HB 5032, An Act Adjusting The State Budget For The Biennium Ending June 30, 2027 (Hospital Tax)
TESTIMONY OF THE CONNECTICUT HOSPITAL ASSOCIATION
SUBMITTED TO THE APPROPRIATIONS COMMITTEE
Wednesday, February 18, 2026
The Connecticut Hospital Association (CHA) appreciates this opportunity to submit testimony concerning HB 5032, An Act Adjusting The State Budget For The Biennium Ending June 30, 2027. CHA opposes provisions of the proposed budget related to the hospital tax. If enacted, the budget would impose $100 million more in taxes on hospitals while making no meaningful investment in patient care. There is a better solution that will use the hospital tax to maximize federal revenue to support hospital care for Connecticut residents.
Connecticut hospitals make our state stronger by delivering nationally recognized, world-class care, supporting jobs and economic growth, and serving communities across Connecticut. Every day, hospitals improve access, affordability, and health equity — providing care to all patients regardless of ability to pay. At the same time, hospitals invest in their workforce and local communities, even as they navigate significant financial and federal challenges.
This state fiscal year, hospitals will pay $820 million in taxes. Of that amount, the state retains a little more than $500 million for its own purposes and uses approximately $300 million to draw down federal matching dollars to support Medicaid payments to hospitals. Under the governor’s budget proposal, in state fiscal year (FY) 2027, the tax will increase by $100 million to $920 million. Waterbury Hospital will become exempt from the tax but will still be entitled to tax-funded Medicaid payments, and Connecticut Children’s will be prohibited from participating in the tax program.
If implemented, the state will be the largest beneficiary of the tax hike, increasing its gain by an extra $53 million (this is in addition to the $500 million it already takes). Of the $40 million set aside to support hospitals from the revenue generated from the tax increase, $15 million is designated to Waterbury Hospital, which would no longer pay the tax, and the remaining $25 million would be divided among the 23 remaining taxpaying hospitals. And each year, Connecticut hospitals will continue to lose $1.5 billion providing care to Medicaid (HUSKY) patients.
We oppose the governor’s proposal. The tax program should be used to support patient care at hospitals; the governor’s proposal does not. The tax program should seek to maximize federal funding for Connecticut; the governor’s proposal leaves money on the table. Hospitals that receive tax-funded payments should pay taxes; the governor’s proposal does not require it. Hospitals that want to participate in the tax, like Connecticut Children’s, should be able to; the governor’s proposal prohibits it.
There is a better approach to the hospital tax, and we look forward to working with the legislature to advance that approach. We believe the hospital tax program should maximize federal revenue and ensure that 100% of any increase in the tax is used to improve hospital reimbursement for patient care and begin to address Medicaid underpayment. We believe Connecticut Children’s should participate in the tax program and that Waterbury Hospital should fully participate in the program as a taxpaying hospital, maintaining its current status.
Finally, while in no way sufficient to address the significant problem of inadequate Medicaid reimbursement, we do support the $45 million included in the budget to support an increase in Medicaid provider rates. Low Medicaid reimbursement for providers has resulted in a lack of access for Medicaid beneficiaries, particularly for specialty care. The additional reimbursement will help modestly to address these access issues with far more to do in the future to improve Medicaid reimbursement for both hospitals and healthcare providers.
Thank you for your consideration of our position. For additional information, contact CHA Government Relations at (203) 294-7301.