The state House voted Thursday to renew a tax on hospitals to avert cuts in TennCare, and Democrats called off a threatened uprising to try to raise even more revenue.
Gov. Bill Haslam’s state budget recommendation assumes the legislature will adopt the more than $400 million in hospital fees, which would qualify for a 2-to-1 match by the federal government.
The state’s hospital association has agreed to the tax for the second year in a row to keep TennCare funding and to avoid having to absorb the costs of treating uninsured patients as charity cases.
Haslam’s budget plan for the fiscal year starting July 1 proposes to extend the tax for another year and raise it from 3.5 percent to 4.5 percent of the hospitals' net patient revenue. Even in the governor’s budget with the hospital tax, there are $40 million in cuts in TennCare, the state’s version of Medicaid.
Democrats threatened to try to raise the tax another percentage point to the maximum allowed by the federal government to draw more matching money to pay for health care.
“For every dollar we put up, we get two from the federal government. With $100 million investment, not by us but by the hospitals on our behalf, we get to pull down an extra $200 million,” Rep. Joe Armstrong, D-Knoxville, told the House.
Democrats withdrew their amendments to raise the tax after their party’s House leader, Craig Fitzhugh, met with the governor before Thursday’s session began. Democrats had been demanding that the governor work with them more closely on his budget proposal.
The vote for the hospital tax was 86-3. It already has passed the Senate. Some Republicans were queasy about voting for it because they were afraid of the political repercussions of voting for a tax.
Before voting, Rep. Rick Womick, R-Rockvale, insisted to the House that the tax actually was a donation by hospitals to the state.
“This is not a tax,” he said. “This is a donation really to state government in order to get money from the federal government.”