The Legislature looks set to extend and overhaul the hospital safety net assessment (HSNA) this year. Under current law, an assessment is levied on hospitals’ non-Medicare inpatient days. The collections are then returned to providers as Medicaid payments, which generates the federal Medicaid match. Those funds can be used to supplant state spending. This policy was begun in 2010 and has been extended several times (most recently in 2021), as I wrote here. It is currently set to expire July 1, 2025. The enacted 2021–23 budget assumed that $292.0 million in HSNA funds would be used in lieu of the general fund–state (GFS).

This year, HB 1850 and its companion SB 5764 would repeal the expiration date and make other changes to the program. (HB 1850 was approved by the House Appropriations Committee on Friday and SB 5764 is scheduled for executive session in Senate Ways & Means today.)

For example, the bills would impose the assessment on both inpatient and outpatient days. Assessment rates in CY 2024 would be set to generate $510.0 million from the inpatient assessment and $386.4 million from the outpatient assessment. Under the bill, $452 million per biennium could be used lieu of the GFS for Medicaid hospital services. Of that, $160 million would be used for post-acute hospital transitions.

According to the fiscal note, the additional taxes paid under the bills would be $54.2 million in 2023–25 and $74.8 million in 2025–27.

Reflecting this policy change, the operating budget approved by House Appropriations Committee would reduce GFS appropriations by $160.0 million in 2023–25 and assumes 2025–27 savings of $452 million. Additionally, the House proposal assumes that the hospital safety net program would increase GFS revenues by $54.2 million in 2023–25 and $74.8 million in 2025–27.

The Senate-passed budget would also make these changes. However, because the Senate budget was proposed before SB 5764 was introduced, the numbers assumed in the Senate budget were placeholders and are a little different. The Senate-passed budget would reduce GFS appropriations by $120.0 million in 2023–25 and assumes 2025–27 savings of $452.0 million. It assumes that the new hospital safety net assessment would increase GFS revenues by $66.5 million in 2023–25 and $86.8 million in 2025–27.