Senate Finance Committee advances bill to revise Medicaid enhancement tax distribution, prompting debate over hospital losses and federal match

The New Hampshire Senate Finance Committee voted 4-1 in executive session to advance Senate Bill 249, a measure that changes how Medicaid enhancement tax (MET) revenues and DISH (disproportionate share hospital) payments are distributed and establishes directed payments to hospitals.

The bill, as amended in committee, moves the share paid back to hospitals from 80% to 91% beginning in state fiscal year 2026 and leaves room for an additional supplemental payment (an “adder”) that proponents say could reduce projected losses for several large hospitals. Committee members agreed to send the bill to the Senate floor so negotiators can continue talks with the governor’s office before crossover.

Supporters told the committee the revised distribution would allow the state to draw more federal matching funds while preserving a longstanding partnership between hospitals and the state. “We wanna continue the partnership that has existed on this issue for over a decade,” Steve Onan, president of the New Hampshire Hospital Association, said during the executive session. Onan and hospital leaders described the proposal they had shared with the governor as mirroring last summer’s approach but including changes to capture enhanced federal matching dollars.

Onan told senators the proposal would generate roughly $80,000,000 more state revenue than the prior agreement while still leaving larger hospitals with aggregate losses. “We would see $46,000,000 in losses for our 13 largest hospitals,” Onan said, adding that hospitals had accepted that trade-off to preserve critical access hospital funding and the state’s Medicaid match.

Former U.S. Rep. and state Sen. Jeb Bradley, speaking to the committee in his capacity as a private citizen, urged adoption of a specific committee-of-conference amendment he helped develop that would add about $5,700,000 a year to directed payments. “If you insert that into Senator Birdsall’s bill ... that’s the $5,700,000 adder,” Bradley said, arguing it would reduce net losses to hospitals and shield the state budget from litigation risks tied to the MET. He reminded the committee that two New Hampshire Superior Court rulings had found the MET unconstitutional and warned that a failed collection could leave the state without federal matching dollars. “If it’s unconstitutional it can’t be collected. If it can’t be collected there is no federal match,” Bradley said.

State officials described mechanics and limits under federal rules. “Under the CMS rules, they have to be allocated based on a hospital’s actual utilization of Medicaid services,” David Chorney, deputy Medicaid director, said when asked how directed payments would be distributed. He explained directed payments are tied to New Hampshire Medicaid utilization (for example, per Medicaid discharge for inpatient services or per outpatient encounter), while DISH payments historically have compensated for uncompensated care that can include uninsured out-of-state patients.

Committee questions focused on the distributional effects — particularly on critical access hospitals and larger hospitals with different patient mixes — and on timing. Senators pressed witnesses about the scale of projected losses under different percentage splits. Onan and Bradley gave differing but related figures: Bradley said that a 91% allocation as voted by the Senate last week would still leave about $60,000,000 in losses for some of the 13 largest hospitals, while Onan described the governor’s proposal and the hospitals’ counterproposal that would leave $46,000,000 in net losses to larger hospitals after adding the proposed adder.

Several senators emphasized the April 15 payment deadline. Onan and Bradley noted hospitals will pay the Medicaid enhancement tax on April 15 — an amount the testimony identified as $348,000,000 — which the hospitals’ tax payment would generate roughly $430,000,000 in federal matching funds for the state’s Medicaid program.

The committee’s action advances the bill but leaves open one pathway the chair described repeatedly: the governor’s office should be the single negotiator for the state and may reach an agreement with hospitals that would be reflected as a floor amendment before crossover. The committee chair said the committee would move the bill to the Senate calendar and allow time before the crossover deadline for negotiations; if no agreement is reached, the bill will appear on the floor with potential floor amendments reflecting committee members’ positions.

Votes at a glance: The committee voted 4-1 in favor of the “ought to pass” recommendation in executive session; the motion was made and seconded on the committee floor (mover recorded in the transcript as Senator Birtzel/Birdsall and seconded by Senator Waters) and was not sent on consent.

What’s next: The committee chair said the bill will be placed on the Senate calendar for crossover; negotiators from the governor’s office and hospital representatives were expected to continue discussions during the following week so any settlement could be incorporated as a floor amendment.

Key figures and details clarified in committee testimony: Hospitals’ proposal and related administration changes were described as producing about $80,000,000 in additional revenue compared with the prior agreement; hospitals’ aggregated losses under the amended 91% split were described as roughly $60,000,000 by one witness and approximately $46,000,000 after adding the committee-of-conference adder discussed by witnesses; the adder amount discussed was $5,700,000 per year; the scheduled MET tax payment on April 15 was stated as $348,000,000, which testimony estimated would draw about $430,000,000 in federal matching funds.