The Legislature extended the hospital safety net assessment again this session. The state has imposed the assessment since 2010, when it was to “be used solely to augment funding from all other sources and thereby obtain additional funds to restore recent reductions and to support additional payments to hospitals for medicaid services.” According to the 2010 bill, E2SHB 2956, hospitals proposed the assessment as a way “to generate additional state and federal funding for the medicaid program, which will be used to partially restore recent inpatient and outpatient reductions in hospital reimbursement rates and provide for an increase in hospital payments.” (The program is codified as RCW 74.60.)

Essentially, as the bill report for E2SHB 2956 put it, “States collect funds from providers and pay them back as Medicaid payments, and states can claim the federal matching share of those payments.” This generates general fund–state (GFS) savings for the state.

The 2010 bill allowed up to $66.8 million from the hospital safety net assessment account (HSNA) per biennium to be used in lieu of GFS payments to hospitals for Medicaid services. Additionally, as enacted, E2SHB 2956 was supposed to expire after the 2011–13 biennium. Subsequent bills have moved the expiration date and increased the HSNA amount that can be used in lieu of the GFS, as shown in the table.

(Note that in 2013, ESSB 5913 extended the HSNA, with the intent of phasing it down over four years and ending by the end of FY 2019. In 2015, 2EHB 2151 repealed the language about phasing down by the end of FY 2019.)

In 2021, HB 1316 moves the expiration to July 1, 2025. The HSNA is meant to generate $292 million per biennium in 2021–23 and 2023–25 in new funds to be used in lieu of GFS payments for Medicaid hospital services. Thus, the budget outlook assumes savings in funds subject to the outlook of $292 million for 2023–25.

When the program was first created in 2010, 2009–11 HSNA revenues were estimated to be $263.5 million. Under HB 1316, 2023–25 HSNA revenues are estimated to be $1.013 billion.

This may be the last time the HSNA is extended in this form. As the bill report for HB 1316 notes, under a 2016 rule from the federal Centers for Medicare & Medicaid Services, pass-through payments for hospitals must be phased out as of July 1, 2027.