Provider Tax: why now is the time to repeal the sunset

Minnesota’s health care provider tax raises nearly $680 million annually for affordable health care and investments in healthy communities across the state. This essential funding source will expire at the end of this year unless policymakers take action during this legislative session. The urgency is real: without an extension of this vital funding, the state’s Health Care Access Fund will quickly run out of money – threatening the future of essential health care services in Minnesota.

The provider tax is a major funding source for health care initiatives that reach more than one million Minnesotans. It was instituted in 1992 to expand access to affordable health care. The dollars raised go to the Health Care Access Fund (HCAF), which funds health care through Medicaid and MinnesotaCare for lower-income Minnesotans and investments in healthy communities. Though there are other revenues that feed into the HCAF, the provider tax produces about 80 percent of the HCAF’s revenue.

As part of a deal to end the 2011 state government shutdown, policymakers added a 2019 “sunset” to the provider tax law. As Mary Krinkie, Vice President of Government Relations for the Minnesota Hospital Association, put it: “there’s always a tendency to kick the can down the road, and at that time 2019 seemed a long way away.”

If the provider tax sunsets, revenues will disappear but needs will persist. A look at the projected balance of the HCAF, assuming the provider tax does sunset, shows that the HACF quickly runs out of money needed to fund essential health services.

Projected HCAF Balance (numbers in 000s)
FY 19 FY 20 FY 21 FY 22 FY 23
Balance $670,233 $602,218 $61,213 ($416,149) ($918,959)

Some might be tempted to kick the can down the road again, but Minnesotans’ access to affordable health care is too important to risk, especially as we grapple with challenges like shortages of providers in rural areas, persistent racial inequality in access to health care and health outcomes, and uncertain federal funding. Introducing risk and uncertainty to Minnesotans counting on Medicaid and MinnesotaCare is an unacceptable burden to place on our neighbors. Policymakers must act to extend the provider tax and ensure affordable health care will continue to be available without disruption.

We shouldn’t wait until we get into trouble before finding a solution: we need to repeal the sunset this year, before it expires. There would be substantial administrative hurdles involved if we turned the tax “off,” even for a short period of time, and then tried to go back to it later when alternatives don’t pan out. Allowing the provider tax to continue will ensure a smooth experience for both the providers who remit the tax and the Minnesotans who rely on the services it funds.

The future of affordable health care for one million Minnesotans is at stake. Policymakers must act now to repeal the sunset, and ensure stable and adequate funding to support affordable, equitable health care for Minnesota.

-Betsy Hammer

About Betsy Hammer

Betsy Hammer is the Minnesota Budget Project's policy advocate.
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One Response to Provider Tax: why now is the time to repeal the sunset

  1. Curt Kristensen says:

    Please extend the MN Provider tax to apply to ALL persons requiring tax preparation fees, attorney fees
    who lack sufficient monies to pay for this individually. Then, we may see the logic of this monstrosity exposed. Instead, we continue to run surpluses in the MN Care fund w/o relief for medical practices.
    So let us commit to sharing the fun of completing this burdensome paperwork to CPAs and attorneys fees.
    After all, we have plenty of need for helping people pay for tax preparation and legal fees. To propose this idea would mobilize the well organized lobbying efforts for accountants and attorneys and expose the lie!

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