Research & Commentary: Colorado’s Hospital Provider Tax and TABOR Collide
In 2009, the Colorado General Assembly passed legislation creating a hospital provider fee (HPF) as part of its effort to provide health care for those Coloradoans who cannot afford private medical coverage and do not qualify for Medicaid. The HPF is assessed on hospitals based on the number of patients they treat and the number of outpatient services provided.
Each hospital pays a different amount for the tax, ranging from millions of dollars to nothing at all. The Denver Post reported preliminary state figures estimate the state’s hospitals paid $688.5 million in fees from October 2014 through September 2015. The federal government matched the fees, paying $1.2 billion.
The provider tax became a more important issue in Colorado after the Affordable Care Act (ACA) was passed in 2010. The Colorado legislature added an expansion of Medicaid to the hospital provider fee program in 2013, growing the program to roughly $2.4 billion during the state’s 2014–15 fiscal year. The fee is matched by the federal government, and it is used to provide expanded Medicaid coverage and increased enrollment in Colorado’s Child Health Plan Plus program.
The amount of revenue generated by HPF has grown rapidly over the past year. Revenue in 2015 increased by around 30 percent compared to the previous year, because the state’s Medicaid program is only now appearing in fee revenue. All told, the program funds an expanded Medicaid population of around 300,000 people.
Linda Gorman of the Independence Institute argues HPF has generated controversy ever since its inception. The original legislation creating the tax attempted to hide the true nature of the tax by calling it a “fee.” Even the federal government referred to the provider fee as a tax in a letter approving its payment.