Connecticut hospitals threaten legal action over bed tax

Connecticut's hospitals are gearing up for a legal fight over a bed tax used to draw down additional federal funds for the Medicaid program.

The Danbury News Times has reported that Connecticut began collecting the tax in 2012. That year, it collected a total of $350 million in revenue from the hospitals and redistributed $400 million in drawn down Medicaid funds. 

Bed taxes to draw Medicaid matching funds have grown increasingly popular in recent years, with states such as Georgia and Utah pursuing them. But they have also created battles. Hospitals in Georgia began fighting over funding allocations not long after lawmakers approved the tax. 

But as budget woes have grown in Connecticut, the hospitals have seen far less of the matching funds. This year, they are expected to pay in $556.1 million, but will receive only $164.3 million, according to the News Times--and that sum was $100 million more than Gov. Dannel Malloy provided in his initial budget.

As a result, the Connecticut Hospital Association and 24 hospitals have filed documents with several state agencies claiming the hospital tax violates state and federal laws and is unconstitutional.

"The state's hospital tax is preventing us from doing the work we know our community expects and deserves," John Murphy, M.D., CEO of the Western Connecticut Health Network, told the newspaper in a statement. "We have no choice but to fight for what we know is right." Murphy suggested that the hospitals would likely take legal action to obtain more Medicaid funds.

The publication noted that a similar showdown in New Hampshire over bed tax/Medicaid revenues led to the hospitals getting more money, although smaller facilities received a far larger share than bigger facilities. A state judge ruled in 2014 that the bed tax was unconstitutional.

To learn more:
- read the News Times article