Josh Elliott-Traficante

The unemployment rate in New Hampshire fell by one tenth of a percentage point in June to 5.2%, representing a decrease in the number of unemployed by 1400. The number of jobs created according to the Household Survey however was only 250, meaning the balance of the no longer unemployed (1,150) left the workforce. While the size of the state’s labor force has rebound since the depths of the recession, the last 6 months have seen a series of declines.

Whether this is a short term pull back or the sign of a larger trend remains to be seen. While it is true that New Hampshire is a “graying” state, the dip as of late is too large and too rapid to be attributed to the aging of the labor force.

Turning to the Establishment Survey Data, 1,900 non-farm jobs were created in the month of June. Sectors seeing the largest gains were Durable Goods Manufacturing (+600), Financial Activities (+700) and Accommodation and Food Services (+1,700). Retail Trade (-600), Professional, Scientific and Technical Services (-600) and State Government (-900).[i]

The cities do not seem to have fared as well this month, with all four losing jobs: Manchester     -500, Nashua -500, Rochester-Dover -600 and Portsmouth -200.

[i] This ‘loss’ seems to be a partial correction from last month’s gain of 1300 state government jobs


Grant D. Bosse

July 9, 2013

As originally published in the Concord Monitor

Gov. Maggie Hassan was flanked by Republican and Democratic leaders as she signed into a law a much-needed update of New Hampshire’s Business Corporation Act. There were no great ideological issues at stake. The bill brings New Hampshire government up to date on handling technical corporate practices, such as domicile and dissolution.

The legislation was a top priority for the New Hampshire Business and Industry Association and was expertly guided through the State House by Republican Sen. Jeb Bradley. The new code goes into effect in January.

Business owners should also be happy for a change that didn’t happen. Gov. Hassan has hoped to delay two popular tax reforms approved by the last Legislature in order to boost tax revenues in her proposed budget.

Last year, Republicans and Democrats overwhelmingly approved increasing the business income threshold for paying the Business Enterprise Tax. They also extended the ability of businesses to carry forward BET payments against the Business Profits Tax. These small changes in the tax code benefited struggling small firms and those just starting to show a profit.

Hassan would have reinstituted the lower BET threshold just months after it went up and put off the carry-forward for two years. That would have meant a tax increase of $17 million on small business, and it would have undermined confidence in New Hampshire government.

The private sector doesn’t like high taxes, but it despises uncertainty. Repealing these two modest tax reforms would have sent a horrible signal to anyone looking to start a business in New Hampshire just to fuel a small increase in state spending.

In a year when partisan rhetoric overstated minor policy differences, it’s nice to see Republicans and Democrats working together to make New Hampshire more welcoming to business owners.

Charlie Arlinghaus

July 17, 2013

As originally published in the New Hampshire Union Leader

There is a right way and a wrong way for the government to do something stupid. It won’t surprise anyone that the current administration in Washington has chosen the wrong – and almost certainly illegal – way while New Hampshire managed to do a whole host of silly things but in the right way.

Routinely, governments find that laws previously passed are quite inconvenient and get in the way of something they are trying to do (or not do) today. But they don’t want to repeal the law for the future, they just don’t want to follow it this year.

That happened recently with the byzantine federal health care law. Those following closely will recall that the law includes mandates to purchase health insurance for both individuals and for businesses. Implementing the law has taken longer and been more complicated than some administrators had expected.

Citing concerns about the complexity of the requirements under the law, the administration unilaterally suspended for a year the portion of the law that applies to businesses. They didn’t ask Congress to pass a temporary repeal. They merely announced that they will cease to enforce a law of the land for a year –businesses get this break, individuals are still out of luck. Apparently the law is too complex for businesses to follow but perfectly fine for individuals.

Businesses with more than 50 employees, the ones to whom the law applies, are only a few percent of all firms but they account for 72% of employment.

While I think delaying the very complex law is reasonable, I would have delayed for both businesses and individuals just to be fair. But, a much more important point, administrators do not have the authority to pick and choose which laws they will enforce or not. If a law making the tax rate 35% passes, can the IRS announce it will only enforce the first 30%? If Congress chooses to require airbags on new cars, would it be OK for the transportation secretary to announce that they won’t actually enforce that?

Administrations can request laws be repealed or suspended but they may not choose to enforce or not laws they disagree with. If a Republican had replaced the current president, would it have been acceptable for him to not try to repeal ObamaCare but instead just announce he won’t be enforcing it? Of course not.

