1.1                          A bill for an act 
  1.2             relating to health; reducing the tax rate on the gross 
  1.3             revenues of hospitals and health care providers; 
  1.4             amending Minnesota Statutes 1996, sections 256.9352, 
  1.5             subdivision 3; 295.52; 295.53, subdivisions 3 and 4; 
  1.6             295.54, subdivision 2; and 295.582. 
  1.7   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.8      Section 1.  Minnesota Statutes 1996, section 256.9352, 
  1.9   subdivision 3, is amended to read: 
  1.10     Subd. 3.  [FINANCIAL MANAGEMENT.] (a) The commissioner 
  1.11  shall manage spending for the MinnesotaCare program in a manner 
  1.12  that maintains a minimum reserve equal to five percent of the 
  1.13  expected cost of state premium subsidies.  The commissioner must 
  1.14  make a quarterly assessment of the expected expenditures for the 
  1.15  covered services for the remainder of the current biennium and 
  1.16  for the following biennium.  The estimated expenditure, 
  1.17  including minimum reserve requirements, shall be compared to an 
  1.18  estimate of the revenues that will be deposited in the health 
  1.19  care access fund.  Based on this comparison, and after 
  1.20  consulting with the chairs of the house ways and means committee 
  1.21  and the senate finance committee, and the legislative commission 
  1.22  on health care access, the commissioner shall, as necessary, 
  1.23  make the adjustments specified in paragraph (b) to ensure that 
  1.24  expenditures remain within the limits of available revenues for 
  1.25  the remainder of the current biennium and for the following 
  1.26  biennium.  The commissioner shall not hire additional staff 
  2.1   using appropriations from the health care access fund until the 
  2.2   commissioner of finance makes a determination that the 
  2.3   adjustments implemented under paragraph (b) are sufficient to 
  2.4   allow MinnesotaCare expenditures to remain within the limits of 
  2.5   available revenues for the remainder of the current biennium and 
  2.6   for the following biennium. 
  2.7      (b) The adjustments the commissioner shall use must be 
  2.8   implemented in this order:  first, stop enrollment of single 
  2.9   adults and households without children; second, upon 45 days' 
  2.10  notice, stop coverage of single adults and households without 
  2.11  children already enrolled in the MinnesotaCare program; third, 
  2.12  upon 90 days' notice, decrease the premium subsidy amounts by 
  2.13  ten percent for families with gross annual income above 200 
  2.14  percent of the federal poverty guidelines; fourth, upon 90 days' 
  2.15  notice, decrease the premium subsidy amounts by ten percent for 
  2.16  families with gross annual income at or below 200 percent; and 
  2.17  fifth, require applicants to be uninsured for at least six 
  2.18  months prior to eligibility in the MinnesotaCare program.  If 
  2.19  these measures are insufficient to limit the expenditures to the 
  2.20  estimated amount of revenue, the commissioner shall further 
  2.21  limit enrollment or decrease premium subsidies. 
  2.22     The reserve referred to in this subdivision is appropriated 
  2.23  to the commissioner but may only be used upon approval of the 
  2.24  commissioner of finance, if estimated costs will exceed the 
  2.25  forecasted amount of available revenues after all adjustments 
  2.26  authorized under this subdivision have been made. 
  2.27     By February 1, 1995, the department of human services and 
  2.28  the department of health shall develop a plan to adjust benefit 
  2.29  levels, eligibility guidelines, or other steps necessary to 
  2.30  ensure that expenditures for the MinnesotaCare program are 
  2.31  contained within the two one percent taxes imposed under section 
  2.32  295.52 and the gross premiums tax imposed under section 60A.15, 
  2.33  subdivision 1, paragraph (e), for fiscal year 1997.  
  2.34     (c) Notwithstanding paragraphs (a) and (b), the 
  2.35  commissioner shall proceed with the enrollment of single adults 
  2.36  and households without children in accordance with section 
  3.1   256.9354, subdivision 5, paragraph (a), even if the expenditures 
  3.2   do not remain within the limits of available revenues through 
  3.3   fiscal year 1997 to allow the departments of human services and 
  3.4   health to develop the plan required under paragraph (b). 
