Lamont budget increases hospital tax

After watching his predecessor, Gov. Dannel P. Malloy, spar with Connecticut’s hospitals for much of the past eight years, Gov. Ned Lamont got off to a rough start with the industry himself on Wednesday.

Lamont’s new budget canceled a previously approved tax cut for hospitals, replacing it with an effective tax hike of about $43 million per year.

The governor set aggressive goals to cut state health care costs, flatfunded social services and nursing homes, and created a new asset test for a health care assistance program for seniors.

Lamont also used his budget to reaffirm his support for a paid family and medical leave system, a new 75 percent tax on electronic cigarettes, and a minimum age of 21 to purchase cigarettes and vaping products.

“We are developing a budget that will put the state’s finances on a stable trajectory over the biennium and into the future,” Chris McClure, spokesman for the governor’s budget office, said earlier this month in response to the hospital tax issue. “Disruption of recurring revenue sources, such as the current hospital tax arrangement, creates additional challenges to meeting this goal.”

After two years of paying $900 million annually in state provider tax, hospitals were supposed to get big relief next fiscal year, with the tax dropping to $384 million.

The industry currently gets $496 million in supplemental payments back from Connecticut as part of a complicated arrangement to leverage more federal Medicaid dollars for the state. It was supposed to see those payments decline as well, down to $166.5 million per year.

Still, that meant the instead of a net annual loss of $404 million, hospitals only would lose $217.5 million.

But Lamont, who is trying to avert a potential deficit of $3.5 billion over the next two fiscal years combined, said Connecticut could not afford that relief right now.

Lamont’s budget, however, would freeze the tax at the current $900 million-per-year and give the industry back $453 million — $43 million less than it receives now. That would leave hospitals out $447 million annually.

The Connecticut Hospital Association denounced the plan Wednesday.

“We are strongly opposed to the proposed budget. The current administration is not honoring the bipartisan agreement for this year or next year, and the budget makes additional cuts to hospitals,” said Jennifer Jackson, CEO of CHA. “We continue to be willing partners to find a sustainable solution, but this is not it.”

Hospitals have been suing the state since 2015, arguing Connecticut’s budgetary policies begun under Gov. Dannel P. Malloy’s administration violate federal Medicaid rules. That case is still pending.

And the industry also recently charged that Connecticut shortchanged hospitals by millions of dollars this year in exchange for care provided to Medicaid patients and to the under-insured.