In New Hampshire, we pass temporary restraints on laws all the time. But the governor doesn’t decide to just enforce it. Instead the legislature passes a law temporarily suspending another one.

For example, technically we have a law that requires surpluses left at the end of the two-year cycle to be deposited into a “rainy day fund” – in theory to allow the extra in good years to be a reserve to balance out small revenue shortfalls in bad times. But every budget for the last five has suspended that law.

After state reserves had been drained from $188 million to $17 million by 2003, then-Gov. Craig Benson set of a goal of building the state’s operating reserving back to a more prudent $100 million. Benson’s $82.2 million surplus would have brought the state’s reserves to $99.5 million had the law been allowed to work. Instead, the next governor and next legislature passed a law suspending the rainy day fund law so the surplus would be available for them to spend.

The surplus turned out larger than they thought so they put some of it and some of the $51 million surplus two years later aside but they kept and spent a total of $61 million that should have been set aside for the rainy day that was on their doorstep.

The Republican legislature that decried this sort of practice in 2011 nonetheless passed a law preventing $17 million from going in the rainy day fund and the current divided government hangs on to that $17m and an additional $39m surplus the last budget generated. At this point, it isn’t clear why we have a rainy day fund at all.

As annoying as I find the bipartisan effort to neuter the state’s rainy day fund, our governors and legislatures do it legally. This was never done by executive fiat. Instead, the law was duly suspended by passing another law as opposed to administration in Washington which is just refusing to enforce the laws they are elected to administer.

 Signs of a recovery, but a long way to go

Josh Elliott-Traficante

The June unemployment rate remained unchanged at 7.6%. While the ranks of the unemployed grew by 17,000, the increase was not large enough to change the rate. The number of those not in the workforce grew by 12,000, but those classified as wanting a job fell by 132,000.

The critical labor force participation rate increased by one tenth of a point to 63.5%, marking three straight months of improvement. While this rate, a reflection of the large numbers of people who have left the workforce due to the recession, is still at 30 year lows, incremental increases are an encouraging sign.

At the same time however, the unemployment rates that capture some of those discouraged workers who gave up looking for work increased. The U-5 rate increased from 8.0% to 8.2%, the U-5 from 8.8% to 9.1% and the U-6 from 13.8% to 14.3%.

Another discouraging sign was the drop in the number of full time works with a corresponding spike in full time workers. The number of full time employees fell by 240,000, while the number of part time workers grew by 360,000. Part time employment has been surging since March of this year, while full time employment was also growing (at least until June), albeit at a much slower rate.

The reasons for the growth in part time employment over full time employment have been attributed to both a fear on the part of employers over the strength of the recovery and the reluctance to hire full time employees due to the extra costs incurred from the Affordable Care Act or Obamacare.

Turning to the Establishment Survey Data, 195,000 non-farm jobs were added. Sectors seeing the largest gains were Construction (+13,000), Retail Trade (+37,100) and Food Services (+51,700). Seeing the biggest losses were Manufacturing (-6,000) [although automobile manufacturing was +5,000], Government (-7,000), and Transportation and Warehousing (-5,000).

The Establishment Survey Data reflects the surge in part time workers mentioned above. The areas of biggest growth, Retail Trade and Food Services, are sectors where the vast majority of the jobs are part time, entry level positions, not full time jobs.

Josh Elliott-Traficante

According to New Hampshire Employment Security, the unemployment rate for the state in the month of May fell to 5.3%, a drop from 5.5% in April.

This drop reflects a 1350 fewer unemployed New Hampshire residents. The Household Survey data also found that 1800 jobs were created and the labor force grew by 450.

All of this is good news, in particular the fact that the labor force is growing. This indicates that people are no longer leaving the workforce due to a lack of work, which has been a hallmark of the long recovery.

According to the Establishment Survey, 2,500 non-farm jobs were created in May, with 1,400 of those being in the private sector. Sectors seeing the biggest gains were Arts, Entertainment and Hospitality (+1,200), Accommodation and Food Service (+800), and State Government (+1,300)[i]

Seeing the biggest losses were Wholesale Trade (-600) and Educational Services (-300)

Greater Manchester lost 300 jobs in May, Nashua and Portsmouth each gained 800, while Rochester-Dover shed 400.


