The proposed changes would benefit private hospitals that lose money under the current design of the so-called bed tax, which is actually a levy on net patient revenue. The money is used as state matching funds to get federal money that increases Medicaid insurance payments to hospitals.
GHA executives said the changes would make the overall program more lucrative for the state without harming financially teetering hospitals that serve a large number of Medicaid patients, most of whom are children.
What to do about the tax will be a key issue for state lawmakers in their upcoming session that begins Jan. 14. If the tax expires with no substitute, lawmakers would effectively add $650 million or so to the fiscal year 2014 shortfall for the Medicaid insurance program for the poor, elderly and disabled.
That would force lawmakers to make steep cuts to the Medicaid payments for providers, replace the lost Medicaid money by cutting other public services or some combination. There is uniform opposition among Gov. Nathan Deal and the Republican legislative leadership to increase broad-based taxes as a way to handle budget woes.
GHA spokesman Kevin Bloye said hospital representatives have presented the plan to Deal and that he is generally supportive. Deal spokesman Brian Robinson did not immediately respond to a request for comment.
Deal will present his budget proposal after the General Assembly convenes.
Bloye promised that hospital executives, along with local and civic business leaders from around the state, will lobby for the plan. “We are arguing that this is an economic development and quality-of-life issue,” Bloye said. “It would be catastrophic to local communities” for hospitals to lose revenue, lay off health care professionals and deny care to patients. “Some community hospitals would close,” he predicted.
But there is political pressure not to renew or replace the tax, led by anti-government advocate Grover Norquist, author of the famous anti-tax pledge that many Republican politicians, including Deal, have signed.
The dynamic could force legislators to choose between threatening their local economies or having to run for re-election with a “tax hike” on their record.
Lawmakers adopted the tax in 2010 as state tax collections tanked because of the Great Recession.
Currently, hospitals in Georgia pay a 1.45 percent levy on net patient revenue. That will yield about $234 million in the budget year that ends June 30. That money yields about $448 million in additional federal support for Medicaid. Hospitals then get a resulting 11.88 percent bump in their payment rates for treating Medicaid patients.
The scheme amounts to a redistribution of revenue throughout Georgia hospitals. Large private systems like Atlanta-based Peidmont Healthcare are net losers because Medicaid patients aren’t a significant part of their patient base. The biggest net gainers are rural community hospitals and urban safety-nets like Grady Health System.
Of course, private hospitals have stronger balance sheets in part because Grady and other, smaller hospitals serve patients who have no insurance or not enough coverage to pay for care.
Bloye said the industry plan would allow the tax to continue, while adding a second layer to help mitigate the losses for the private, wealthier hospitals. GHA’s financing chief, Carie Summers, explained that private hospitals would pay a second assessment based on the number of all overnight stays, except those paid by Medicare, the federal insurance program for older Americans.
Like the patient-revenue tax, that money would be parlayed into more federal cash, with the resulting pool helping finance what would effectively be rebate payments back to the private facilities.
Bloye described the plan as a hard-fought compromise among hospitals with varying interests.
Rep. Terry England (R-Auburn) chairman of the House Appropriations Committee and a supporter of the general hospital tax concept, reviewed the proposal Friday. He called it a positive sign that the hospital groups had rallied around a common plan.
England said the proposed changes would reduce the number of hospitals who pay more in taxes than they get in benefits. And he said Georgia’s state government would not keep any portion of the new revenue. “Every dime of that then comes back to the hospitals and to the industry, so it all flows directly back to them,” England said. “And it helps provide indigent health care to the state.”
England was unsure whether the plan would be palatable to some of the staunchest anti-tax lawmakers in his party. “I think with the hospital groups coming together on it, it makes things more palatable to folks than when everyone was all split,” he said.