Gov. Chris Sununu is at odds with the state’s hospitals over proposed changes to a key source of funding for Medicaid.
The governor says his proposal would bring more federal dollars into the state to support Medicaid. It would also set aside more funding for certain community-based health services – including mental health, which Sununu has accused the hospitals of not doing enough on.
But hospitals in New Hampshire have criticized the governor’s proposal because some of them would see a drop in funding, even though the total amount of money going to hospitals as a group wouldn’t change. Hospital leaders say that could force cuts to services and undermine their financial stability.
An amended version of the plan is moving through the New Hampshire Senate. But some senators say it needs more work to address the impact on hospitals.
“Half of these red hospitals are in the rural parts of the state, and we need them,” Sen. Cindy Rosenwald, a Nashua Democrat, said during a hearing Tuesday, referring to hospitals that would see their funding go down.
What is the Medicaid Enhancement Tax?
At issue is something called the Medicaid Enhancement Tax. In essence, New Hampshire imposes a tax on hospital revenues. It then pays nearly all of that money – 91% – back to hospitals in different forms. The maneuver allows New Hampshire to claim the same amount in federal matching funds.
The state uses that money – more than $300 million in each of the last two years – to help pay for its Medicaid program. That in turn reduces what the state has to spend from general funds.
The money that comes back to hospitals is largely through what are called “disproportionate share hospital payments,” or DSH payments. They’re intended to offset uncompensated care costs at hospitals that serve a high share of low-income patients.
The current structure has been in place since 2018, but it expires this year.
What is the governor’s plan?
Sununu’s proposal, unveiled to state senators last week, would make changes to how the Medicaid Enhancement Tax is paid back to hospitals – shifting some of it to other forms of payment that come with a higher federal match. That could potentially bring tens of millions more dollars into the state’s Medicaid program.
Under Sununu’s plan, the hospitals, as a group, would still get back 91% of what they pay through the Medicaid Enhancement Tax. But some individual hospitals would get more, while others would see cuts.
That led to pushback from some hospital leaders, who said they’re already being squeezed by rising labor costs and other challenges.
“It will only, you know, force decisions as to the types and levels of services that they can provide” for the hospitals that lose funding, Steve Ahnen, the president of the New Hampshire Hospital Association, said in an interview Tuesday.
But Sununu said last week that the hospitals have already been getting a “golden deal,” and criticized them for not doing enough to address the state’s shortage of mental health treatment – something the hospitals vigorously dispute.
It’s a theme Sununu has returned to repeatedly over the past year, after the hospitals successfully sued the state in federal court over its practice of boarding psychiatric patients in hospital emergency rooms while they wait for treatment. Last week, the state missed a court-imposed deadline to end the practice.
Sununu noted his proposal would bring millions more dollars into the state’s health care system overall. It would also prioritize funding for substance use services, community mental health centers, and federally qualified health centers. That would come out of the 9% of the Medicaid Enhancement Tax that doesn’t go directly to hospitals.
“To come to the state, and demand even more dollars and more dollars and more dollars – yet say they’re going to do less and less and less – is just wrong,” Sununu told lawmakers last week, speaking of the hospitals. “This is an opportunity, again, to secure funds for these other very critical community services.”
The plan also gives the New Hampshire Department of Health and Human Services more discretion to determine how to structure those payments will take year to year. State health officials say they need that flexibility to respond to a changing regulatory landscape, including looming cuts to federal disproportionate share funding.
What are lawmakers looking to change?
On Tuesday, the Senate Finance Committee voted to move forward with an amended version put forward by Senate President Jeb Bradley. Bradley said it would raise the amount paid back to hospitals to 93% – providing them an additional $6 million or so – while netting the state an extra $26 million in Medicaid funds.
Half of the state’s 26 hospitals would end up with more money than they get now, ranging from a few hundred thousand to several million dollars. The other 13 hospitals would receive less – including some smaller hospitals in central and northern New Hampshire, which prompted concern from committee members.
Bradley said the amendment is not a “finished product” but a way to keep the process moving, and lawmakers can make further changes when they meet in committee of conference.
“We can continue to work to ensure that we’re maximizing revenue to the state while having the least possible impact on the hospitals,” he said.
The amended bill is scheduled to go before the full Senate later this week.
