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Illinois has yet to file MCO tax plan with federal government

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Wednesday, July 10, 2019  |  Article  |  By Greg Bishop | The Center Square

Health (49) , Health Care , Insurance (53)

The Illinois Department of Healthcare and Family Services is working with the federal government to implement the single largest tax included in the new state budget, an assessment on managed care organizations in Illinois that officials have estimated will bring in hundreds of millions in revenue for the state.

However, questions about how the tax on managed care organizations will work remain. MCOs are organizations that handle both taxpayer-funded Medicaid and traditional insurance claims. Lawmakers approved a tiered tax on MCOs beginning in 2020 as part of the budget that was passed with bipartisan support in the final days of the legislative session last month. That revenue would then be matched by federal funding as a way to pay the state’s Medicaid bills.

Davesurance.com insurance broker Dave Castillo said it’s like using the same tax dollar twice.

“The funny thing about this is it’s already matched federally,” Castillo said. “So they’re collecting a tax on money they got from the government to put in a trust fund to match money they’re going to get from the government.”

Castillo questioned if the plan would fly with the federal government.

“It seems to me that they’re using money to get money, the money that they got,” he said. “I guess it will raise money but you’ve got to wonder what the federal government has to say about doing it that way.”

U.S. Department of Health and Human Services and federal Central Management Services said it couldn’t comment on the plan. The department said Illinois hasn’t filed a State Plan Amendment.

The Illinois Department of Healthcare and Family Services said it’s working to implement the plan.

“The Department is working closely with the Governor's Office of Management and Budget and the Federal Centers for Medicare and Medicaid Services to implement this smart approach which will increase our federal match and strengthen access to healthcare,” Illinois Department of Health and Human Services spokesman John Hoffman said.

Regardless, Castillo said MCOs would likely pass the cost to consumers in one way or another.

“Insurance company actuaries are probably smarter than government accountants, and so they’re going to find ways to make up that difference,” Castillo said.

While the increased cost for consumers isn't expected to be anything more than a couple of dollars more a month, Castillo said they’ll still be paying a little more for health care.

“It’s death by a thousand cuts,” Castillo said. “Over time, these things add up.”