  3.5      Sec. 2.  Minnesota Statutes 1996, section 295.52, is 
  3.6   amended to read: 
  3.7      295.52 [TAXES IMPOSED.] 
  3.8      Subdivision 1.  [HOSPITAL TAX.] A tax is imposed on each 
  3.9   hospital equal to two one percent of its gross revenues. 
  3.10     Subd. 1a.  [SURGICAL CENTER TAX.] A tax is imposed on each 
  3.11  surgical center equal to two one percent of its gross revenues. 
  3.12     Subd. 1b.  [PHARMACY TAX.] A tax is imposed on each 
  3.13  pharmacy equal to two one percent of its gross revenues. 
  3.14     Subd. 2.  [PROVIDER TAX.] A tax is imposed on each health 
  3.15  care provider equal to two one percent of its gross revenues. 
  3.16     Subd. 3.  [WHOLESALE DRUG DISTRIBUTOR TAX.] A tax is 
  3.17  imposed on each wholesale drug distributor equal to two one 
  3.18  percent of its gross revenues.  
  3.19     Subd. 4.  [USE TAX; PRESCRIPTION DRUGS.] A person that 
  3.20  receives prescription drugs for resale or use in Minnesota, 
  3.21  other than from a wholesale drug distributor that paid the tax 
  3.22  under subdivision 3, is subject to a tax equal to two one 
  3.23  percent of the price paid.  Liability for the tax is incurred 
  3.24  when prescription drugs are received in Minnesota by the person. 
  3.25     Subd. 4a.  [TAX COLLECTION.] A wholesale drug distributor 
  3.26  with nexus in Minnesota, who is not subject to tax under 
  3.27  subdivision 3, on all or a particular transaction, is required 
  3.28  to collect the tax imposed under subdivision 4, from the 
  3.29  purchaser of the drugs and give the purchaser a receipt for the 
  3.30  tax paid.  The tax collected shall be remitted to the 
  3.31  commissioner in the manner prescribed by section 295.55, 
  3.32  subdivision 3. 
  3.33     Subd. 5.  [VOLUNTEER AMBULANCE SERVICES.] Volunteer 
  3.34  ambulance services are not subject to the tax under this 
  3.35  section.  For purposes of this requirement, "volunteer ambulance 
  3.36  service" means an ambulance service in which all of the 
  4.1   individuals whose primary responsibility is direct patient care 
  4.2   meet the definition of volunteer under section 144.8091, 
  4.3   subdivision 2.  The ambulance service may employ administrative 
  4.4   and support staff, and remain eligible for this exemption, if 
  4.5   the primary responsibility of these staff is not direct patient 
  4.6   care. 
  4.7      Sec. 3.  Minnesota Statutes 1996, section 295.53, 
  4.8   subdivision 3, is amended to read: 
  4.9      Subd. 3.  [SEPARATE STATEMENT OF TAX.] A hospital, surgical 
  4.10  center, pharmacy, or health care provider must not state the tax 
  4.11  obligation under section 295.52 in a deceptive or misleading 
  4.12  manner.  It must not separately state tax obligations on bills 
  4.13  provided to patients, consumers, or other payers when the amount 
  4.14  received for the services or goods is not subject to tax.  
  4.15     Pharmacies that separately state the tax obligations on 
  4.16  bills provided to consumers or to other payers who purchase 
  4.17  legend drugs may state the tax obligation as two one percent of 
  4.18  the wholesale price of the legend drugs.  Pharmacies must not 
  4.19  state the tax obligation as two one percent of the retail price. 
  4.20     Whenever the commissioner determines that a person has 
  4.21  engaged in any act or practice constituting a violation of this 
  4.22  subdivision, the commissioner may bring an action in the name of 
  4.23  the state in the district court of the appropriate county to 
  4.24  enjoin the act or practice and to enforce compliance with this 
  4.25  subdivision, or the commissioner may refer the matter to the 
  4.26  attorney general or the county attorney of the appropriate 
  4.27  county.  Upon a proper showing, a permanent or temporary 
  4.28  injunction, restraining order, or other appropriate relief must 
  4.29  be granted.  
