Committee Substitute February 26, 2025 in HHHC: 

HHHCcs/HB 344: House Health and Human Services Committee Substitute for House Bill 344 makes several key changes to existing law regarding Gross Receipts Tax (GRT) deductions for health care providers and Medicaid reimbursements. It removes the July 1, 2028, sunset date for an existing deduction that allows health care practitioners or their associations to deduct copayments and deductibles paid by insured patients under commercial contracts. By making this deduction permanent, the bill ensures that practitioners continue to receive GRT relief on these payments beyond the previously established expiration date.

The bill further expands GRT deductions by introducing a new deduction for receipts from direct payments made by patients to health care practitioners, provided the services are not covered under a contract with a managed care organization or health care insurer. This measure is aimed at reducing tax burdens for out-of-pocket health care expenses, which could benefit patients who pay for care outside traditional insurance networks.

Additionally, HHHCcs/HB 344 creates a GRT deduction for sales of medical equipment, supplies, and drugs when purchased by a health care practitioner or an association of health care practitioners. This applies only to items used within the scope of their practice, ensuring that tax relief is targeted at essential medical supplies.

The bill also modifies Medicaid reimbursement regulations by requiring that managed care organizations specify the gross receipts taxes included in their reimbursement rates when contracting with health care providers. This provision enhances transparency in Medicaid payments and ensures that providers receive full reimbursement for GRT liabilities, preventing unexpected tax burdens.

Finally, the bill mandates that all GRT deductions introduced or modified by this act be included in the state’s tax expenditure budget, allowing for annual tracking and evaluation of their fiscal impact.

Implications

HHHCcs/HB 344 has significant implications for both health care providers and patients in New Mexico. By permanently extending the GRT deduction for copayments and deductibles, the bill provides continued tax relief for health care practitioners, reducing the financial strain of collecting out-of-pocket payments. This measure may also prevent increased patient costs, as providers are less likely to pass on tax expenses when receiving direct payments.

The new GRT deduction for direct patient payments could encourage greater access to care outside of insurance networks, benefiting individuals who self-pay for services or those who seek treatment outside of managed care contracts. This could also incentivize more providers to offer direct-pay services, improving availability for uninsured or underinsured patients.

The tax deduction for medical equipment, supplies, and drugs is another significant financial benefit for health care practitioners, as it reduces operating costs for essential materials used in patient care. This may, in turn, lower overall health care expenses, particularly for independent practitioners and small health care businesses.

By requiring Medicaid managed care organizations to specify gross receipts taxes in reimbursement rates, the bill clarifies Medicaid payment structures and ensures that providers are not burdened with unaccounted-for tax liabilities. This change could increase provider participation in Medicaid, addressing concerns about low Medicaid reimbursement rates and encouraging more practitioners to serve Medicaid patients.

However, while the bill provides broad tax relief for health care providers, it may also reduce state and local GRT revenues. The full fiscal impact will depend on the volume of health care transactions eligible for these deductions and whether the increased accessibility to care offsets potential revenue losses. The inclusion of these deductions in the tax expenditure budget ensures that their fiscal impact can be monitored and adjusted if necessary.

Comparison of Original HB 344 and HHHCcs/HB 344

The House Health and Human Services Committee made several notable changes to the original bill:
  1.	Removal of the Fee-for-Service Deduction
	•  The original bill allowed a GRT deduction for health care providers receiving fee-for-service payments from health care insurers.
	•  The committee substitute removed this provision, meaning fee-for-service payments remain taxable.
  2.	Clarification of Medicaid Reimbursement Provisions
	•  The original bill stated that health care providers receiving Medicaid reimbursement must be reimbursed for all applicable GRT liabilities.
	•  The substitute modifies this to require that managed care organizations itemize GRT liabilities within Medicaid reimbursement rates, providing transparency without mandating separate reimbursements.
  3.	Refinement of GRT Deduction for Medical Equipment, Supplies, and Drugs
	•  The original bill provided a broad GRT deduction for all medical equipment, supplies, and drugs.
	•  The substitute clarifies that this deduction applies only to purchases made by health care practitioners or their associations for use within their practice, preventing potential abuse or unintended use of the deduction.
  4.	Inclusion of Tax Expenditure Budget Reporting Requirement
	•  The substitute explicitly requires that these GRT deductions be tracked in the tax expenditure budget, ensuring annual legislative oversight and evaluation.

These changes narrow the scope of tax relief to health care providers and managed care organizations, ensuring targeted benefits without excessive revenue losses for the state. The removal of the fee-for-service deduction suggests concerns about overly broad tax exemptions that could significantly impact state and local tax revenues. The clarification of Medicaid reimbursement policies ensures fairness and transparency without creating new state obligations for direct tax reimbursements.