LANSING, Mich. (AP) — A continuation of a 1 percent tax on health insurance claims passed Michigan’s Senate Thursday, but yet to be resolved is how to ensure the levy brings in enough revenue for Medicaid, which serves 1.9 million low-income state residents.
The tax, which took effect nearly 17 months ago and replaced a different tax, is due to expire at the year’s end unless lawmakers act. Legislation headed to the House on a 25-13 vote would extend collection of the tax through 2017.
The move came the same day the Republican-led Senate passed a budget bill without Gov. Rick Snyder’s proposed expansion of Medicaid eligibility to 320,000 more low-income adults. Talks over expanding the health insurance program will continue as legislators review a House GOP alternative that would make more people eligible but include a four-year cap on coverage for nondisabled adults.
Even in states viewed as strong supporters of the Patient Protection and Affordable Care Act (PPACA), Democratic officials like California Gov. Jerry Brown have expressed concerns about the stability of PPACA Medicaid expansion funding.
In Michigan, the claims tax is a touchy issue. While the Republican majority opposes a tax increase, the existing tax brings in at least $130 million a year less than expected. Without the money, Michigan could lose $400 million in a Medicaid match from the federal government in both this budget year and next.
The Snyder administration and nonpartisan legislative analysts in 2011 overestimated how much the new tax would generate, in part because out-of-state health insurers not subject to the tax paid far more claims than expected. The tax is not applied to Medicaid and Medicare claims or to out-of-pocket costs.
Fourteen Republicans and 11 Democrats voted for the bill, while 12 Republicans and one Democrat voted against it.