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Taxpayer Group Opposes Motion to Dismiss in Healthcare Case

Sep 28, 2017 | by William Perry Pendley

DENVER, CO.  A Colorado group that defends the rights of taxpayers today responded to a motion to dismiss filed by two Colorado entities and their officials that the group alleges violated the Colorado Constitution’s Taxpayer’s Bill of Rights (TABOR).  On June 26, 2015, the TABOR Foundation filed a complaint in Denver County Court alleging that its members should have been allowed to vote on the levying of a “hospital provider fee” on Colorado hospitals, which since enactment in 2009, allowed Colorado’s Department of Health Care Policy and Financing to collect tens of millions of dollars.  Although the 2009 act provided that the funds collected would be kept separate from the general fund, in fiscal year 2010-11, some tax proceeds were put in the general fund.  The Foundation sought declaratory and injunctive relief and refund of revenues collected, with the payment of interest, as required by TABOR.  As of October 16, 2015, a motion by the Colorado defendants to dismiss the lawsuit had been briefed fully.  On May 30, 2017, Governor Hickenlooper signed S.B. 17-267, creating the Colorado Healthcare Affordability and Sustainability Enterprise to administer the Hospital Provider Charge beginning on July 1, 2017.  On June 30, the Foundation amended its lawsuit to challenge S.B. 17-267 and the creation of the Enterprise.

“We are pleased that the Colorado defendants have abandoned their challenge to our client’s right to file its lawsuit; however, they continue to argue that our client’s lawsuit should be dismissed,” said William Perry Pendley of Mountain States Legal Foundation (MSLF), which represents the TABOR Foundation.  “The court should deny that motion in its entirety.”  

Federal regulations allow States to impose a “tax” on healthcare services and then leverage that “tax” to receive federal matching funds.  Yet, to stay eligible for federal Medicaid funds, State health care-related taxes must be broad based, uniform, generally redistributive, and cannot violate the “hold harmless” provision of the regulations, that is, a State cannot guarantee it will reimburse a hospital—either directly or indirectly—for taxes paid to the State. 

Although, under federal regulations, Colorado is barred from providing any service to a hospital in exchange for the taxes collected at that hospital, the provision of services in exchange for a fee is what causes a fee to differ from a tax.  Instead, Colorado, by federal regulation, uses a uniform formula to assess healthcare taxes and then redistributes funds in a way that guarantees some hospitals will not receive any funds in return.  For example, contrary to holdings of the Colorado Supreme Court and the Supreme Court of the United States that a fee must be a charge for services provided to the fee payer, a Jefferson County hospital paid $2.1 million in taxes for no services.  Ten Colorado hospitals paid more taxes than the State services received.

Mountain States Legal Foundation, created in 1977, is a nonprofit, public-interest legal foundation dedicated to individual liberty, the right to own and use property, limited and ethical government, and the free enterprise system.  Its offices are in suburban Denver, Colorado.

For more information:  TABOR Foundation v. Colorado Department of Health Care Policy And Financing


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