House leaders unveiled a $40.3 billion state budget Monday that significantly tempered two controversial plans by Governor Charlie Baker to tackle the cost of health care. Lawmakers slashed his proposed fee on businesses to fund state medical costs, and they rejected a plan to cap the prices charged by hospitals.
The budget proposal comes as state tax revenue has failed to meet projections. It effectively maintains spending levels in many areas, including the University of Massachusetts system, and cuts funding for lawyers for poor defendants.
Like the plan Baker released in January, the House budget calls for a new fee on employers to help pay for the state Medicaid program, which provides health coverage to 1.9 million residents. But House leaders did not detail how their version of the fee would work, saying the Department of Revenue — overseen by Baker — should determine exactly which companies would have to pay and how much.
The House plan would raise an estimated $180 million from employers in the fiscal year that begins July 1, far less than the $300 million proposed by the governor.
Business groups had slammed Baker’s original plan as an unfair and expensive new tax and lobbied hard against it. On Monday, they said they were open to the House proposal for a smaller fee, one that would be implemented after months of public debate.
“It’s clearly a step in the right direction,’’ said James E. Rooney, chief executive of the Greater Boston Chamber of Commerce. “It gives us all more time to craft a solution that is actually more targeted at the problem.”
The House plan also rejected the governor’s effort to impose a tax on people who use short-term rental services like Airbnb from landlords who have a high-volume rental business.
Representative Brian S. Dempsey, the House budget chief, said legislators are examining the issue and hope to address whether short-term rentals should be taxed and regulated like hotels in a more comprehensive bill after hearing further from the public.
The most significant move by House leaders, though, was the dent they want to put in Baker’s attempt to address rising health costs.
Baker’s proposal charged companies $2,000 per worker if they failed to meet a slate of requirements for providing health coverage. He argued the fee would help stem the number of people who are leaving employer-sponsored health insurance because their employer isn’t providing adequate and affordable coverage. The administration says these people are shifting to subsidized coverage under the state Medicaid program, called MassHealth, driving up costs to the state budget.
As MassHealth enrollment has grown, spending on the program has doubled over the past decade and now represents 40 percent of the state budget. About half the costs are paid by the federal government.
In their spending blueprint, House leaders also axed a plan by the governor to rein in health care spending by capping the prices charged by expensive hospitals. Speaker Robert A. DeLeo cast hospitals as crucial to the state’s economy and said they should not be subjected to new cost-control measures at a time when Congress continues to consider repealing and replacing the Affordable Care Act.
Baker had proposed that the most expensive hospitals get no rate increase in insurance payments. Mid-priced health care providers would get a 1 percent increase, and the lowest-priced providers would not see their payments capped. He included a separate measure to limit rates for hospitals that do business with the state Group Insurance Commission, an agency that administers health benefits to public employees and their families.
House leaders did away with all of that.
Hospitals have been lobbying against rate caps, warning that such measures could force them to lay off staff.
“When you’re talking about a cap, you’re talking about a limitation as a result of that cap on nursing staff, you’re talking about limitation as to some of the people who do home-keeping type of services,” said DeLeo, a Winthrop Democrat.
Hospitals welcomed DeLeo’s comments. The Massachusetts Health and Hospital Association “greatly appreciates that the House listened to the concerns of hospitals and approached this budget proposal with caution about its impact on the Massachusetts health care community,” Lynn Nicholas, president of the association, said in a statement.
The House budget also differs slightly from the governor’s plan in several areas related to human services. It proposes $15 million to increase the pay of child-care workers, an issue the speaker has made a priority. That is more than double the amount proposed in the governor’s budget.
The House budget does not include a controversial proposal by the governor to shrink the number of people eligible for a program that provides cash to the state’s neediest families. Baker spokesman Billy Pitman said the administration was concerned the House dropped that welfare “reform” measure.
The state’s 11 district attorneys would see a bump in their budget if the House proposal becomes law. But money for lawyers for poor defendants would be sliced from the more than $230 million expected to be spent this fiscal year to $174 million. (Funding for those lawyers is often supplemented mid-year, so a cut of that size, even if it were to become law, would be unlikely to last.)
In line with the governor’s budget, the House budget proposes a $10.3 million increase for public higher education. But that’s a modest increase of about 1 percent.
The plan comes as the state grapples with flagging tax revenue.
Through March, tax revenues are up just 1.7 percent — about $220 million less than Beacon Hill expected to take in. That could mean more emergency budget-tightening measures from Baker in the coming weeks. And that could impinge on the new budget House leaders are proposing for fiscal year 2018, which begins July 1.
In his January spending plan, Baker proposed several ideas for bringing in additional tax revenue to the state, including more aggressive efforts at collection. The House budget proposal embraces some of those plans.
The House is poised to pass a budget this month. The Senate will then pass its own plan. Differences will be ironed out in a conference committee before a final vote. Baker will likely veto some parts of the budget and sign the rest into law.
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