News
Perdue's hospital tax strongly opposed
2/19/2010
By Craig Schneider
The Atlanta Journal-Constitution
Several key lawmakers say Gov. Sonny Perdue’s plan for a hospital "bed" tax -- to help fund a $608 million shortfall in Medicaid -- is going nowhere fast.
They say they won't support a new tax that could add to the burden of already struggling hospitals and possibly raise medical costs for patients.
Beyond his own formidable opposition, state House Speaker David Ralston (R-Blue Ridge) said, "I don't see any real support for a hospital tax."
Added House Appropriations Chairman Rep. Ben Harbin (R-Evans), "It's probably not going anywhere."
But that hardly ends the discussion.
Several proposals are swirling around: the hospital bed tax, a higher tax on tobacco, a Medicaid rate cut, and good old-fashioned spending cuts. For Georgians, the result could mean paying a dollar more for a pack of cigarettes, or seeing a decrease in state services, or seeing their medical costs rise as hospitals and doctors pass on the pain.
The House is slated to hold a public hearing on the hospital bed tax at 2 p.m. Wednesday at the Capitol.
One thing is certain: Something must be done. There is a huge hole to fill in the state budget, and the Medicaid gap is emerging as one of the biggest and most controversial issues in the fiscal 2011 budget, which takes effect in July. Powerful state leaders are knocking heads over it. Powerful lobbying groups are pulling out the stops. And all the while, the need for Medicaid is growing in a state hard hit by an unforgiving economy.
"This is a central crisis," said Bill Custer, director of the Center for Health Services Research at Georgia State University.
Though the legislative session only began in January, lawmakers say they expect a solution to the Medicaid issue to emerge within weeks. The budget for the upcoming fiscal year is usually formed by the end of the legislative session in early April.
Medicaid is the massive joint state-federal program that provides health insurance to the needy. The Medicaid funding gap is largely due to the reduction of $506 million in money from sources that include the federal stimulus program and the national settlement with tobacco companies.
The political drama is already playing out. Ralston has asked the House Appropriations Committee to craft a proposed budget that doesn't include the hospital tax or the cigarette tax. He wants the Medicaid gap made up through spending cuts.
Meanwhile, the sponsor of the tobacco tax plan, Rep. Ron Stephens (R-Savannah), said his bill is gaining steam. The number of signed sponsors of House Bill 39 has grown from 25 to more than 60, he said. He noted that Georgia has one of the lowest tobacco taxes in the country, and that smoking contributes to many health problems covered by Medicaid.
Lt. Gov. Casey Cagle, for his part, called the tobacco tax "a non-starter." He said one option could be a 5 percent Medicaid rate cut to hospitals.
It remains too early to tell which way the wind blows on the Medicaid issue. “The wind is blowing in every direction,” said Perdue spokesman Bert Brantley.
Political analysts say the Medicaid issue is a microcosm of the state’s financial challenges: a lack of money, increasing demand for a service, and a Republican-dominated Legislature greatly opposed to new taxes.
Despite the opposition, Perdue stands by the hospital tax. The 1.6 percent tax on patient revenues is the most controversial piece of a package of proposals the governor has floated to cover the Medicaid gap. He has also proposed a 1.6 percent tax on the premium revenues of managed care insurers. Together, they would raise about $300 million. Perdue has also proposed a 1.9 percent cut in the rate used to pay many physicians through Medicaid.
State Medicaid officials said federal restrictions largely prevent the state from reducing Medicaid eligibility and services.
Brantley said he believes the plan is affordable to the hospitals, insurers and doctors.
Georgia hospital officials disagree, and they are fighting hard to crush the hospital tax. Their trade group, the Georgia Hospital Association, is meeting with lawmakers, reaching out to media and distributing printed "talking points" around the Capitol.
Perdue has tried to sweeten the prospect of a bed tax by including an average Medicaid rate increase of 14.5 percent for hospitals. Currently, Medicaid pays hospitals at a average rate of 84 percent of the hospital's costs. The change would increase the rate to about 98 percent of costs.
Under the plan that includes the hospital bed tax, the hospital industry would lose $48 million a year, said hospital association spokesman Kevin Bloye. He said that could lead to job losses, service cuts and postponed capital improvements.
The majority of hospitals would lose money under the bed tax plan, he said. However, some hospitals, particularly those which serve a lot of Medicaid patients, would profit from the plan. Children's Healthcare of Atlanta at Egleston would see a bump of $10 million, and Grady Memorial Hospital, ever struggling to manage its books, would see $2 million more.
Lawmakers cannot simply do nothing on this issue, stressed Brantley, the spokesman for Perdue. To make that crystal clear, Perdue has said that if the Legislature fails to fill the gap, he will push a 16.5 percent decrease in Medicaid rates on payments to health providers across the board.
Health providers say that decrease could devastate the Medicaid system, cutting enormous amounts from hospitals that depend on Medicaid. Hospital officials say that plan could drive more hospitals and doctors away from accepting Medicaid patients. That could limit access to health care for Medicaid patients, said Bloye of the hospital association.
Cagle, the lieutenant governor, said he believes the hospitals, which benefit greatly from Medicaid, must play a role in filling the gap. While he said he hardly favors additional taxes, he said, "We have to remain open-minded."
Putting the full burden on the tobacco industry, he said, doesn't seem fair. He said he wants the Legislature to look hard at cutting spending.
Ralston, the leader of the state House, said he opposes any new taxes, and he wants the gap filled with budget cuts. He would not identify any targeted cuts at this time.
Supporters of the hospital bed tax and the tobacco tax say that once such budget cuts are announced, the constituents for those services will start making their own noise. That could make a new tax look a bit better.
"That's our strategy," said Stephens, the main sponsor on the tobacco tax.
He's waiting for the drama to move forward.
He's not alone.
