The phrase “Medicaid Enhancement Tax” or MET has been thrown around a lot as budget writers work on the spending plan for FY 2014-2015.
As confusing as it sounds, a little history goes a long way toward understanding this issue.
The Medicaid Enhancement Tax dates back to the early 1990s when it was introduced as a way to leverage federal matching dollars. In very simplistic terms, it’s a tax the state collects on what hospitals earn for treating patients.
Until two years ago, half the MET revenues were used to get federal matching dollars to provide hospitals with some financial relief for uncompensated care – losses related to care for the uninsured and for Medicaid patients. Together half the MET and the federal matching funds were distributed back out to the state’s hospitals. The other half of the MET money went into the General Fund for the legislature to spend in other areas.
But the previous legislature departed from this arrangement and used only about 15 percent of the MET revenue to bring in matching federal funds for uncompensated care.
The reduced amount of MET and matching funds went only to small rural hospitals, known as Critical Access Hospitals. The state’s other thirteen hospitals received none of this money. Instead the legislature let the remaining 85 percent of the MET money go unmatched and used it for provider payments and other General Fund expenses. Hospitals argue this is not sustainable.
The Governor’s SFY14-15 budget restored $146 million to the uncompensated care line, but it did so by assuming MET revenues will increase by about 8 percent every year, a figure well above what the state is actually collecting currently.
The House budget used those same MET estimates but sent about $33 million less to hospitals for uncompensated care, directing more into the General Fund.
Now Senate budget writers have raised questions about whether the projected 8 percent increase in MET revenue is realistic for 2014-2015. But they also have indicated they’d like to send more of the money to hospitals for uncompensated care.
As with any revenue, you can only spend it once. What goes to the hospitals won’t go into the General Fund. How the Senate navigates this terrain with the MET will make for some interesting discussion in the coming months – and we hope this explainer helps you follow those talks.