Written by Timothy Sweeney & Wesley Tharpe
A national anti-tax group is starting a push here in Georgia to end an obscure but important fee on hospitals come January. If the new General Assembly goes along with it, Georgia will face a difficult choice: dramatically slash payments to doctors and other health care providers who serve Medicaid patients or find a way to fill a $200 million hole in the budget.
Originally conceived as an emergency measure to plug some of Georgia’s massive budget holes during the Great Recession, the so-called “hospital bed tax” has become a key component for financing Medicaid in Georgia.
Without the fee, hospitals and other providers that serve Medicaid patients would have fared much worse over the past few years. The state would have deeply cut how much they pay these providers for serving Medicaid patients – cuts that would have been harsher for most hospitals than the fee itself. Rural and other safety-net hospitals that already operate on very small margins would have been hit especially hard. And as doctors and hospitals faced lower payments, people with Medicaid would have found it harder to find a doctor who would see them and harder to get the care they need.
Even Georgia’s hospitals supported the tax as an alternative to severe budget cuts. Because of how Medicaid funding works, many Georgia hospitals roughly gain back what they pay in through the fee. Here’s why: a portion of the revenue that the fee generates is used to increase payments to hospitals that treat Medicaid patients. These payment-increases in turn trigger more federal Medicaid funds for Georgia, which help offset the fee for hospitals. In fact, the fee either benefits or does not substantially affect an estimated 60 percent of Georgia hospitals.
So if many hospitals get back roughly what they pay in through the fee, who is crying out to end it? The national lobbying group Americans for Tax Reform, led by Grover Norquist. This group is best known for convincing lawmakers nationwide to sign “no tax pledges,” which essentially handcuff policymakers by preventing them from pursuing – or even considering – reasonable approaches to budget policy. In a recent letter, Norquist states that extending the hospital fee would violate the pledge, but says nothing about how Georgia should replace the revenue.
Further cutting simply isn’t a realistic option. Georgia already spends less per Medicaid enrollee than every other state in the country but one. And even with the continuation of the hospital fee, the Medicaid program faces roughly a $400 million shortfall in the 2014 budget year.
Without new revenue to replace lost hospital fees, Georgia’s doctors, hospitals, pharmacies and other providers will likely face even deeper cuts to Medicaid reimbursement rates that are already too low to cover their costs. Those cuts would lead to a loss of hundreds of millions of dollars in federal funding for Georgia’s economy. They also could force some health care providers to stop serving Medicaid patients. That’s a surefire way to threaten the health of Georgia’s most vulnerable residents and the livelihood of many of Georgia’s health care workers.
If our lawmakers decide to end the hospital tax, they must find a new revenue source to compensate for the loss. Raising the state’s cigarette tax – currently the 4th lowest in the nation – is the best option. A $1 per pack increase in the tax could generate as much as $400 million in new state revenue. It would also make Georgians healthier and reduce the burdens of smoking on the health care system, according to researchers at the University of Georgia.
Georgia’s policymakers should stand up to Norquist and, more importantly, focus on what’s in Georgia’s best interest. Ensuring that Medicaid is adequately funded – whether through the hospital fee or some other means – is the right choice for Georgia.