[i] Note: This number conflicts with the actual number of hires by the state. See for more details.

The national unemployment rate grew to 7.6% in May, up from 7.5% in April. That increase translates to 101,000 additional unemployed persons.

Though the unemployment rate did increase, the crucial Labor Force Participation Rate saw a slight increase from 63.3% to 63.4%, reflecting a drop of 231,000 of those considered ‘not in the labor force.’ This means that people who had left the work force due to a lack of jobs, are now returning and looking for work.

However, those who did not finding work quickly are now counted as unemployed causing the unemployment rate to go up as well.

Paradoxically, this could be taken as good news, since it means that means that the long term unemployed (or some of them at any rate) feel strongly enough about their chances of finding a job, that they have started to look again.

Taking into account historical baselines, if all of those people not in the workforce, but would like a job were counted in the official unemployment rate, the rate would be 8.7%

Turning to the establishment data, the country added 175,000 non-farm payroll jobs in May. Sectors seeing the largest gains were Retail Trade (+27,000), Temporary Help Services (+25,600) and Healthcare (+11,400) and Food Services and Drinking Places (+38,100).

Growth in the Healthcare field is constant, especially with an aging population, so payroll jobs in that sector does not say much about the economy as a whole.

The growth in Food Services and Retail Trade, while large in real terms, is actually consistent with the growth seen over the past two years. Retail Trade in particular is still well short of pre-recession highs.

Temporary Help Services (i.e. temp jobs) have seen greater than average growth over the past year. There are at least two possible causes for this: employers have a need for more workers, yet are unsure about future growth so they are hesitant to bring on full time employees or they have concerns over the implementation of the Affordable Care Act.

Seeing the largest losses were Federal Government (-14,000), Hospitals (-5,900) and Manufacturing (-8,000).

Charlie Arlinghaus

May 15, 2013

As originally published in the New Hampshire Union Leader

Don’t believe anything you read about the New Hampshire budget. It might be a good idea not to believe anything read in any political story. Communications “professionals” on either side of a debate excel only in screeching and grotesque exaggeration. Debate in politics in increasingly composed of two people saying things neither of them believes and no one is expected to take seriously but they hope may fool a few activists who already agree with them. Lost in the ridiculous caterwauling is anything vaguely resembling a fact.

If we are to believe political staff, the debate over the budget is between one group making dishonest claims and an extremist cabal with a secret plan to destroy state government.

As an example, New Hampshire Republicans hailed good economic news last week not by touting their success in the past but by attacking Democrats “who for months have spread false and dishonest claims about a potential budget shortfall.” Those “dishonest claims” were based on the fact that revenues were $41 million behind budget. The dishonest claim was perpetrated by the Governor, House Democrats, House Republicans, Senate Democrats, Senate Republicans, the Legislative Budget Office, and me.

Apparently, while every budget observer in the state was fooled by math, the one guy who wrote this screed alone saw clearly and knew when no one else did that a fabulous two months were coming even if it was unexpected by the rest of us. Good thing he remained silent so he could attack us later. Actually, most of us are excused apparently for just being stupid – we aren’t included in accusation of dishonesty so he must presume we were too stupid to know that the two anomalous months were coming and that lawsuits would be settled on the precise timing they were settled. The omniscient release writer only attacks “Democrats” for being dishonest. They apparently are smarter than the rest of us or it wouldn’t be dishonesty would it?

In reality, no one takes anything these people say seriously. Thanks to the internet, they don’t even waste paper in fax machines anymore. Their laughable screeds can be deleted unread.

Speaking of laughable screeds, The Democratic release writers are no better. There’s a lot of material here that is fairly predictable but let me mention the typical budget release which attacks “Jeb Bradley and his Tea Party Caucus” because they have “devastated essential services for thousands.”

You can divide the GOP broadly into conservatives and moderates with the Tea Party as a subset of conservatives Yet Jeb is and has always been quite well known as a moderate. So why make such a ridiculous identification. Well Jeb is perceived as an opponent to Sen. Shaheen next year so they want to confuse people about him and use him as a piñata for everything they don’t like. Nothing wrong with that per se, it just makes the average reader wonder about the accuracy of what might come next and well it should.

The “devastate essential services” charge is easier to peddle because so many people are innumerate. But simple math does refute the charge.

