A hospital fee that spurs additional federal revenue for providers while covering other costs is unlikely to run afoul of cost-cutting measures DC Republicans have floated for the Medicaid program.
But those talks in Washington could complicate Gov. Tony Evers’ call in the budget to triple the hospital assessment, a move the state’s largest hospital association generally supports.
The Wisconsin Hospital Association began pitching the Capitol last fall on increasing the assessment, which hasn’t changed since it was implemented in 2009. WHA President and CEO Eric Borgerding argued that with costs increasing significantly over the past 16 years, it made sense to look at increasing the assessment to the maximum allowed to boost hospital revenues.
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He also downplayed the possibility that the coming federal budget could jeopardize what Evers has proposed. The net impact of the guv’s budget also would more than triple the payments hospitals receive each year under the arrangement.
“At this point, I’ve seen nothing coming out of Washington that would jeopardize not only the existing assessment, but nothing coming out of Washington that would jeopardize increasing it in a way that would allow us to start catching up to inflation,” Borgerding said.
The push to cut federal spending has created uncertainty for the state as the budget season heats up. Congress earlier this month approved the framework for a budget with the Senate outlining $4 billion in spending cuts and the House seeking at least $1.5 trillion.
As House Republicans have sought ways to hit their target, some have looked at the Medicaid program for possible savings even as various lawmakers insist benefits won’t be cut. That includes a closer look at the hospital assessment that Wisconsin and other states have implemented. While drawing matching federal funds that are sent to hospitals, states also keep part of the money — which critics call a skim — to use for other expenses.
Under federal law, states can receive reimbursement for assessments that go up to 6% of net patient revenue.
According to the Legislative Fiscal Bureau, the state is currently at 1.8% of net patient revenue, while Evers’ budget would take that to 5.7%.
In 2024-25, most hospitals were scheduled to pay $414.5 million to the Hospital Assessment Trust Fund. The state then put $265.5 million of that back into payments to the hospitals, while pulling in $426 million in federal money.
In all, while the hospitals paid $414.5 million, they received $672 million for a net gain of $257 million.
Under Evers’ budget, that assessment would jump to more than $1.3 billion. Hospitals would net $808.9 million under his plan.
Joint Finance Committee Co-chair Mark Born, R-Beaver Dam, said he’s been open to the idea of increasing the assessment since the hospital lobbying effort began. But Born said he hasn’t had a discussion with his caucus to gauge support among his colleagues.
He said a complicating factor for the discussion will be the governor’s veto authority, especially after last month’s state Supreme Court ruling finding that Evers has the power to strike out individual numbers in spending bills. While it would seem odd for the guv to rework one of his own ideas, Born said Republicans have seen it before. “You can’t really trust him,” Born said.
A portion of Evers’ plan would also increase the assessment on critical access hospitals, which are generally in rural communities. Smaller providers would come out $31.2 million ahead of where they are now.
“I’d be interested in doing this to help rural health care and not close some more hospitals,” Born said. “But if he’s just interested in creating a bigger slush fund for him or DHS, I don’t think anyone in the Legislature is going to be interested in that.”
When it comes to the assessment, some House Republicans have floated the idea of ratcheting down the maximum percentage states can tax patient revenues in exchange for matching federal funds.
With that cap now at 6%, the Congressional Budget Office has laid out scenarios of possible changes. Reducing that cap to 5% could produce $48 billion in savings by 2034, while going down to 2.5% could push that to $241 billion. Eliminating the option entirely could save $612 billion.
The Kaiser Family Foundation noted in a background piece on the assessments last month that the impact of any changes to the current 6% cap would vary widely by state. Those near the current 6% would feel the biggest impact, while those — like Wisconsin — now at the lower end could be spared any changes.
Borgerding said while the WHA supports increasing Wisconsin’s current assessment, it also wants to see more of the money going back into the payments to hospitals. Meanwhile, some in Congress have raised concerns that states are using money for things besides health care.
Currently, $168.5 million of the $414.5 million that hospitals paid went into the Wisconsin assessment trust fund. The rest went to cover other Medicaid expenses.
Robin Rudowitz, a vice president at the Kaiser Family Foundation and director of the program on Medicaid and the uninsured, said it’s difficult to compare how Wisconsin uses the assessment to other states. That’s due to the mix of general funds, hospital assessment and federal dollars that go into the program.
“We’ve heard ‘financing scheme,’ ‘money laundering,’ all of these things are within the bounds of the rules that Congress has set up,” she said.
