IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
WASHINGTON STATE HOSPITAL ASSOCIATION, Appellant,

v. STATE OFWASHINGTON, SUSAN N. DREYFUS, in herofficial capacity as SECRETARY OF SOCIAL & HEALTH SERVICES, DOUG PORTER, in his officialcapacity as DIRECTOR OF THE WASHINGTON STATE HEALTH CARE AUTHORITY, and JAMES L. MCINTIRE, in his officialcapacity ofTREASURER OF THE STATE OF WASHINGTON, Respondents. No. 69461-8-1 DIVISION ONE PUBLISHED OPINION

FILED: July 29, 2013 wo

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Grosse, J. - A legislature, here the 2010 legislature, cannot prevent a future legislature, here the 2011 legislature, from exercising its plenary power to 

### enact laws, including the amendment or repeal of prior laws. And here, despite what might appear to have been legitimate expectations on the part of the Washington State Hospital Association (WSHA) to a continuing commitmentto a 

### funding scheme to maintain and increase state funds available for federal Medicaid matching money, that is all that occurred. The 2011 legislature changed the commitment made by the 2010 legislature. The trial court's summary dismissal ofthis action is affirmed.
FACTS Medicaid is a jointlyfunded federal and state medical assistance program. 

### The federal government reimburses state governments for a portion of the costsNo. 69461-8-1/2 

### ofproviding medical assistance to low-income individuals.1 Each state has authority to administer the program and devise its own reimbursement systems 

### solong as those systemscomplywith certainfederal guidelines.2 InWashington, the federal government's financial support generally covers approximately 50 percent of the costs of Medicaid. The federal rate increased to 60.2 percent 

### undertheAmerican RecoveryandReinvestmentActof2009.3 Washington paid its share of Medicaid expenses primarily from monies appropriated from the state general fund. In 2009, the Washington legislature 

### reduced its funding for hospital services under the state's Medicaid program.4 Washington hospitals, working with the Washington State Department of Social and Health Services (DSHS), proposed a hospital safety net assessment to 

### generate additional funding for theMedicaid program.5 In 2010, thelegislature enacted the hospital safety net assessment act (Act), codified as chapter 74.60 

### RCW.6 The purpose of the Act was to generate additional funding to match federal funds to ensure payment at the 2009 reimbursement rate. The original 2010 Act imposed an assessment on hospitals to generate the additional funds necessary to add to the state's appropriations from the 

### general fund in order to maintain the 2009 pre-amendment hospital



### 142U.S.C. §1396(a)-(e). 2Seatoma Convalescent Ctr.v. Dep'tofSoc. & Health Servs., 82 Wn. App. 495, 501, 919 P.2d 602 (1996). 

### 3Pub.L No. 111-5, § 5002 (2009); 74Fed. Reg. 18325, 18327 (Apr. 21,2009). 4Lawsof2009,ch. 564, § 201 (effectiveJuly 1,2009). 5 In 2009, DSHS administered the state's Medicaid program. It is now administered bythe state's Health CareAuthority. 

### 6 H.B. 2956, 61st Leg., 1st Spec. Sess. (Wash. 2010); Chapter 74.60 RCW (Lawsof2010, 1stSpec. Sess., ch. 30, §3).No. 69461-8-1/3 

### reimbursement rates.7 Underthis statutory scheme, participating hospitals pay 

### an assessment on each non-Medicare hospital stay.8 Those assessments are placed in a dedicated fund called the hospital safety net assessment fund. Monies are dispersed from that fund in amounts sufficient to maintain the same level of Medicaid payments that were ineffect before the 2009 reduction, and in 

### specified amounts to certain hospitals. These assessment funds were added to the reduced general fund appropriation in orderto bring the state's spending up
to the reimbursement amounts in existence before the 2009 reduction. These funds were then matched bythe federal program resulting inpayments at leastat the same level as 2009. 

### The Act further provided thatthe fund could only be dispersed as dictated 

### by the Act and that ifmonies were otherwise dispersed or any part of the Act was declared invalid, the entire Act would become inoperative (the "poison pill" 

### provision). The Act expressly permitted a specific amount of the fund to be substituted for general fund appropriations in 2011 and 2012 to make up the 

### reduction infunding from thestate.9 TheActexpired onJuly 1,2013. In 2011, the legislature amended the Act to provide that $199.8 million from the assessmentfund was to be expended in lieu ofthe state's general fund 

## paymentsto hospitalsfrom July 1, 2011 through June 30, 2013.10 Moniesfrom

7RCW 74.60.030. 

### 8RCW 74.60.040 exempts state and federally owned hospitals, public hospitals that participate in certified public expenditure programs, hospitals that do not chargefor hospital services, and long-term acute care hospitals. 