The supposedly horrific 2012 budget estimated revenues correctly (in fact, almost precisely with two months left to go). It then spent that amount of money according to the opposite priorities the Democrat release writer says. Compared to the budget 6 years prior (the budget closest to the same amount as 2012), a 30% increase in debt spending (and debt is a decision made by prior legislatures which is non-negotiable) left $1.2 billion to be spent by the general fund if revenue estimates were right (and it turns out they were).

The slightly larger half of the budget goes to Health and Human Services. Those human service priorities were actually 4.4% higher than 2006. Whatever differing priorities you and I might have, the services we each consider essential are probably in the this HHS half of the budget The actual spending reductions necessary to balance the budget came from the slightly smaller half of the general fund budget outside of HHS. This “rest-of-the-budget category was down 11%.

That hardly sounds like “balancing the budget on the backs of the needy and disabled.” Furthermore, the portion of the HHS budget that goes for mental health and the developmentally disabled (considered the most critical populations in the minds of both political parties) was up 34%. But somehow that gets translated into Republicans hate the disabled and poor people.

Many conservatives and liberals are more than willing to engage in an honest debate about priorities. But generally speaking we are drowned out by the writers of ridiculous screeds who never let reality get in the way of invective.

The Unemployment rate in New Hampshire dropped to 5.5% in April, down from 5.7% in March. This drop represents nearly 1700 fewer unemployed in the state. According to the Household Survey, the number of people employed in New Hampshire also grew by over 1000, with the Labor Force contracting by roughly 500.

In contrast, the Establishment Survey data showed a net loss of 400 jobs[i] in New Hampshire over the month. The sectors seeing the biggest losses were Manufacturing   (-500) and Arts, Entertainment and Recreation (-600). Sectors seeing the biggest increases were Retail Trade (+1400) and Professional Scientific and Technical Services (+800).

Looking at the metropolitan areas in the state, Manchester saw a loss of 400 jobs, Nashua shed 500 and Rochester-Dover down 300. Portsmouth, on the other hand, saw a gain of 400.

So what to make of this data? For starters the drop in unemployment is real. In the past, both nationally and at the state level, decreases in the number unemployed have seen corresponding increases in those leaving the labor force. Though there is some evidence of that in the April data, in the contraction of the Labor Force by 500, the majority of those no longer employed found employment. It should be noted that March saw the labor force grow by nearly 2000. While the contraction is not great news, it is not terrible either.

That being said, there are some bright spot. The Household and Establishment survey discrepancies seem to indicate a growth in the number of self-employed. Whether or not this is out of necessity due to a lack of job openings or faith that the economy is going to make a comeback soon remains to be seen. Retail stores seem to be betting on the latter with nearly 1400 jobs in that sector created. Though there is volatile in the month to month figures for this sector, the trend is in the upward direction.

[i] The discrepancy between the Household data showing job gains while the Establishment data showing losses is largely because Household data includes the self-employed, while the Establishment data does not.

New Hampshire budget writers grapple with a brand new tax that’s been around for 20 years

By Grant D. Bosse

SUMMARY: New Hampshire adopted the Medicaid Enhancement Tax as a means to leverage federal matching funds without imposing any real tax liability on state hospitals. After two decades, budget writers finally ended the practice of MediScam by turning this phantom tax into a real one. Faced with a new multimillion dollar tax liability, New Hampshire hospitals took the state to court and started paying closer attention to how much they owed.  As the Legislature struggles to understand a huge source of state revenue that went without much oversight for twenty years, how they change the Medicaid Enhancement Tax will have expensive implications for the state budget and state hospitals for years to come. This paper will outline the history of the Medicaid Enhancement Tax in New Hampshire, describe how the complex tax works in conjunction with the Disproportionate Share Hospital Program, and dispel some of the many misunderstandings that trip up budget writers trying to incorporate this brand new, 20-year old tax into the FY14-15 State

Click here to download a copy of  “Meet the MET”

Under the Federal Medicaid program, participating states split the cost for providing health care to low income recipients with the federal government. Most states, including New Hampshire, elect to reimburse hospitals for treatment based on a fee-for-service model. Reimbursement rates are set by state officials, but must be approved by the Centers for Medicare and Medicaid Services.[1]

Reimbursement rates under fee-for-service plans are not sufficient to pay for the hospitals’ costs to treat Medicaid patients. The program relies on hospitals to be an implicit third partner, along with states and the federal government, in financing Medicaid. Losses incurred through treating Medicaid patients are offset by patients paying through private insurance, or in rare cases out of pocket.

