With new attack on the Affordable Care Act, Minnesota’s provider tax is a must

March 27--The Trump administration’s reckless new assault on the Affordable Care Act ought to drive a stake through wishful thinking at the Minnesota Capitol that the state’s provider tax should sunset this year.

On Monday, a terse legal filing from the U.S. Department of Justice created massive uncertainty for health care consumers, the industry and states, which rely heavily on federal funding for medical assistance programs. The one-paragraph statement signed by three DOJ attorneys essentially petitions the Fifth Circuit Court of Appeals to strike down the entire 2010 health reform law. In doing so, the DOJ is not only departing from the institutional norm of defending current law (in this case, against a lawsuit spearheaded by the Texas attorney general), but advocating for the law’s invalidation.

The DOJ action drew strong condemnation from legal experts and from Minnesota’s health care leaders. “We expect that a judicial decision overturning the law would result in returning hundreds of thousands of lower income, working Minnesotans to the ranks of the uninsured; more people would rely exclusively on the emergency department for care and lose access to prevention services; and health plans could deny coverage to those with pre-existing medical conditions,” the Minnesota Hospital Association said in a statement.

The Minnesota Medical Association, which represents more than 10,000 state doctors, said it “strongly opposes” this legal challenge and sounded the alarm about the lack of an ACA replacement plan to help Minnesotans who have “benefited from the ACA’s Medicaid expansion, insurance subsidies, and insurance coverage protections for those with pre-existing conditions.”

It’s likely that the case, Texas vs. Azar, will wind up before the U.S. Supreme Court. When, and whether the argument at its heart succeeds, is unclear. The ACA has survived two Supreme Court challenges and congressional efforts to eradicate it. The Texas case offers a dubious new objection. In late 2017, Congress effectively repealed the individual mandate to buy health insurance but let the rest of the law stand. The plaintiffs argue that the mandate is so integral to the law that if it goes, so must everything else. Late last year, a federal judge agreed -- an outcome squarely at odds with congressional judgment that the mandate could be separated from the law.

The uncertainty created by this case has serious implications for the provider tax debate in Minnesota this session. The 2 percent tax, which has been in place since the early 1990s, is projected to generate $684 million this year for the state’s Health Care Access Fund. The tax was originally passed to fund MinnesotaCare, the state’s insurance plan for working families, but now the access fund provides about $439 million a year for the state’s medical assistance program for the poor, disabled and elderly -- a sum that can’t just casually be made up with general fund dollars. Republicans also are relying on the tax to fund a proposed extension of the state’s reinsurance program, which has helped lower premiums for those who buy coverage on their own.

The provider tax is on course to expire at year’s end. Gov. Tim Walz has called to extend it but has met with pushback from GOP lawmakers. One key argument for letting it expire is that new federal dollars available through the ACA cover most MinnesotaCare costs. Federal dollars have also offset the state’s cost for the reinsurance program thus far. The Trump administration, however, has been an unreliable partner in its support for these state programs. A hallmark has been the sudden announcement of less federal aid, such as the recent $99 million reduction in federal reinsurance dollars.

So what happens if the ACA is struck down? Where do the dollars for MinnesotaCare come from? What about dollars to extend the reinsurance program, if that is the direction the Legislature chooses to go? Or the funds to assist the roughly 65,000 Minnesotans who currently qualify for ACA subsidies to instantly discount monthly premiums? Where will the dollars come from to keep covering the 206,000 Minnesotans who qualified for medical assistance under the ACA’s Medicaid expansion?

Looming legal action could demolish the ACA in one fell swoop. That hopefully won’t happen, but Minnesota needs to be prepared for the worst. Leaving the provider tax in place, or passing an alternative generating substantial sums, to spur health care innovation and improve coverage was good policy before the Trump administration’s legal bombshell. Now, it’s the only responsible path forward.

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