The version of the state budget passed by the Ohio House last week includes a provision to increase the franchise fee paid by Ohio hospitals, a move that would bring in an additional $1.2 billion in federal Medicaid money (Source: “Ohio House’s budget would aid hospitals by tapping federal funds,” Columbus Dispatch, April 26, 2015).
States can tax hospitals and use that money to attract matching federal Medicaid dollars; 49 states do it. Some of that money is returned to hospitals based on the number of Medicaid patients they serve, while the rest goes into the state Medicaid fund or is siphoned off into other areas of the budget.
Kasich proposed bumping the fee to 3 percent, but hospitals objected because he structured it in a way that didn’t give them more money while requiring them to pay a higher fee. So they instead proposed going to 4 percent, giving House Republicans extra money to play with while also returning more money to hospitals.
Under the 4 percent fee in the House-passed budget, hospitals would pay $1.8 billion, and the federal government would kick in $3 billion. Compared with current law, hospitals would get back $1 billion more over two years while paying an extra $800 million in fees, while the state would bring in an extra $1 billion.