### 9$49.3 million perbienniumwith an additional $17.5 million. 10 H.B. 2069, 62nd Leg., 1st Spec. Sess. (Wash. 2011); RCW 74.60.020(3)(e) (Laws of2011, 1stSpec. Sess., ch. 35, § 1).No. 69461-8-1/4 the general fund would then be provided to assure payment at least at the same level as in 2009. In response, WSHA sued the State and several state officers for declaratory relief and a writ of mandamus arguing that the State violated the constitution by diverting tax revenue for a purpose other than the reason given for its collection. Alternatively, WSHA argues thatthe amendment invalidated the Act underthe "poison pill" provision. The State argues thatthe assessment was
a fee not a tax and thus not a constitutional violation, and further that the legislature had the right to amend the statute. WSHA and the State filed cross motions for summary judgment. The trial court denied WSHA's motion and 

### granted the State's motion, holding that the assessment was not a tax and that the poison pill provision was not triggered. WSHA appeals.
ANALYSIS 

### WSHA argues that the safety net assessmentis a tax subjectto articleVII, 

### section 5 of theWashington State Constitution.11 Accordingly, it contends that the legislature's amendment to the Act was unconstitutional because itwould divert funds for purposes otherthan those contemplated by the original Act. In the alternative, WSHA argues that the 2011 amendment triggered the "poison pill" provision. Neitherargument has any merit. WSHA concedes that the legislature has the power to amend its statute, 

### but argues that the amendment's diversion of the assessment funds (the additional $199.8 million) to the general fund is contrary to the purpose of the 

### 11Wash. Const, art.VII, § 5provides: No tax shall be levied except in pursuance of law; and every law 

### imposing a tax shall state distinctly the object of the same to which only itshall be applied.No. 69461-8-1/5 original enactment, and thus renders the Act invalid. In other words, the assessmentfunds substituted for general funds were now not available to secure additional federal matching funds, the real purpose ofthe assessment inWSHA's view. But, in our view, the purpose of the Act was to maintain reimbursement rates at the same level as existed in 2009. The 2011 amendment accomplishes that purpose. The amendment does not reduce reimbursement rates below the pre-2009 rate reduction and the assessment funds generated matching federal funds as part of the general fund contribution to the Medicaid program. Therefore, whether or not the assessment is a tax or a fee is immaterial. The 

### purpose of the Actwas to maintain reimbursement costs at the 2009 level, which
it continues to do. WSHA's argumentthatthe amendmenttriggered the "poison pill" provision is likewise without merit. RCW 74.60.150(1)(a),(b),(c), and (d) provides that the assessment, collection, and disbursement of funds is conditioned upon several 

### occurrences, including the restoration of the four percent rate reduction, federal approval of any state plan changes necessitated by this Act, and certification from the office of financial management that sufficient appropriations supportthe reimbursement rates. The statute also provides that the assessment will cease to be imposed if (1)an appellate court or federal reviewer determines that any elementofthis chaptercannotbe implemented, (2) reimbursement rates are reduced below the pre-2009 level, or 

### (3) "[t]he fund is used as a substitutefor or to supplant otherfunds, 

### exceptas authorizedbyRCW74.60.020(3)(e)."[121

12RCW74.60.150(2)(e).No. 69461-8-1/6 But the legislature amended RCW 74.60.020(3)(e) with the 2011 amendment. That section now provides specifically for the action taken, that $199.8 million could be substituted for general fund appropriation. This action was within the plenary power of the 2011 legislature. As stated in Washington State Farm Bureau Federation v. Gregoire:13 It is a fundamental principle of our system of government that the legislature has plenary power to enact laws, except as limited by our state and federal constitutions. Each duly elected legislature is fully vested with this plenary power. No legislature can enact a statute that prevents a future legislature from exercising its law making power. That which a prior legislature has enacted, the current legislature can amend or repeal. Like all previous legislatures, it is limited only by the constitutions. To reason otherwise would elevate enactments of prior legislatures to constitutional status and reduce the current legislature to a secondclass representative ofthe people. 

### While it may be true that the hospitals anticipated that any remaining funds could be used in the future as matching federal funds or be returned to the 

## hospitals, thiswas notavestedright, northestatedpurposeofthelegislature14 We affirmthe summaryjudgmentdismissal ofthe action.



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WE CONCUR:



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13162 Wn.2d 284, 290, 174 P.3d 1142 (2007) (footnotes omitted). 

### 14 RCW 74.60.150(2) provides that if the Act ceases to be implemented, the remaining funds are returned to the hospitalsin proportionto theircontributions.