Researchers at the Connecticut Center for Economic Analysis found that the state could benefit to the tune of $30 million per year if it didn’t tax hospitals.
The study was commissioned by the Connecticut Hospital Association and is just the latest in the public relations and possibly legal battle brewing between the state of Connecticut and its 27 acute care hospitals.
The state currently taxes hospitals $556 million per year. The idea of the tax, which was reinstituted in 2012, was to increase the amount of federal matching funds the state would receive and then redistribute to hospitals. However, the state has decided to keep more of the money from the tax as it’s struggled to balance its budget.
The study found that the state is leaving $373 million federal dollars on the table each year by keeping more of the tax than it redistributes. The study also found that if the state returned the money to the hospitals, it would create about 6,600 jobs both directly and indirectly and those jobs would lead to increased sales, income, and other related tax revenue that would generate a surplus to the state of over $30 million annually.
But Gov. Dannel P. Malloy isn’t impressed by the numbers or the ad campaign.
He said the hospitals just want $500 million to $1 billion of state taxpayer money.
“The hospitals want to be able to dictate to the people of Connecticut — ‘you are going to pay us a lot more money,’ period,” Malloy said Tuesday.
He said the nonprofit hospitals are already profiting to the tune of $916 million a year and they don’t need the taxpayers to continue to subsidize their industry. That’s the amount of profit the hospitals made in 2014, according to the Office of Health Care Access. The Yale-New Haven and Hartford Hospital systems accounted for most of those profits.
On Monday, the Connecticut Hospital Association filed letters with the Departments of Social Services and Revenue Services asking them to determine whether the hospital tax was constitutional.
On Tuesday, Malloy said he felt the tax was constitutional and would sustain a legal challenge.
The hospital association argues that no state agency has the power to set a tax rate, and that only the General Assembly can do so. When the General Assembly reinstituted the hospital tax in 2012, the association argues that the legislature failed to define a rate.