Guzman and Grantham: Dave Anderson of InSync Photography + Design, used by permission, Metro Denver Chamber of Commerce
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