HOUSE BILL REPORT

HB 1378

BYRepresentatives Braddock, Sprenkle, Vekich, Cantwell, Cole, Rust, Anderson, Basich, Sayan, Fraser and Phillips; by request of Governor Gardner

Changing provisions relating to health care costs and access to health care.

House Committe on Health Care

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass.  (7)

      Signed by Representatives Braddock, Chair; Day, Vice Chair; Cantwell, Morris, Prentice, Sprenkle and Vekich.

Minority Report:  Do not pass.  (4)

      Signed by Representatives Brooks, Ranking Republican Member; Chandler, D. Sommers and Wolfe.

House Staff:Bill Hagens (786-7131)

Rereferred House Committee on Revenue

Majority Report:  The second substitute bill be substituted therefor and the second substitute bill do pass.  (9)

      Signed by Representatives Wang, Chair; Pruitt, Vice Chair; Appelwick, Fraser, Fuhrman, Morris, Phillips, Rust and H. Sommers.

Minority Report:  Do not pass.  (6)

      Signed by Representatives Holland, Ranking Republican Member; Horn, Assistant Ranking Republican Member; Brumsickle, Haugen, Silver and Van Luven.

House Staff:      Robin Appleford and Bob Longman (786-7136)

AS REPORTED BY COMMITTEE ON REVENUE MARCH 1, 1989

BACKGROUND:

Access to maternity care prenatal, delivery, and postpartum has become increasingly difficult for low-income women.  Of the 70,000 births in Washington state during 1988, approximately 9,000 were delivered without consistent maternity care.  Washington state has a higher rate of infant mortality than the national average.  This is particularly disturbing when the United States, as a whole, has one of the highest rates of infant mortality among industrialized nations. Two factors associated with this problem are too few women eligible for publicly funded maternity care services and low rates of reimbursement for health care providers.

Low birth weight deliveries (5.5 lbs or 2,500 grams) are identified as a major factor in infant death and illness.  Adequate maternity care is identified as an effective tool in reducing low birth weight deliveries.  It is estimated that for every $1 spent on prenatal care, over $3 are saved in medical cost during the first year of the infant's life.

Recent changes to federal Medicaid law (Title XIX) (OBRA 87) permit a state to expand its federally matched program for low-income pregnant women and their children. A state is now able to extend medicaid coverage to pregnant women and children, under the age of one, whose income is below 185 percent of the federal poverty level (FPL), and children up to age eight below 100 percent FPL.  The Governor has proposed these enhancements in the program called "First Steps." Its cost in state funds is $39.5 million.

The State's Medically Indigent (MI) program provides health care for persons who are not eligible for Medicaid.  MI provides acute and emergent care only.  Recipients must "spend down" excess resources before they are eligible.  In addition, a deductible of $500 per family per year is required.  The MI is 100 percent state funded.  Funding for this program has been unstable.  In the past, ratable reductions in hospital reimbursements have been imposed.  Also, the amount of the deductible has been raised from time to time.

SUMMARY:

SUBSTITUTE BILL:  This measure creates the Health Access Fund.  The source is a tax on hospitals.  The Fund's purposes are:  to provide a stable source of funding for the Medically Indigent program; and to provide for an increased amount of state funds to be available to match federal funds in order to enhance maternity care and other medicaid services.

The Fund is created in the custody of the State Treasurer.  Only the Secretary of Social and Health Services or the secretary's designee may authorize expenditures from the the fund.

Assessment is 1.07 percent for rural hospitals (defined) and 2.14 percent for all other hospitals.  The tax is assessed on the hospital's "adjusted net patient services revenue" (defined). Deductions are provided for Medicaid, Medicare, charity care, bad debts, and purchaser discounts.

It is estimated that this tax will yield $60 million annually.  These funds would be used primarily to reimburse hospitals for the medically indigent services.  It is intended, though not expressed in the act, that the usual appropriation for the Medically Indigent program would then be available to matched federal funds to be used for the First Steps Program and other medical assistance enhancements.

The Department of Social and Health Services (DSHS) is required to promulgate rules to administer this act.

DSHS is required to contract with the Department of Revenue (DOR) for the administration and collection of the assessment.  The contract between DOR and DSHS must be approved by the Office of Financial Management.

Penalties, not to exceed $500 per day, may be imposed on hospitals that fail to pay the assessment.

SUBSTITUTE BILL COMPARED TO ORIGINAL:  Provisions for the restructuring of the Washington Hospital Commission and the Certificate of Need process are deleted.

The tax is changed from 2.06 percent for all hospitals to 1.07 percent for rural hospitals and 2.14 percent for all other hospitals

A definition of rural hospital is added.

Contractual allowances are added as a deduction from revenue in computing the tax.

CHANGES PROPOSED BY COMMITTEE ON REVENUE:  The second substitute bill contains technical changes to clarify how much hospital income is subject to taxation and to provide for ease of administration by the Department of Revenue.

Revenue:    There is a revenue impact.

Fiscal Note:      Requested March 3, 1989.

Effective Date:The bill contains an emergency clause and takes effect immediately.

House Committee ‑ Testified For:    (Health Care)  Dave Smith, Washington State Hospital Commission; George Starkovich and Chuck Bailey, Washington State Labor Council, AFL-CIO.

(Revenue)  Representative Dennis Braddock, Prime Sponsor; Bob Crittendon, Governor's Office; Barney Goltz, Washington State Hospital Commission; Sharon Case, Washington Primary Care Association; and Tom Byers, Seattle Mayor's Office.

House Committee - Testified Against:      (Health Care)  K. Collins Sprague, Association of Washington Businesses; Sean Bleck, Evergreen Legal Services; Jan Meisels; Health Insurance Association of America and Dave Broderick, Washington State Hospital Association.

(Revenue)  Dave Broderick, Hospital Association; and Len Eddinger and Tom Curry, Washington State Medical Association.

House Committee - Testimony For:    (Health Care)  Additional revenue is needed to provide medical care services.

(Revenue)  This bill is needed to cover a variety of health care programs, particularly pre-natal care and health care for young children.  It will also provide greater equity for providers who care for Medicaid patients by decreasing hospitals' uncompensated care costs.

House Committee - Testimony Against:      (Health Care)  The tax is too narrowly based.  Hospitals should not have to pay for services that are the responsibility of the broader public.  It could seriously hamper the operations of smaller, less prosperous hospitals.

(Revenue)  This bill will not decrease hospital costs.  The programs funded by this tax should be covered by a broader based tax.