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Provider fee

AG’s opinion could allow Colorado to balance its budget without painful cuts

Colorado Attorney General Cynthia Coffman issued a formal opinion Monday saying that treating the state’s Hospital Provider Fee as an enterprise fund would indeed be constitutional. In doing so, she paved the way for a big win for Colorado’s schools and roads.

The Hospital Provider Fee is a fee paid by hospitals based on occupancy and out-patient charges. The money collected qualifies for matching federal funds, effectively doubling it. That money is then used to cover Medicaid, Child Health Plan Plus and to reduce the amount of uncompensated care.

It sounds like a expense for hospitals, but in fact it brings money into the state and lowers their costs. Thirty-eight states have a Hospital Provider Fee for exactly that reason.

In Colorado, however, the Hospital Provider Fee must interact with TABOR, the so-called Taxpayers Bill Of Rights. It limits how much revenue the state can keep based on inflation and population growth. And it does not matter where that money comes from.

State revenue above the TABOR limit has to be refunded to the taxpayers. The Hospital Provider Fee is expected to generate more than $750 million this fiscal year. Although the state had been receiving some of that federal money before the Hospital Provider Fee was enacted in 2009, the total is enough to push state revenue over the TABOR limit.

The problem that creates is multi-faceted. Lessening the Hospital Provider Fee would also reduce the federal matching money and effectively cut funding for Medicaid and CHP+. That would hurt the patients who are the intended beneficiaries and boost costs for hospitals. TABOR forced refunds, however, would not come from the Hospital Provider Fee, but from the state’s General Fund, which is to say from money needed for schools and roads.

Gov. John Hickenlooper’s proposed fix to all that is to re-categorize the Hospital Provider Fee as an enterprise fund, essentially a government-owned business. That would exempt its revenue from TABOR limits, keep the state’s revenue below those limits and allow the state to keep as much as $373 million it would otherwise have to cut from schools, roads and other vital programs.

It is more than just a gimmick. To qualify as an enterprise fund a program must meet a three-part legal test. It was that Coffman spoke to in her opinion. She pointed out that the enterprise lacks the power to tax, does provide government services in exchange for “involuntary fees levied on service recipients” and that it is financially distinct from its parent agency.

She also said that her opinion was not politically motivated but is “based solely on the law and its application to the facts.” In fact, her action might actually serve to help diffuse the politics surrounding the Hospital Provider Fee.

Hickenlooper is, of course, a Democrat, while Coffman is a Republican. Coffman’s predecessor as attorney general, Republican John Suthers, said when the Hospital Provider Fee was created in 2009 that it should be an enterprise fund. With those three agreeing across party lines that treating the Hospital Provider Fee as an enterprise fund is constitutionally permitted, perhaps the debate can refocus from the sanctity of TABOR to whether Colorado really wants to further cut spending on schools and roads.

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