  4.30     Sec. 4.  Minnesota Statutes 1996, section 295.53, 
  4.31  subdivision 4, is amended to read: 
  4.32     Subd. 4.  [DEDUCTION FOR RESEARCH.] (a) In addition to the 
  4.33  exemptions allowed under subdivision 1, a hospital or health 
  4.34  care provider which is exempt under section 501(c)(3) of the 
  4.35  Internal Revenue Code of 1986 or is owned and operated under 
  4.36  authority of a governmental unit, may deduct from its gross 
  5.1   revenues subject to the hospital or health care provider taxes 
  5.2   under sections 295.50 to 295.57 revenues equal to expenditures 
  5.3   for allowable research programs.  
  5.4      (b) For purposes of this subdivision, expenditures for 
  5.5   allowable research programs are the direct and general program 
  5.6   costs for activities which are part of a formal program of 
  5.7   medical and health care research approved by the governing body 
  5.8   of the hospital or health care provider which also includes 
  5.9   active solicitation of research funds from government and 
  5.10  private sources.  Allowable research must:  
  5.11     (1) have as its purpose the development of new knowledge in 
  5.12  basic or applied science relating to the diagnosis and treatment 
  5.13  of conditions affecting the human body; 
  5.14     (2) be subject to review by individuals with expertise in 
  5.15  the subject matter of the proposed study but who have no 
  5.16  financial interest in the proposed study and are not involved in 
  5.17  the conduct of the proposed study; and 
  5.18     (3) be subject to review and supervision by an 
  5.19  institutional review board operating in conformity with federal 
  5.20  regulations if the research involves human subjects or an 
  5.21  institutional animal care and use committee operating in 
  5.22  conformity with federal regulations if the research involves 
  5.23  animal subjects.  Research expenses are not exempt if the study 
  5.24  is a routine evaluation of health care methods or products used 
  5.25  in a particular setting conducted for the purpose of making a 
  5.26  management decision.  Costs of clinical research activities paid 
  5.27  directly for the benefit of an individual patient are excluded 
  5.28  from this exemption.  Basic research in fields including 
  5.29  biochemistry, molecular biology, and physiology are also 
  5.30  included if such programs are subject to a peer review process. 
  5.31     (c) No deduction shall be allowed under this subdivision 
  5.32  for any revenue received by the hospital or health care provider 
  5.33  in the form of a grant, gift, or otherwise, whether from a 
  5.34  government or nongovernment source, on which the tax liability 
  5.35  under section 295.52 is not imposed or for which the tax 
  5.36  liability under section 295.52 has been received from a third 
  6.1   party as provided for in section 295.582. 
  6.2      (d) Effective beginning with calendar year 1995, the 
  6.3   taxpayer shall not take the deduction under this section into 
  6.4   account in determining estimated tax payments or the payment 
  6.5   made with the annual return under section 295.55.  The total 
  6.6   deduction allowable to all taxpayers under this section for 
  6.7   calendar years beginning after December 31, 1994, may not exceed 
  6.8   $65,000,000.  To implement this limit, each qualifying hospital 
  6.9   and qualifying health care provider shall submit to the 
  6.10  commissioner by March 15 its total expenditures qualifying for 
  6.11  the deduction under this section for the previous calendar 
  6.12  year.  The commissioner shall sum the total expenditures of all 
  6.13  taxpayers qualifying under this section for the calendar year.  
  6.14  If the resulting amount exceeds $65,000,000, the commissioner 
  6.15  shall allocate a part of the $65,000,000 deduction limit to each 
  6.16  qualifying hospital and health care provider in proportion to 
  6.17  its share of the total deductions.  The commissioner shall pay a 
  6.18  refund to each qualifying hospital or provider equal to its 
  6.19  share of the deduction limit multiplied by two one percent.  The 
  6.20  commissioner shall pay the refund no later than May 15 of the 
  6.21  calendar year. 
