Illinois Gov. Pat Quinn last week signed a measure that allows the state to borrow $500 million from two state funds to kick-start its hospital assessment tax program, which was enacted to leverage additional federal Medicaid dollars and expedite payments to hospitals.

The state will take $335 million from a fund that goes to cover debt service to retire general obligation bonds and will use another $175 million from the State Employees’ Retirement System fund. The state will repay the money with interest next month. In the past, Illinois has issued short-term certificates to jump-start the program.

The state last year passed a new $3.85 billion, five-year hospital assessment program that was later approved by the federal Centers for Medicare and Medicaid Services. The program will leverage about $640 million annually for hospitals and another $130 million for long-term care and other health programs.

Under the program, Illinois assesses a tax on hospitals based on volume, with the rate set at $218.38 annually per occupied hospital bed, excluding Medicare beds. The federal government matches much of the assessments and the state then distributes the assessment payments and most of the matching federal funds back to hospitals.

The additional funds are distributed over the course of the year and the amount hospitals receive is based on their level of services provided to Medicaid.

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