The Connecticut Hospital Association and Connecticut hospitals launched legal action Tuesday to contest a September ruling by two state agencies that the so-called tax on hospitals is legal.
In the first step, hospitals appealed the declaratory ruling of the state departments of Social Services (DSS) and Revenue Services (DRS), arguing that the hospital tax was illegally implemented. Second, hospitals are petitioning the Centers for Medicare & Medicaid Services (CMS) in an effort to show that the state’s reimbursement and tax scheme violates the federal Medicaid Act.
In the DSS/DRS appeal, the hospitals assert that the hospital tax, among other things, violates the U.S. and Connecticut Constitutions and federal and state statutes and was outside of the departments’ authority to implement. They are asking for an end to the tax.
In the CMS petition, the hospitals argue that the hospital tax, which now totals $556 million a year and exceeds the corporate tax rate by nearly 30 times, is bad public policy and violates federal law. Connecticut hospitals are asking CMS to compel the state to amend its Medicaid State Plan to bring Connecticut’s Medicaid rates and payments, as well as the hospital tax, in compliance with the federal Medicaid Act.
The CHA and the hospitals attribute 1,390 layoffs and more than 1,700 eliminated positions since 2013 to the implementation of the hospital tax and poor Medicaid funding.
Gov. Dannel P. Malloy Spokesman Chris McClure said the administration is not surprised that the association is seeking out legal remedies, adding, “Nevertheless, we are confident the state will prevail as the legislated measure is legally and properly implemented.”
McClure also noted that the annual user fee of $556.1 million for hospitals actually ends up being lower when tax credits are used.