  6.22     Sec. 5.  Minnesota Statutes 1996, section 295.54, 
  6.23  subdivision 2, is amended to read: 
  6.24     Subd. 2.  [PHARMACY CREDIT.] A pharmacy may claim a 
  6.25  quarterly credit against the total amount of tax the pharmacy 
  6.26  owes during that quarter under section 295.52, subdivision 1b, 
  6.27  as provided in this subdivision.  The credit shall equal two one 
  6.28  percent of the amount paid by the pharmacy to a wholesale drug 
  6.29  distributor subject to tax under section 295.52, subdivision 3, 
  6.30  for legend drugs delivered by the pharmacy outside of Minnesota. 
  6.31  If the amount of the credit exceeds the tax liability of the 
  6.32  pharmacy under section 295.52, subdivision 1b, the commissioner 
  6.33  shall provide the pharmacy with a refund equal to the excess 
  6.34  amount. 
  6.35     Sec. 6.  Minnesota Statutes 1996, section 295.582, is 
  6.36  amended to read: 
  7.1      295.582 [AUTHORITY.] 
  7.2      (a) A hospital, surgical center, pharmacy, or health care 
  7.3   provider that is subject to a tax under section 295.52, or a 
  7.4   pharmacy that has paid additional expense transferred under this 
  7.5   section by a wholesale drug distributor, may transfer additional 
  7.6   expense generated by section 295.52 obligations on to all 
  7.7   third-party contracts for the purchase of health care services 
  7.8   on behalf of a patient or consumer.  The additional expense 
  7.9   transferred to the third-party purchaser must not exceed two one 
  7.10  percent of the gross revenues received under the third-party 
  7.11  contract, and two one percent of copayments and deductibles paid 
  7.12  by the individual patient or consumer.  The expense must not be 
  7.13  generated on revenues derived from payments that are excluded 
  7.14  from the tax under section 295.53.  All third-party purchasers 
  7.15  of health care services including, but not limited to, 
  7.16  third-party purchasers regulated under chapter 60A, 62A, 62C, 
  7.17  62D, 62H, 62N, 64B, 65A, 65B, 79, or 79A, or under section 
  7.18  471.61 or 471.617, must pay the transferred expense in addition 
  7.19  to any payments due under existing contracts with the hospital, 
  7.20  surgical center, pharmacy, or health care provider, to the 
  7.21  extent allowed under federal law.  A third-party purchaser of 
  7.22  health care services includes, but is not limited to, a health 
  7.23  carrier, integrated service network, or community integrated 
  7.24  service network that pays for health care services on behalf of 
  7.25  patients or that reimburses, indemnifies, compensates, or 
  7.26  otherwise insures patients for health care services.  A 
  7.27  third-party purchaser shall comply with this section regardless 
  7.28  of whether the third-party purchaser is a for-profit, 
  7.29  not-for-profit, or nonprofit entity.  A wholesale drug 
  7.30  distributor may transfer additional expense generated by section 
  7.31  295.52 obligations to entities that purchase from the 
  7.32  wholesaler, and the entities must pay the additional expense.  
  7.33  Nothing in this section limits the ability of a hospital, 
  7.34  surgical center, pharmacy, wholesale drug distributor, or health 
  7.35  care provider to recover all or part of the section 295.52 
  7.36  obligation by other methods, including increasing fees or 
  8.1   charges. 
  8.2      (b) Each third-party purchaser regulated under any chapter 
  8.3   cited in paragraph (a) shall include with its annual renewal for 
  8.4   certification of authority or licensure documentation indicating 
  8.5   compliance with paragraph (a).  If the commissioner responsible 
  8.6   for regulating the third-party purchaser finds at any time that 
  8.7   the third-party purchaser has not complied with paragraph (a), 
  8.8   the commissioner may by order fine or censure the third-party 
  8.9   purchaser or revoke or suspend the certificate of authority or 
  8.10  license of the third-party purchaser to do business in this 
  8.11  state.  The third-party purchaser may appeal the commissioner's 
  8.12  order through a contested case hearing in accordance with 
  8.13  chapter 14. 
  8.14     Sec. 7.  [EFFECTIVE DATE.] 
  8.15     Sections 1 to 6 are effective for gross revenues generated 
  8.16  by services performed and goods sold after June 30, 1997.