Minnesota looks over array of taxes for universal care.

CHICAGO -- The Minnesota Health Care Commission is studying a variety of unusual taxes that could be used to raise money once a state law mandating universal health care coverage takes effect in 1997.

The state-sponsored health insurance program, known as Minnesotacare, was approved by the state legislature in 1992 with the goal of establishing universal coverage in five years. MinnesotaCare now serves 72,000 people, leaving about 390,000 still to be covered.

The Health Care Commission is drawing up proposals, to be sent to state lawmakers in January, for the benefits that universal coverage will provide and how they will be paid for. MinnesotaCare is currently funded by a 2% tax on health care providers, a revenue stream that has encountered problems.

To supplement or possibly replace the providers tax, commission members have asked their staff to study options including a tax on guns and ammunition, a tax on lottery tickets, a tax on attorney fees in medical matpractice lawsuits, and tying taxes on cigarettes and alcohol to the rate of inflation.

The options also include a value-added tax, a driver's license tax, a motor fuels sales tax, and a property tax on hospitals.

Lawmakers are scheduled to nail down the universal coverage plan and its funding by next May, according to David Haugen, assistant director of the commission.

However, the ultimate price of extending coverage remains unclear. Haugen said the commission has asked the staff to come up with two model plans -- one with a price tag between $100 million and $200 million, and one with a price tag between $300 million and $400 million.

"We're trying to figure our what's an appropriate level of benefits with appropriate subsidies and how many people will be eligible," said Haugen. "Once we come up with what we think is the price tag, then we'll come up with the means to finance it."

The 2% tax on health care providers that now funds the program has been the subject of ongoing legal challenges and may not be continued.

A lawsuit filed by the Twin City Pipe Trades Welfare Trust, which provides a self-insured health plan for unionized plumbers, is now pending in the U.S. Court of Appeals for the Eighth Circuit. The union contends that the tax violates the Employees Retirement Income Security Act of 1974.

In addition to the legal wrangling, there is also some doubt about whether the provider tax raises enough revenue to fund the program. In fiscal year 1994, the state collected a total of about $67 million from pr0vider taxes. In fiscal year 1995, the state expects to collect about $137 million from the taxes.

Analysts said it is too early to tell whether the expanded program would have any impact on Minnesota's stellar credit ratings. Standard & Poor's Corp. rates Minnesota AA-plus, and Moody's Investors Service rates the state Aa1.

"We would consider the potential impact on the ongoing budget balancing of these measures, and a secondary effect we would consider would be whether the additional costs involved might have a significant slowing effect on economic growth," said Steve Hochman, a vice president at Moody's.

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