A group of legislators, including Democratic Sen. Dennis Damon of Hancock, are calling for cutting back or eliminating all together the provider tax on hospitals that draws down more than $100 million in federal matching funds.

While no one expects the bills to ultimately pass because of their hefty price tag, Damon and his Republican colleagues say it’s time to show the public what the so-called tax-and-match program is really doing to area hospitals.

The Maine Hospital Association estimates that 30 of the state’s 39 hospitals lose money under the tax-and-match, even though it was sold to the Legislature as a way for the state to make money while not hurting the hospitals’ bottom line.

The hardest hit is York Hospital, which pays more than $1 million in taxes that are not reimbursed. Others have lost smaller amounts – all because they don’t have a lot of Medicaid patients that make them eligible for the pay back.

Sen. Dana Dow, R-Lincoln, said two hospitals in his district – Miles Memorial and St. Andrews – are losing money.

“They were told ‘you put up this tax money and you’ll get it back,” Dow said, comparing the offer to a “shiny apple.” “All they got back was an apple core,” he said. “We need to come up with a new scheme.”

The so-called scheme has hospitals paying a 2.2 percent provider tax. That tax is then added onto the cost of doing business under Medicaid and triggers a 2-to-1 federal match. Hospitals can be reimbursed, however, only based on the number of Medicaid patients they serve.

The hospital tax was tried and abandoned before, but brought back by the Baldacci administration. It is also applied to nursing homes at a 6 percent rate. A similar service provider tax of 5 percent has been added to private non-medical institutions and cloaked with other services like telecommunications, cable, fabrication and the rental of furniture and audio and video equipment so it doesn’t appear solely aimed at drawing down federal funds. In Gov. John Baldacci’s proposed Part 2 budget, services for the mentally retarded also would be taxed as service providers.

Sen. Damon said two hospitals in his area – Blue Hill and Mount Desert Island – are losing money under tax and match. He said the state has said, “it would try to make them whole, but it hasn’t happened.”

Several bills have been introduced targeting the tax – one that would reduce the tax rate from 2.2 percent to .74 percent and the other that would eliminate it all together. The price tags on those bills range from $30 to $60 million annually.

Even supporters say the bills won’t go anywhere because the cost to the general fund is too great, but they want to get the discussion started.

Sen. Arthur Mayo, D-Sagadahoc, co-chairman of the Health and Human Services Committee, spoke against the bills, saying eliminating the tax would leave a huge hole in the budget already passed.

“There are some hospitals at a disadvantage and there are some hospitals that come out ahead,” he said, but overall, it’s a net gain to the state.

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