Lawmakers reach high-stakes deal to save rural hospitals

Two House lawmakers and two Senate leaders have reached bipartisan agreement on a high-stakes and hard-fought state finance deal that fell apart as many times as it came together.

The bill, which centers around reclassifying the state’s hospital provider fee into a government-owned enterprise, seeks to reverse a $264 million cut to hospitals statewide, which was part of the $26.8 billion budget sent to Gov. John Hickenlooper Wednesday. With just five working days left in the 2017 session, lawmakers fear what would happen to hospitals if an agreement couldn’t be reached.

If approved, the measure, “Sustainability of Rural Colorado,” would save close to a dozen rural hospitals, fund rural schools, give small businesses a break on business personal property taxes, and set aside money for long overdue transportation projects. But perhaps its most sought-after achievement — at least by Democrats — lies in reclassifying the hospital provider fee. The fee helps cover the cost of medical care for low-income Coloradans and is matched by federal dollars. Reclassifying it moves roughly $600 million to $700 million out from beneath state constitutionally-mandated revenue limits set by the Taxpayer’s Bill of Rights (TABOR).

With reclassification, the state can collect more revenue starting July 1 to spend on roads, education and other projects. It also spares hospitals from the budget chopping block this year. Republican lawmakers long have opposed reclassification because they see as an end run around TABOR. In exchange for reclassification, Democrats working on the deal agreed to lower the state’s revenue limits by $200 million, a move that, in turn, limits state spending.

Sen. Jerry Sonnenberg, a Sterling Republican who sponsored the bill and who has 11 rural hospitals in his district, told The Colorado Independent that the measure has been “the largest, most difficult-to-navigate piece of legislation – but I would also argue the most important piece of legislation I’ll ever run in my life.”

And its fate is not assured. It first must hurdle the Senate Appropriations Committee Friday morning, which means getting by Sen. Kevin Lundberg of Berthoud, one of the Senate’s most conservative members.

Such an agreement has been in the works since last year. But negotiations intensified over the past 10 days when all the talk at the Capitol has pivoted on “do you have a deal?”

The intensity ramped up Monday, when Sonnenberg told reporters a deal had been reached, only to be passed a note saying it was off. Then he and the other three lawmakers kept ironing out the last key points of division between the House and Senate and between Republicans and Democrats.

Sonnenberg, Sen. Minority Leader Lucia Guzman, Democratic House Majority Leader KC Becker and Republican Rep. Jon Becker have been working and meeting outside the state Capitol and talking several times a day as they tried to come up with one more compromise.

At this hour, the agreement looks like this:

• Medicaid copays: The last major sticking point was whether to require Medicaid recipients to pay a little more for prescriptions and outpatient care. Democratic Rep. Becker of Boulder indicated that was a non-starter for her caucus, while Republican Sonnenberg of Sterling said it was not something he would back away from.

Under the agreement, the cost for prescriptions for Medicaid recipients would double from $1 to $2; outpatient copays would also double from $2 to $4. Both may vary slightly based on family income. A previous agreement also called for patients to pay more for daily inpatient hospital stays, but to appease Democrats, that provision was nixed.

Rural schools would get a one-time funding boost of $30 million in 2017-18, a change from earlier this week when the boost was to be $10 million per year over three years. That drew opposition from Michelle Murphy of the Colorado Rural Schools Alliance, who said that, spread out over 147 rural school districts, the funding wouldn’t help that much. The boost will be funded by increasing the state’s recreational marijuana tax by 2.1 percent. Currently, the tax is 10 cents on the dollar, with an additional state sales tax of 2.9 percent. The total tax would be 15 percent, a maximum that is already allowed under the state’s marijuana laws. The state education fund would receive $20 million for the two years following.

• Another lingering issue: The fee charged by the state Department of Health Care Policy and Financing to administer the hospital provider fee program would decrease from 5 percent to 3 percent. The savings from that drop – up to $56 million per year – would go to the hospitals in the provider fee program. With a federal federal match, it would amount to an additional $112 million per year.

• The provision on the state’s business personal property tax also changed from an earlier draft. Last week, it would have allowed small businesses to receive a state tax credit against county taxes paid on business property valued at up to $18,000. That credit is now limited to property with assessed values of up to $7,300.

Funding for transportation projects – with 25 percent of total transportation dollars earmarked for rural communities – now at $1.88 billion, to be paid for with $50 million from the state’s highway trust fund and $100 million from the general fund, which is largely made up of sales and income tax revenues. The $150 million would finance bonds for transportation projects. Another $120 million per year would go to pay for controlled maintenance at the state’s public colleges and universities.

• What remains unchanged: The $200 million reduction in the state’s TABOR limits, currently set at about $13.3 billion. The reduction is meant to counterbalance the removal of provider fee revenues – about $656 million in 2017-18 – from the state’s revenue limit into a government-owned enterprise. TABOR allows for enterprises. Among the largest: college tuition , which pays for college costs, and fees paid at state parks, which pay for the operations of those parks.

• Also unchanged: State agencies would be required for the 2018-19 fiscal year to submit budgets to the governor’s budget office showing a 2 percent across-the-board cut.

Sonnenberg beamed as he disclosed the agreement Wednesday afternoon. But he was later somber about the costs to his rural constituents if an agreement was not reached. His district includes two hospitals that could close, and that could cost lives.

“This [bill] may cost me an election,” he said, meaning that some Republicans both inside and outside the state Capitol are talking about finding someone to challenge him in a primary.  Sonnenberg, a farmer and now at the end of his 11th year in the legislature, is up for reelection in 2018 to his final term in the state Senate and the General Assembly.

“You have to do the right thing for your constituents,” he added. “It’s important to note that we’re addressing unintended consequences because of federal mandates” such as the expansion of Medicaid. “To just leave our hospitals out in the cold, and balance the budget on the backs of those hospitals…it’s like sticking your head in the sand.”

According to the Colorado Hospital Association, as many as a dozen rural hospitals, including two in Sonnenberg’s district, could close without the fix from the provider fee bill.

Sonnenberg’s Senate co-sponsor, Senate Minority Leader Lucia Guzman of Denver, agreed that this has also been the most difficult bill she’s ever worked on.

Reclassifying the provider fee into an enterprise is a huge challenge that has not come easy, she told The Independent. The agreement doesn’t include everything she wanted, but she called it a major start. Guzman, a Denver pastor, grew up on a farm in Texas and has taken on rural issues as a lawmaker, most notably, attempting to help rural communities with broadband Internet access.

“I have never experienced this amount of stress, lack of sleep and worry,” Guzman said. But, she added, the support she has received from rural Coloradans “shows me why all that stress has been well worth it.” 


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