Throughout the 1980’s, Congress sought ways to encourage states to provide additional funding to hospitals who served a disproportionate number of low-income patients through Medicaid, and thus had fewer privately funded patients on which to shift costs. Beginning with the Omnibus Budget Reconciliation Act of 1981, Congress established the Disproportionate Share Hospital program.[2] DSH allowed states to provide higher payments to hospitals serving more low-income patients, but states were slow to adopt the program. Congress increased state flexibility throughout the 1980s, and states began turning to DSH as a way to leverage federal matching grants to help balance their general fund budgets.

Under DSH, states could exceed the caps on assistance to hospitals under Medicaid, and receive federal matching funds for every dollar. The matching grants range from 50% for wealthy states such as New Hampshire to 75% for the poorest states. On average, the Federal Medical Assistance Percentage (FMAP) is 57% nationwide.[3]

State budget writers now had great flexibility to increase state assistance to hospitals. In states like New Hampshire, every dollar in DSH payments would receive a matching dollar in federal spending. The program was designed to help reduce the hidden subsidies built into the Medicaid program. But nothing in federal law prevented states from recapturing this new pot of money through taxes on the very hospitals the DSH program was meant to help.

State payments under DSH exploded from $1 billion in 1990 to $17.4 billion in 1992, accounting for 15% of total state medical expenditures.[4] New Hampshire quickly became one of the most aggressive states in implementing DSH payments as part of its state Medicaid program. DSH accounted for 35.8% of New Hampshire’s total Medicaid spending by 1992, just two years after adopting it.[5]


New Hampshire began making DSH payments in Fiscal Year 1992, at the same time it imposed a new revenue stream to pay them. The Medicaid Enhancement Tax was a 6% levy on hospitals’ gross patient service revenue, essentially every dollar charged for patient care at all 28 New Hampshire hospitals.[6] The rate is currently 5.5%. The first payments were made in August 1991, and were credited to FY1991, which had ended on June 30th.[7]

Every hospital in the state was designated a Disproportionate Share Hospital, and captured under both MET and DSH. Upon making its MET payment, the State would refund an often identical amount to the hospital under the DSH program. The State would then apply for 50% reimbursement from the federal government.

For example, if a hospital owed $10 million under the MET, it would send its payment to the State, which would send a $10 million DSH payment to the same hospital later that same day. The federal government would soon get an application for a $5 million DSH matching grant, which would be deposited directly into New Hampshire’s General Fund.

Though the DSH program was meant to help narrow the gap between what hospitals spent to treat Medicaid patients and the low reimbursement rates they received, DSH and MET cancelled each other out for New Hampshire hospitals. It resulted in a windfall in unrestricted revenue for the New Hampshire General Fund.[8]

While many states passed new revenue sources like the Medicaid Enhancement Tax to claw back some or most of the new DSH matching grants, New Hampshire was particularly aggressive, recapturing all of its DSH spending through the MET.

The following chart shows DSH and MET payments tracking each other until very recently (Blue and Red Columns), with approximately half that amount making its way into the New Hampshire General Fund (Green Line). Net MET revenues were not always credited in the same Fiscal Year that gross MET revenues were paid.


Sources: Office of the NH Treasurer, Department of Administrative Services, Governor’s Budget, HB 1-2013

The Urban Institute’s 1997 paper on the DSH program found that New Hampshire was not alone in using this corner of the federal Medicaid program to shore up its state budget. “In sum, federal DSH payments provided a much needed source of revenue for states.”[9]

Governors and legislative budget writers from both parties have relied on this diversion of DSH funds to help balance the state budget for the past 20 years, in a practice often referred to as “MediScam”.[10]

New Hampshire’s aggressive use of the DSH program to backstop its budget, without providing any additional resources to hospitals serving Medicaid patients earned the attention of federal regulators. In fact, state officials have been fighting a 20-year battle with the Centers for Medicare and Medicaid Services over how much New Hampshire could receive under the DSH program. However, Congress has never stepped in to clarify that federal DSH grants must eventually make their way to Medicaid hospitals, allowing states to continue the practice.

Using Fiscal Year 2006 as an example, the following chart shows how state and federal DSH payments were entirely recaptured by the MET, with federal money eventually making its way into the New Hampshire General Fund. Hospitals were held harmless.


