Hospital tax increase in CT prompts concern from executives as Lamont gets involved

CT Insider – Tuesday, June 3, 2025
By Paul Hughes

Uneasy hospital executives sought assurances Tuesday that the revenue from higher hospital provider taxes will be equitably distributed between hospitals and the state government.

The two-year, $55.8 million budget plan working its way to Gov. Ned Lamont’s desk increases the hospital tax in a bid to secure more federal Medicaid payments.

Hospital CEOs and representatives of the Connecticut Hospital Association met Tuesday morning with Jeffrey Beckham, the governor’s budget director, to discuss the tax change and other budget-related issues, including Medicaid reimbursement rates.

Under current federal government rules, states can place a tax on health care providers to help finance their Medicaid programs and use the revenue collected from the tax to receive federal matching funds. In Connecticut, the hospital tax was imposed in 2012 to leverage more Medicaid reimbursements for the state and hospitals to split.

The final year of the seven-year agreement with the hospital caps the provider tax at $820 million. The budget plan increases the tax by $375 million to nearly $1.2 billion in the 2027 fiscal year, and the amount would then increase by $25 million annually.

The Connecticut Hospital Association is concerned because it said the budget plan only increases supplemental payments by $140 million in 2027 and provides for annual increases of $25 million in subsequent years only if the amount of the provider tax collections increased by $25 million over the preceding year.

Beckham described the budget provision as a placeholder to preserve maneuvering room depending on what happens on the federal level.

“We have to sort of have to wait and see what Washington is doing. Washington is up to a lot of stuff and it is unclear at the moment where they are going to land,” Beckham said.

He said the current agreement with the hospital industry expires next June 30. He said the governor’s office and the legislature will be able to make any necessary adjustments to the second year of the budget plan in the 2026 legislative session.

“There is plenty of time to work this out. We’re trying to do this in good faith. We’re not looking to hurt them. We’re looking to help them,” Beckham said. “I think they had some adverse experiences with a prior administration that leaves them a little battle scarred. There are some trust issues, but we are trying to assure them that we want there to be net winners here.”

He said an equitable distribution of the additional Medicaid funds leveraged by the provider tax was a topic of discussion.

The CHA said in a statement that concerns were raised in Tuesday morning’s meeting about the amount of the tax increase as it relates to federal limitations on how much hospitals can be reimbursed under Medicaid. “We appreciate the administration’s commitment to adjusting the level of the tax when considering these federal payment limitations.”

Beckham said the budget deal essentially locks in a higher provider tax rate before the federal government places any limits on states. He said there is no agreement yet on the level of the supplemental payments back to hospitals, and he acknowledged this is a major industry concern.

“They are concerned they will overpay. They will be taxed and not get nearly get enough back to deal with their issues,” Beckham said. “They believe themselves to be underfunded.”

House Minority Leader Vincent Candelora, R-North Branford, criticized the Democratic governor and the Democrat-led legislature for failing to act sooner.

“We knew the federal cap was coming. We knew almost a year ago that we needed to come in and renegotiate this contract because it is expiring in a year. The administration did nothing,” he said. “Now, we’re looking at a federal bill being passed that may impose a freeze on any more hospital taxes and they’re scrambling to try to get a waiver. I know in my conversations with the hospital association they have been asking us to apply for that waver in the last six months. That didn’t happen, and now we are scrambling to try to get legislation done. It is certainly no way to do business.”

House Speaker Matt Ritter, D-Hartford, said he understands the wariness of the hospital industry, but the “hospital wars” of the Malloy years are over.

“We’ll never go back to that. There is a commitment to our hospitals,” he said.

Access this article at its original source.