*This is an archive page. The links are no longer being updated. 
1992.11.20 :  Medicaid Tax Revenues and Donations

Contact: Bob Hardy  202-690-6145 
November 20, 1992 
 
       A federal regulation announced today will assist states 
struggling with their Medicaid budgets, HHS Secretary Louis W. 
Sullivan, M.D., said.
       The regulation, which implements legislation enacted by 
Congress in December 1991, defines special tax revenues and  
donations from health-care providers that enable state Medicaid  
programs to qualify for federal matching grants.  
       It includes provisions to the effect that the federal  
government will match Medicaid funds raised from health-care-  
related taxes that are broad-based, applying uniformly to all  
providers in a class, and are not guaranteed refundable to the  
providers. 
       Secretary Sullivan said:  "With this regulation, we
believe we have achieved a balanced and equitable solution for
the states and the federal government." 
       Before enactment of the law, all special tax revenues and  
donations from health-care providers, such as hospitals and
nursing  homes, could be used in state Medicaid programs and
counted for federal matching grants. 
       Under the 1991 law, federal payments matching provider tax 
 revenues and donations are estimated to be $11.3 billion in
fiscal year 1993, up from an estimated $8.7 billion in FY 1992,
and from an estimated $2.5 billion in FY 
1991. 
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       Forty-five states are currently obtaining federal Medicaid 
 matching funds for revenue raised by provider taxes and
donations.       The regulation filed today followed lengthy
discussions among White House, federal legislators, HHS, and
governors and other state officials. 
       Prior to the enactment of the legislation, discussions
included:  the National Governors' Association, the National
Conference of State Legislators, the National Association of
Counties, the National Association of State Budget Officers and
the American Public Welfare Association. 
       Commenting on the impact of the regulation, William Toby
Jr.,  acting administrator of the Health Care Financing
Administration, said, "We trust that the federal matching funds
will help states cope with rising Medicaid budgets, and permit
them to improve services to the poor, disabled and medically
indigent who make up this nation's  Medicaid population."     
       The law provides a transition period for states, allowing
them to adjust their Medicaid financing to comply with it.  That 
transition period varies according to states' differing fiscal
years and legislative meeting schedules.  For most states that
period expired on Sept. 30, *This is an archive page. The links are no longer being updated. 
1992.         
       The regulation also provides the following: 
     o    A state may obtain a waiver from the requirement that
          taxes be broad-based and uniform if it can show that
          the tax is "generally redistributive," having less
          impact on providers serving proportionately more
          Medicaid patients than on other providers in the same
          class. 



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     o    Permissible donations are defined and limited. 
          Donations that pay for stationing Medicaid eligibility
          workers in "disproportionate-share" hospitals and other
          health-care institutions are permissible to a limited
          extent.  Donations from providers may have no direct or
          indirect relationship to Medicaid payments to those
          providers. 
 
     o    Generally, federal funds cannot be used to match
          provider donation and tax revenues that exceed 25
          percent of a state's non-federal share of Medicaid
          expenditures. 
 
     o    Total payments to "disproportionate-share" hospitals
          that exceed 12 percent of the national Medicaid
          expenditures will not be matched with federal funds. 
 
     Disproportionate-share hospitals receive extra Medicaid 
payments because they serve large numbers of poor people.  Some
states have coupled generous definitions of DSH hospitals with
provider tax and donation strategies as a means of raising
federal funds for those institutions. 
 
     The regulation is an interim final rule that invites
comments from interested parties.  Comments should be mailed to
the Health Care Financing Administration, Attention MB-062-IFC,
P. O. Box  26676, Baltimore, Md. 21207 



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EDITOR'S NOTE:  HCFA, an agency of the U. S. Department of Health
and Human Services, directs the Medicare and Medicaid programs,
which help pay the medical bills of more than 62 million
Americans.  HCFA's estimated FY 1993 expenditures are $230
billion, the 12th largest governmental budget in the world.