BILL ANALYSIS AND FISCAL IMPACT REPORT	Page 1 of  4

DATE:  February 24, 2001	Submitted by: TAXATION AND REVENUE DEPT.
	T. GLENN ELLINGTON, SECRETARY
BILL NUMBER: HB - 882

SPONSOR: Representative Sandoval

BILL SHORT TITLE: Comprehensive Tax Relief for All Heathcare Services

CONFLICTS, DUPLICATES, COMPANIONS: appended is a listing of all bills this session on Healthcare Tax Relief

DESCRIPTION: this bill provides for gross receipts tax deduction for all health care services of all kinds. This includes the list of health care practitioners proposed in many bills this session (physicians, osteopathic physicians, chiropractic physicians, physician assistants, dentists, dental hygienists, doctors of oriental medicine, podiatrists, psychologists, RNs and LPNs, registered lay midwives, physical therapists, occupational therapists and respiratory care practitioners) and adds optometrists. Receipts from selling prosthetic devices (wholesale or retail) may be deducted. Medical laboratory services, even if not provided by an MD, may be deducted. All the remaining receipts of for-profit hospitals may be deducted. Nursing home receipts may be deducted. To level the playing field, the bill also proposes to repeal the 3% premiums tax on health care insurance policies.

EFFECTIVE DATE: July 1, 2001.

FISCAL IMPACT (Thousands of dollars):  		Note: Parenthesis ( ) indicate a revenue loss:
		Recurring or		
Estimated Impact on Revenues	Nonrecurring	Funds 	
 FY 2002 	FY 2003	FY 2004   	     Impact     t     	             Affected          .             	
(44,200)	(51,100)	(54,400)	Recurring	General Fund (GRT)	
(39,000)*	(41,000)*	(43,500)*	Recurring	General Fund (Premiums Tax)	
(35,700)	(41,200)	(43,900)	Recurring	Local Governments (GRT)	
(118,900)*	(133,300)*	(141,800)*			

* The Department has no direct knowledge of this component. This is included for reference; TRD defers to the estimate provided by the Insurance Department. Total general fund amounts attributed to insurance for FY 2000 equaled $49.061M. An additional amount designated “fire protection” probably derives from net insurance premiums collected from property/casualty insurance, including motor vehicle insurance. Assuming 80% of the $49M labeled insurance premiums derives from health insurance (the remainder is life insurance) leads to the conclusion that about $1.2 billion in health care expenses and $100 M in administrative costs, reserves and profit are covered by private insurance.

Total personal health care in New Mexico is estimated at $6.4B for FY 2002. This leads to the uncomfortable conclusion that only 19% of health care expenses in the state are paid by private insurance.

ADMINISTRATIVE IMPACT: minimal on processing and systems. Regulatory effort my be difficult.

TECHNICAL ISSUES: Blood banks are excluded; home health care agencies are excluded; non-PA ambulance services are excluded; family planning centers are excluded; cosmetic surgery is excluded.

OTHER IMPACTS AND ISSUES:
1.	Gross Receipts tax five-year impact is as follows:
	FY 2002	FY 2003	FY 2004	FY 2005	FY 2006	
    General Fund	-44,200	-51,100	-54,400	-58,300	-62,400	
    Local Governments	-35,700	-41,200	-43,900	-46,900	-50,200	
        Total	-79,900	-92,300	-98,300	-105,200	-112,600	

2.	
Major Health Care Taxation Reform Bills
(Note: only the State General Fund impact is shown. For most of the gross receipts tax deduction bills, there is a companion local impact. This is noted, one way or the other, in the “Description” section.

Bill Number and Sponsor	Description	FY 2002 Fiscal Impact	FY 2003 or Full Year Impact	
HB – 202 (Foley)	Immediate, 100% gross receipts tax deduction for licensed health practitioners (local impact).	(33,300)	(36,300)	
HBIC Sub for HB – 202, 253 & 370	Five-year phased-in 100% GRT deduction for receipts of deduction for licensed health practitioners (local impact)..	(6,000)	(13,700)	
HB –227 (Knauer)	Three-year phased GRT deduction for receipts of doctors and osteopaths (local impact)	(7,500)	(16,700)	
HBIC Sub for HB-227	Immediate, 100% gross receipts tax deduction for receipts of all licensed health care providers from managed care providers; adjust 1.225% state shared distribution to municipalities to 1.24%.	(83,200)*	(92,100)*	
HB –253 (Hobbs)	Immediate, 50% GRT deduction for licensed health practitioners (local impact).	(15,100)	(17,500)	
HB–370 (Sanchez)	Five-year phased-in 100% GRT deduction for receipts of doctors and osteopaths (local impact).	(4,700)	(10,400)	
SB –568 (Smith & Altamirano) & HB-745 (Silva)	Personal or corporate income tax credit for amounts of GRT paid on the provision of physician’s services (no local impact).	(42,000)	(45,900)	
HB-778 (Hobbs)	Income tax credit for GRT paid by physicians and other health practitioners. (no local impact)	(62,000)	(67,900)	
HB-882 (Sandoval)	Comprehensive GRT deduction on all healthcare services and deduction from premiums tax of health insurance.			
SB-5 (Cisneros)	This is the interim Revenue Stabilization and Tax Policy Committee’s compromise. Three-year, phased-in, 100% GRT deduction for receipts of most licensed healthcare practitioners (local impact). 	(11,100)	(24,800)	
SB – 341 (Carraro)	100% immediate deduction for receipts of nursing homes and residential care facilities, doctors and osteopaths, as well as the remaining receipts of for-profit hospitals; allowing local option authority for cities and counties to make up the revenue. (local impact, but makeup authority for local option granted). 	(61,000)
total loss	(70,500)
total loss	
		(39,200)
net loss after local makeup tax	(15,200)
net loss after local makeup tax	

Minor Health Care Taxation Reform Bills

Bill Number and Sponsor	Description	FY 2002 Fiscal Impact	FY 2003 or Full Year Impact	
HB-94 (Lujan)	Gross receipts tax deduction for federal military “TRICARE” managed care health insurance. (local impact).	(244)	(265)	
HB-326 (Stewart) & SB‑582 (Ingle)	Immediate, 100% gross receipts tax deduction for nursing homes licensed by the Department of Health. (local impact)	(5,700)	(6,200)	
HB-357 (Heaton) & HB‑441
	Prohibiting provision in contracts between a health care provider and a health plan that does not permit the provider to pass on the burden of the gross receipts tax imposed on the provider.	0	0	
HB-442 (Wright)	GRT deduction for prosthetic devices -- restricts the definition of “prosthetic device” to exclude artificial hands and feet, dacron veins and arteries, artificial hips, cornea replacement, pacemakers, dental implants, etc. By prohibiting the deduction for prosthetic devices that do not replace a limb, this proposal is a tax increase.	Indeterminate	Indeterminate	
HB-452 (Stell) & SB-191 (Smith)	GRT credit for for-profit hospitals -- a hospital licensed by the Department of Health may claim a credit against gross receipts tax in an amount equal to 3.275% of the hospital’s taxable gross receipts. (no local impact)	(4,000)	(4,400)	
HB-580 (Sandoval) & SB-195 (Altamirano)	Extends 1998’s Medicare B deduction for doctors and osteopaths and 2000’s expansion to Medicare B receipts of hospices to podiatrists (local impact).	(74)	(81)	
SB-347 (Gorham)	GRT deduction for Medicare-B payments to home health agencies (local impact).	(92)	(100)	

For a more elaborate description and analysis, see our website at www.state.nm.us/tax/pubs/Billanalysis/Billanalysis.htm