 In 2007, the Office of the Inspector General at the federal Department of Health and Human Services ordered the state to reimburse the federal government $35 million in DSH payments based on $70 million in state DSH spending that was deemed ineligible for federal matching funds.[11] The OIG report did not force New Hampshire to end MediScam, but did force state officials to lower their annual DSH payment applications. At issue was New Hampshire’s decision to use gross patient service charges. The OIG report found that the state should have been using net patient service charges, allowing deductions for bad debt, charity care, and patient discounts that never resulted in real revenue to the hospital.

Following the OIG audit, the Legislature amended the MET to apply to net patient service revenue[12], resulting in a $78 million drop in gross MET revenues in FY2006 and a $39 million cut to the amount of MET proceeds transferred to the General Fund.

CMS continued to pressure New Hampshire to end MediScam and use federal DSH funds for their intended purpose. Beginning in FY2010, the Legislature finally decoupled DSH payments from a hospital’s MET liability. No longer would a hospital be guaranteed a full refund of its MET payment through the DSH program. As the New Hampshire Center for Public Policy Studies found in 2011, “This arrangement created ‘winners’ and ‘losers,’ whereas previously the program essentially ensured that hospitals received in return exactly what they provided in taxes.”[13]

The impact was quite substantial for several hospitals. Portsmouth Regional Hospital paid nearly $6 million more in MET than it received under DSH, while Mary Hitchcock Memorial Hospital netted more than $4.7 million from the change.[14] But overall, the state continued to divert about half of its total DSH spending to the General Fund through federal matching grants.

It wasn’t until the next budget cycle that the Legislature truly dismantled MediScam.


The Fiscal Year 2012-2013 State Budget, passed by the Legislature as House Bill 1, contained the largest revision of New Hampshire’s DSH and MET programs since they were established in 1992.

In the 20 years since its enactment, the Medicaid Enhancement Tax had existed only on paper, with little economic effect on New Hampshire hospitals. The 2010 changes meant that hospitals were no longer guaranteed a refund of their full MET payments, but all revenues were distributed among New Hampshire’s 28 hospitals. Federal matching funds, and not the MET itself, fueled the transfer to the General Fund. The 2012-13 budget decoupled MET revenues from DSH payments entirely. For the first time, the MET was a real tax, and not just a way to leverage federal matching funds. Legislative leaders could legitimately claim that their budget contained no new taxes, without mentioning the new tax burden on hospitals that had previously been borne only in theory.

In Fiscal Year 2012 for example, gross MET revenues were no longer twice the state’s annual DSH distribution to hospitals, but nine times as much. The federal match brought total DSH payments to just under $50 million, while MET payments totaled more than $175 million.

Additionally, the Legislature dedicated a significant portion of MET revenues to cover some of the state’s Medicaid provider payments. These are the normal payments outside of the DSH program that the state’s pays to reimburse hospitals for treating patients under Medicaid.

Since state funding for Medicaid provider payments comes from the General Fund, it makes no economic difference to dedicate MET revenues directly to them. In effect, the state was now using the MET to pay for standard Medicaid expenses, rather than for the DSH payments it had been making since 1992.

Dedicating MET revenues to provider payments did have one political advantage. It shielded the effect of decoupling DSH from the MET. Using the MET to cover a General Fund cost that had been paid with other revenues, lowered the apparent transfer to the General Fund. The state budget acknowledged a $75 million transfer from the MET to the General Fund in FY2012, but if the newly dedicated provider payments were still considered as part of the General Fund, the actual transfer topped $150 million.


The dark blue line on Figure 1 shows how shifting provider payments turned a large increase in the amount of MET used to balance the state budget into an apparent cut. Both Governor Maggie Hassan’s budget and the budget approved by the New Hampshire House continue to dedicate MET revenues to Medicaid provider payments rather than the General Fund.

Faced with a huge pending deficit, the Legislature was already on pace to cutting a billion dollars from the state’s two year budget. The MET, conceived as a creative way to leverage federal money to balance the state budget, would again help budget writers close the gap. Turning the MET from a tax paid entirely on paper to a real source of state revenue presented the Legislature with a unique opportunity. It could tap into a new source of state revenue not by raising taxes, but by declining to refund an old one.


