Michigan adopts Medicaid claims tax to avoid cuts

NEWS IN BRIEF — Posted Sept. 12, 2011

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The Michigan Legislature in late August repealed a 6% tax on certain Medicaid health plans and adopted a 1% tax on select Medicaid claims in an effort to preserve $1.2 billion in Medicaid funding.

The move was necessary because the state expected the Centers for Medicare & Medicaid Services to disallow the narrowly focused health plan tax, which applied to Medicaid contracted and specialty prepaid health plans. The new 1% tax will apply to most paid Medicaid claims, according to the nonpartisan Michigan House and Senate fiscal agencies.

"Millions of Michigan residents depend on Medicaid services, and thanks to the passage of these bills, they can continue to count on them," said Michigan Sen. Roger Kahn, MD, the legislation's sponsor. Michigan Gov. Rick Snyder had not signed the bills as of this article's deadline, but he indicated that he supported the legislation.

The Michigan State Medical Society supported the bills in part because the loss of revenue from ending the old tax without replacing it with the new tax would have forced the state to cut Medicaid physician payments in half, according to society spokeswoman Sheri Greenhoe.

The claims tax would take effect on Jan. 1, 2012, and would expire on Jan. 1, 2014. It does not apply to certain types of Medicaid claims, including those related to incentive compensation programs and those for out-of-state residents, and it would not apply to patient cost-sharing.

Note: This item originally appeared at

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