LANSING – Some potentially troublesome data coming in on the Michigan’s new tax on health insurance claims shows it is generating only half of what state officials projected, a situation that could raise concerns about whether the state will have enough money to avoid cutting Medicaid programs.
But the key word is “potentially.”
The tax took effect January 1 with all those paying health care claims – whether an insurer or entity that self-insures or a third-party administrator – required to remit a tax to the state equal to 1 percent of the claim. It replaced a 6 percent tax that the state’s Medicaid health maintenance organizations paid on their claims to raise a total of $1.2 billion to support Medicaid programs.
From January through March, the tax brought in just under $50 million, said Kurt Weiss, spokesperson for the Department of Technology, Management and Budget. It should have brought in about $100 million. For the 2011-12 fiscal year, the tax is supposed to raise $300 million directly and then that money will be used to trigger about $600 million in federal matching funds for a total of $900 million.
If the trend continues and the tax only raises $150 million instead of $300 million, then the state would not only be short that $150 million, but a total of $450 million because of the lost opportunity for federal matching funds.
However, Weiss said some of the shortage resulted from the tax being new and the entities realizing belatedly that they had to pay the tax. Additionally, there is a lag between when a medical service is provided and when the claim for that service is paid. In July, state officials plan to assess how well the tax is performing and determine whether the shortage is certain.
At this point, it is unclear whether the shortage is a result of the tax’s structure or the delays in payments.
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