Taxing Hospitals to Pay for Medicaid
By Mike King
Thanks to a big infusion of federal stimulus dollars last year, the 2009 Georgia General Assembly was able to avoid some harsh decisions about how to finance the increased spending needed to pay the state’s portion of the Medicaid program for the poor. The 2010 Legislature won’t be so lucky and already Gov. Sonny Perdue has returned to last year’s idea of taxing hospitals to help pay for the program.
The so-called “bed tax” on Georgia’s hospitals could generate as much as $350 million annually, Perdue’s office estimates. That money would go toward drawing down additional federal Medicaid dollars — the feds pick up about two-thirds of the cost of the program in Georgia — and would help reduce Medicaid’s drain on the tight state budget. The governor’s office and advocates for the tax believe the additional federal dollars will also keep the state from having to cut Medicaid rolls and/or reduce benefits for the nearly 1.8 million Georgians covered by the program.
Perdue floated the idea last year but didn’t get very far because of stiff opposition within the hospital community, as well as from fellow Republicans not eager to enact any kind of tax increase. Hospitals say a new tax would be a body blow to their always uncertain bottom lines. The state already sets reimbursement rates for Medicaid patients at about 84 cents on the dollar it costs them to provide the services — a rate that was scheduled to go up but got postponed when the recession hit. In essence, Georgia’s hospitals are already paying a 16 percent tax to help the state pay for Medicaid, opponents of the new tax say. If they are asked to pay more, those additional costs will be passed on to privately-insured patients, which will lead to premium increases for group health plans further deepening the affordability crisis the state already faces.
But as unemployment continues to rise, so does the demand on the state’s medical assistance program for the poor. And if Congress enacts any kind of health reform measure this year it will almost certainly include an expansion of Medicaid eligibility to cover more working poor families — children and adults. The Medicaid expansion pressure on tight state budgets — as well as the sweetheart deal U.S. Sen. Ben Nelson (D-Neb.) secured for his state in order to back the Senate plan — has reopened discussion in Washington about the federal government picking up the entire tab for bringing more Americans under Medicaid coverage. Such a plan may not only remove the states from their own rule-making on Medicaid eligibility and benefits, it could lead to reimbursement rates for providers at least being closer to what they get for taking care of the elderly and disabled on Medicare.
Still, it’s unlikely that any federal reforms in financing will happen before the Legislature adjourns, which is why the bed tax is back on the table. Hospitals may be in a no-win situation. They may have to choose to accept a bed tax or take a bigger hit on reimbursement rates. Among other financing alternatives that could come up — a significant increase in the excise tax Georgia imposes on cigarettes, which might not only serve to generate an equal amount of new money, but also have the added benefit of reducing consumption.
Mike King is a retired journalist who specializes in writing about health policy issues. He also serves as editor and administrator of the Healthy Debate blog.
