Governor Rick Snyder’s administration and Republicans in the Legislature are at odds over how to pay for the Medicaid program.
The state currently uses a small tax on health insurance claims to get federal matching money to fund health care services. The state tried other approaches, and, after a few misfires, that satisfied a requirement that the mechanism to get federal money must be “broad-based.” But the claims tax is opposed by many Republicans and business leaders, who say it drives up the cost of health coverage.
The plan before the Legislature would scrap the tax, and move around other revenue sources to pay for Medicaid. The money would come from Michigan’s General Fund, which is largely financed by the state income tax.
But the State Budget Office says the Obama administration would likely see that as a shell game and reject the state’s plan.
“It’s not a small number,” said Budget Office spokesman Kurt Weiss.
The state raises about $600 million a year from the claims tax, and the feds offer a two-thirds match, said Weiss. That means the state could take a $400 million hit if the Obama administration says “no” to the plan.
“The concern from the budget office is simply that the federal government would disallow it. From the budget director’s chair, he’s very concerned that this would disallowed and then we would have a big budget hole down the road.”
But the Legislature’s Republican leaders say the state should go nose to nose with the Obama administration on the issue.
“I believe we’re in compliance. I think we should just move forward,” said state Representative Al Pscholka (R-St. Joseph), who chairs the House Appropriations Committee. “I don’t think we should ask for any waivers. We should say, here’s Michigan’s answer. We’re in compliance. Thank you very much.”
The House and Senate have passed similar, but not duplicate plans to retire the health claims tax. Weiss says the Snyder administration still hopes to forge a compromise before the end of the year.