The 2011 changes to the state’s tax code prompted some big changes in taxpayer behavior. When the full amount of a hospital’s MET payment would be deposited back in their bank account later the same day through the DSH program, hospitals didn’t spend a lot of time examining their tax bill. They had no incentive to lower their liability, and state officials had every incentive to make the tax bills as large as possible, in order to maximize DSH payments and the 50% federal match.

For years, New Hampshire hospitals had gone along with the MET/DSH swap, even though they received no additional money from the arrangement. At least they weren’t paying anything. At the time of its inception, state Health and Human Services Commissioner Harry Bird assured New Hampshire Hospital Association President Gary Carter that the state wasn’t targeting his group under the MET, but merely looking for a new way to qualify for DSH matching funds.

“It is our intent that, should Federal Disproportionate Share funds become unavailable, we would no longer require the State revenue and we would recommend that the rate of taxation drop to zero,” Bird wrote.[15]

But now that the MET was a tax in deed as well as word, hospitals started taking a closer look at their multimillion dollar tax bills.  Several filed amended returns seeking $50 million in refunds for past overpayments.[16] And they withheld $34 million from their FY2013 MET payments as they appeal the current year’s tax bill.[17] That shortfall led Governor Hassan and House budget writers to assume the current budget would end with a deficit on June 30th, but strong business taxes have since made up for lower than expected MET receipts.[18]

A group of ten New Hampshire hospitals is also challenging the new tax law in court. In Dartmouth-Hitchcock v. Toumpas, the hospitals claim that the state significantly altered the DSH section of its Medicaid program without filing a state plan amendment with CMS, as is required by New Hampshire’s long-standing Medicaid agreement with the federal government. But the heart of the lawsuit is a series of cuts to the state’s Medicaid reimbursement rates over the past several years.[19]


Despite MET revenues underperforming by $34 million in the current Fiscal Year, and a pending lawsuit in U.S. Superior Court, budget writers are counting on big things from the MET in the FY2014-15 Budget. Governor Hassan’s budget proposal and the version of HB1 approved by the New Hampshire House assume that gross MET revenues will top $482 million over two years, which would fuel the restoration of the previous budget’s cuts to the DSH program.[20]

But state hospitals doubt that their patient revenues will grow quickly enough to satisfy the optimistic revenue projections adopted by the House, with current NHHA President Steve Ahnen calling them “overly aggressive.”[21] Senate Finance Chairman Chuck Morse believes the House MET estimates may be $100 million too high. If that revenue fails to arrive, and prevents the state from increasing its DSH payments as Governor Hassan suggests, that could mean a $200 million shortfall.[22] In her March presentation to the House Finance Committee, State Medicaid Director Katie Dunn testified that these estimates need to be lowered.

“SFY 2014/2015 projected MET revenues needs (sic) adjustment downward, consistent with actual collections in SFY 2013, which will impact amounts available for distribution.”[23]

Now that the MET has been decoupled from the DSH program, federal matching funds are not entirely dependent on MET revenues. DSH payments, and the 50% match from Washington, could be made from any revenue stream. A shortfall in the MET would only double its impact on the upcoming budget if lawmakers fail to provide a contingency to ensure that DSH payments are made. It would be difficult to find another way to pay for the 287% DSH increase sought by Governor Hassan.[24]


The Medicaid Enhancement Tax is likely to remain a key revenue stream in the New Hampshire. And the state is unlikely to resurrect MediScam. The current Legislature could take two important steps to bring stability and transparency to the Medicaid program, the Medicaid Enhancement Tax, and the state’s Disproportionate Share Hospital program.

First, the Legislature should stop thinking of the MET as the primary source for DSH matching funds. If the Legislature wants to impose a tax on net patient service revenue, it should do so independent of the DSH program. If it would like to apply for federal DSH matching funds, it should do so independent of the taxes those hospitals pay. Since DSH payments are matched, it is doubly important that they have a dependable funding source.

Secondly, the Legislature should end the fiscal fiction of dedicating MET revenues for provider payments, rather than depositing MET receipts into the General Fund, and paying for Medicaid from the General Fund as it always had. This may mask the true size of the MET’s contribution to balancing the state budget, but it is absurd to continue to tax hospitals to pay for their own Medicaid reimbursement.

These two small steps won’t end the political and legal wrangling over the Medicaid Enhancement Tax. But after over two decades of gimmickry, budget writers could finally deal with the MET as a transparent and legitimate part of New Hampshire’s tax code.

