Reps. Hutchins, Corry concerned as majority Democrats schedule surprise Thursday hearing for Medicaid reimbursement rate bill that creates new tax

Majority Democrats have scheduled a Thursday hearing for a bill that creates yet another new tax in Washington state.

House Bill 2476 would create a “covered lives tax” – a tax placed on health insurance providers in Washington – to cover the cost of a long-overdue increase in Medicaid reimbursement rates.

“Despite the clear message from the people that they do not want more taxes, the majority in Olympia continues to push measures that increase the cost of living on hardworking Washingtonians,” said Rep. Spencer Hutchins, R-Gig Harbor. “The state has plenty of revenue that can be used to cover this vital increase to Medicaid reimbursement rates.”

“I am amazed by how tone-deaf majority Democrats are when it comes to adding new taxes and costs to residents and businesses in Washington state. The state is consistently sitting on a multi-billion dollar surplus because of all of the excess revenue it is bringing in,” said Rep. Chris Corry, R-Yakima, the ranking Republican on the House Appropriations Committee, which takes up budget-related bills.

Both representatives strongly believe Medicaid reimbursement rates must be increased in Washington and sponsored House Bill 2449 this session to do just that.

“For years, Washington state has had one of the worst Medicaid reimbursement rates in the nation,” said Hutchins. “The negative ripple effect has undermined our already struggling health care system and leaves hundreds of thousands of Medicaid patients waiting months to get an appointment – if they can get one at all.”

“The failure of the majority to address the issue of Medicaid reimbursement rates has created a crisis in Washington state’s health care system,” said Corry. “The solution is clear and it can’t be new taxes.”

According to the Washington State Medical Association, it has been decades since Washington state had a general Medicaid reimbursement rate increase. The impact: local practices limiting or turning away Medicaid patients because they can’t afford the loss to their businesses at the low rate. This is especially true of specialists.

Washington state has struggled with health care staffing for years and doctors say a big part of the problem is the low Medicaid reimbursement rate because that low rate means healthcare facilities can’t compete with wages being offered by hospitals and practices in other states, decimating recruitment efforts.

The state has seen an explosion in Medicaid patients since the passage of the Affordable Care Act in 2012 when Washington was among the first to jump on Medicaid expansion. In 2012, Washington had 1.2 million people on Medicaid. Today, that number has ballooned to 2.1 million. Medical professionals say the rates have essentially stayed the same or worsened with inflation leading to an urgent crisis.

“We know this is an urgent crisis that could cost people their lives,” said Hutchins. “But I completely disagree  with this new tax that majority Democrats have proposed to pay for it. It’s absurd given the record revenue surpluses Washington state has brought in.”

“We have had a better proposal on the table for weeks that, once again, has been completely ignored by majority Democrats,” said Corry. “And once again, that stubborn refusal to listen to House Republican solutions to fix Washington will cost the people of Washington.”

Under the majority’s House Bill 2476, insurance carriers would be hit with a covered lives tax of up to 50-cents per enrolled member to cover the Medicaid reimbursement rate increase.

Alternatively, Hutchins and Corry have proposed House Bill 2449 to cover the cost of raising Medicaid reimbursement rates by shifting the 32% of cannabis revenue that currently goes into the state’s General Fund to the newly created Professional Services Rate Enhancement Account. The Account would only be able to be used to increase the Medicaid rate for professional services provided at clinics and hospitals by Physicians, Physician Assistants, and ARNPs to the Medicare Rate. 

“This solution works and creates a consistent, common sense funding source. We can do the right thing the right away,” said Hutchins, “I am disappointed our bill has not been scheduled for a hearing so far, but I will fight for this solution to fix our state’s health care system to improve the lives of the people of this state.”

“As ranking Republican on the House Appropriations Committee I will do what I can to fight this new tax,” said Corry. “I encourage anyone concerned about yet another new tax proposal from Democrats to call for a hearing on our alternative.”

Under current law, cannabis revenue is distributed under a complex statutory formula.

After an initial distribution for prevention, research, and enforcement, the rest of the revenue distribution is percentage based.

After that $31.5 million distribution, the rest is percentage based:

  • 52% to the Basic Health Trust Plan Account
  • 1.5% to local governments where retailers are physically located and each jurisdiction must receive a proportional share based on total revenues generated and taxes collected in such jurisdictions
  • 3.5% to local governments on a per capita basis provided that cannabis siting isn’t prohibited and where counties receive 60% based on each county’s total proportional population
  • 11% to the Health Care Authority
  • 32% to the State General Fund (GFS)

According to the latest revenue projections, that 32% of cannabis revenue currently expected to arrive in the state’s general fund is between $160-$180 million a year through 2027. That funding is sufficient to fully fund the Medicaid rate increase for physicians and nurses, without raising taxes on Washington families. 

The public hearing on the Democrats proposed covered lives tax is scheduled for today, Feb. 15, at 4 p.m. in the House Appropriations Committee.

You can watch the hearing live here.

You can testify in person or submit written testimony here.


Washington State House Republican Communications