State, hospitals can close a deal
The administration of former Gov. Dannel Malloy started out in 2011 with bold hopes for fiscal management: paying down the state's pension debt and and introducing Generally Accepted Accounting Principles, without which the state had long ducked the gravity of its financial outlook.
Malloy tried for the first few years to take the state's fiscal problems on his shoulders, but in one particular instance that has lingered long and perilously, his administration attempted a maneuver that backfired. The idea was to increase federal reimbursements for Medicaid by having the hospitals pay a tax to the state. As before, the state would claim the reimbursements but would now give the hospitals back both the tax payment amounts and a share of what the state took in.
We have seen how that kind of thing goes, whether it's payments to towns in lieu of taxes or the distribution of the state's share of slots revenues from the two casinos. The inability of state government to keep to its share of the bargain hurts the other parties to the arrangement. As state deficits grew, so did the tax, amounting to $514 million in 2017. The hospitals got nowhere near that amount back, let alone any added benefit from the reimbursement formula. They filed suit in 2015 and were prepared to argue that Connecticut owed them $4 billion.
However, the administration of Gov. Ned Lamont and the office of Attorney General William Tong have reach a tentative settlement with the hospitals. Over seven years the hospitals would receive $1.8 billion, although the state would spend less than that — $872 million — and leverage $1 billion in federal funds. Medicaid rates will go up about 2 percent a year for seven years.
The General Assembly is set to meet Wednesday in special session to vote on accepting the settlement. Indications from a recent informational hearing is that legislators will see the complex, heavily negotiated arrangement as the best option and will vote to approve. That is the right course.
Lamont, Tong and the secretary of the Office of Policy and Management, Melissa McCaw, have done well to make this a priority that avoids the delay and expense of a court case. Now if only state officials would learn not to base financial decisions on best-case scenarios in an unpredictable world.
The Day editorial board meets regularly with political, business and community leaders and convenes weekly to formulate editorial viewpoints. It is composed of President and Publisher Timothy Dwyer, Executive Editor Izaskun E. Larrañeta, copy editor Owen Poole and retired deputy managing editor Lisa McGinley. However, only the publisher and editorial page editor are responsible for developing the editorial opinions. The board operates independently from the Day newsroom.
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