Click here to download a copy of  “Meet the MET”

[2] Mitchell, Alison, Medicaid Disproportionate Share Hospital Payments, Congressional Research Service, December 18, 2012,

[3] Ibid, Mitchell.

[4] Coughlin, Teresa A. and Liska, David, The Medicaid Disproportionate Share Hospital Payment Program: Background and Issues, The Urban Institute, October 1997,

[5] Ibid, Coughlin.

[6] New Hampshire Legislature, HB 1, 1991,

[7] NH Department of Administrative Services, 1991-Current Year Trend-General & Education Funds Unrestricted Revenue

[8] Letter from Levinson, Daniel R, Inspector General, Department of Health and Human Services, July 2, 2007,

[9] Ibid, Coughlin.

[10] Medicaid politics: New Hampshire taxpayers lost, New Hampshire Union Leader, September 24, 2011,

[11] Ibid, Levinson.

[13] Understanding the Impacts of Changes in New Hampshire’s Disproportionate Share (DSH) Program, New Hampshire Center for Public Policy Studies, 2011.

[14] Ibid.

[15] Fleisher, Chris, Why Big Hospitals Are Suing N.H., Valley News, August 6, 2011,

[16] New Hampshire Hospital Association, April 1, 2011,

[17] State of New Hampshire Monthly Revenue Focus, April 2013,

[18] Leubsdorf, Ben, Strong April revenues put N.H. on track to finish fiscal 2013 with a surplus, not deficit, Concord Monitor, May 3, 2013,

[19] Bosse, Grant, Lawsuit complicates budget picture, Concord Monitor, October 7, 2013,

[20] Leubsdorf, Ben, With revenue down, Medicaid Enhancement Tax creates headaches, Concord Monitor, April 14, 2013,

[21] Devil in details? Hospitals move to scuttle House budget, Laconia Citizen, April 2, 2013,

[22] Rogers, Josh, Morse Says Senate Budget Will Be “A Whole Lot Different”, New Hampshire Public Radio, May7, 2013,

[23] Dunn, Katie, SFY 2014/2015 Budget Worksession, House Finance Division III, NH Department of Health and Human Services, Office of Medicaid Business and Policy, March 4, 2013,

[24] Ibid, Dunn.

Josh Elliott-Traficante

According to the Bureau of Labor Statistics, the national unemployment rate dropped to 7.5% in April, a decrease of .1 percentage points over the previous month. The number of unemployed fell by 83,000 while the Labor Force grew by 210,000.

After slipping for several months, the Labor Force Participation Rate, which I have highlighted in previous jobs report analyses, held firm at 63.3. Whether or not this is just brief pause or the beginning of a turnaround remains to be seen. However, it is encouraging that the number of people ‘Not in the Labor Force’ dropped by 31,000 at the same time as a drop in the unemployment rate.

This means that the drop in unemployment is real, not just a shift of unemployed people out of the workforce. While one month’s worth of data does not a trend make, it is a good sign. It is important to note that a net 1.6 million people have dropped out of the labor force over the past year, so there is still a long way to go to return all of these people to the work force.

Turning to the Establishment Survey Data, 176,000 non-farm, private jobs were created. Sectors seeing the biggest gains were Retail Trade (+29.3k) Food Service (+37.9k) Healthcare (+19k) Temporary Help Services (+30.8k).

Seeing the largest losses were Federal (-8k), Information (-9k) and Nonresidential Specialty Trade Contractors (-11.1k) [Though Residential Specialty Trade Contractors and Residential Contractors were up a combined 13k, a good sign for the housing recovery]

The Atlanta Fed recently put out an unemployment calculator where you can calculate what the monthly job creation numbers would have to be to hit certain targets. For example, if you wanted to reach 5.5% unemployment and a Labor Force Participation Rate of 66%, which it was before the recession, it would take nearly 12 years to get there based on April’s job creation numbers of 179,000 per month.

Put another way, to get to 5.5% unemployment in 2 years, with a pre-recession labor force participation rate of 66%, the country would need to see job creation rates of an unheard of 475,000 a month.

(Click here to try the calculator yourself:

While April’s data does offer encouraging signs of growth and reasons to be cautiously optimistic, it remains to be seen if this is a blip or the start of a growth trend. By mid-summer we should have an idea