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Capitol View®
Briana Bierschbach

Provider tax debate heats up at the Capitol

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The debate over a tax on health care providers in Minnesota took center stage at the Capitol this week, with both sides making their case for what should happen when the tax is set to expire next year.

But disagreements between Republicans in control of the Senate and Democrats in control of the rest of government could become one of the major sticking points in budget negotiations this session.

What's called the provider tax is a 2 percent assessment on licensed health care professionals, including physicians, dentists, nurses and physical therapists. It was started 27 years ago by a bipartisan group of legislators trying to find a funding source to help cover health care costs for working Minnesotans who earn too much to qualify for Medical Assistance, the state's version of Medicaid,  but not enough to buy health insurance.

MinnesotaCare, the state's health insurance program for those individuals, was funded by the 2 percent provider tax. But during the 2011 shutdown, an agreement was made to sunset the tax by Jan. 1, 2020, in part because of an infusion of federal money that came with the Affordable Care Act. Now facing the deadline for the tax to expire, Democrats and Republicans are split on what to do.

During a rally at the Capitol on Thursday, DFL Gov. Tim Walz said he will push hard in negotiations with Republicans to keep the tax in place, arguing that without it, thousands of vulnerable Minnesotans will lose coverage.

"I am more than willing and understand that I need to work with others when we have differences of opinion," Walz told the crowd. "I am not willing to compromise people's health or sacrifice our values for the sake of some fake bipartisanship that doesn't matter."

But Republicans call the provider tax a "sick tax," because they say the fees ultimately trickle down to Minnesotans who are paying their medical bills. Senate Majority Leader Paul Gazelka has said continuing the tax is a non-starter for his caucus. Republicans also question whether the fund has strayed too far from its initial purpose of propping up MinnesotaCare given that federal money helps support that now.

A new option emerged Thursday from a bipartisan group of state senators, including two doctors. Scott Jensen, a Republican from Chaska and a family physician who runs his own practice, said their bill recommends a new fee assessed on insurance claims, instead of providers. The proposal is also supported by the Minnesota Medical Association.

"I just know how much controversy there's going to be at the end of this session on the 2 percent provider tax, that before we get there, I want to be at least part of the discussion on what are the alternatives," Jensen said.

Revenue from the provider tax goes into an account called the Health Care Access Fund that is now used in large part to help cover Medical Assistance and other programs.

"For me as a policy maker, it's good to go through this exercise and make sure this tax is doing what it's supposed to do. Is 2 percent the right number? Where is it going," said Sen. Melisa Franzen, DFL-Edina. "Wherever we land, certainly, we'll have to work with the governor."

Walz sounded intrigued by the new idea and said he would have his commissioners examine it. "That's at least a step forward. I'll tell you that is not something we've seen yet, something new," Walz said.

Jensen also pushed back on his party's idea that the provider tax is a "sick tax."

"If it were a true sick tax, then you would have every clinic around the state, when they figure out their bill, adding 2 percent on and then the patient would be expected to pay. Some clinics do that. We never did," Jensen said.

"It's time to skip the spin," Jensen added. "Let's just talk about the issues."