CHICAGO -- Minnesota's plan to extend health care to uninsured residents through a new tax on hospitals and doctors in the state, its immediate neighbors, and Canada faces opposition from out-of-state medical providers.
The 2% tax Minnesota intends to levy on hospitals beginning Jan. 1 is supposed to help finance the state's MinnesotaCare program. That program, passed by the state Legislature in April, is an attempt to ensure access to health care for all Minnesota residents.
Minnesota is one of six states that have approved a plan for universal access to health insurance coverage for its residents, according to Anne Vail, assistant director of the department of state legislatures at the American Medical Association. The other states are Hawaii, Vermont, Oregon, Florida, and Massachusetts.
Under the state's plan, the tax not only will be levied on the gross patient revenues of all Minnesota hospitals, but also will be applied to the revenues of out-of-state and Canadian hospitals that service Minnesota patients, according to Tom Hogan, project manager at the Minnesota Department of Revenue.
Minnesota and out-of-state doctors will be assessed the same 2% tax starting in January 1994, he said.
Attorneys for hospital associations in North Dakota and South Dakota have determined that it is unconstitutional for a tax to cross the boundaries of its state, according to Frank Drew, president of the South Dakota Hospital Association. Both his group and the North Dakota Hospital Association have told their members not to pay the tax, Mr. Drew said.
He added that the does not know what will happen in January when its members do not pay the tax.
"We'll have to wait and see how things play out in January and February," Mr. Drew said.
Other states bordering Minnesota are also looking into the matter.
Jeanine Freeman, senior vice president and staff legal counsel for the Iowa Hospital Association, said the association has urged other states to oppose the tax. She added that the association has asked the Iowa attorney general's office for an opinion on the matter.
"We question whether Minnesota has constitutional jurisdiction," Ms. Freeman said.
Tim Gibson, spokesman for the Iowa Medical Society, said his group is working with representatives in other states to determine the legality of the tax.
Officials from the Wisconsin Hospital Association and Canada's Ministry of Health did not return phone calls.
Mr. Hogan said the state expects the MinnesotaCare law to be "fine-tuned." He added that the state's Department of Revenue is looking into challenges against the law.
MinnesotaCare could also face legal challenges based on a recent federal court ruling in New Jersey that struck down a hospital surcharge used to finance health care for uncompensated patients in that state, according to Dave Abrams, attorney for the Minnesota Department of Health.
The court ruled that the surcharge interfered with self-insured and union health-care plans since those insurance plans are exempt from all state laws under the federal Employees Retirement Income Security Act of 1974, Mr. Abrams said. That law governs a variety of retirement and benefit plans offered to employees of large companies and members of labor unions.
The ruling "doesn't call into question [a state's] ability to tax providers. What is at issue is whether or not providers can pass the tax onto payers," he said.
Mr. Abrams said he was not aware of any Minnesota companies that plan on challenging the MinnesotaCare law. But a section in the new law asks Congress to waive the rules in the 1974 act that could hinder the program.
U.S. Sen. Dave Durenberger, an Independent-Republican from Minneapolis, is planning to introduce legislation to eliminate the ERISA provision that exempts self-insured and union plans from state laws, according to Susan Foote, a spokesman for the senator.
