A proposal to enact a 1.45 percent patient revenue tax on Georgia hospitals for three years was necessary to prevent rural hospitals from closing, according to Republican Rep. Matt Ramsey of Peachtree City, who co-sponsored the bill.
Ramsey said the tax revenue would go directly into the state’s Medicaid fund for indigent medical care — which goes right back into provider payments for Medicaid — and would not be spent on other state programs.
“Hospitals in rural areas were saying: ‘We’re at a breaking point,’” Ramsey said, referring to previous cuts in Medicaid payments from the state due to the economy.
The bill, if it becomes law, would mean that instead of losing $300 million in state budget cuts, the hospitals would only lose about $55 million, Ramsey said. That would be achieved by using matching federal funds, he added.
Republican Sen. Ronnie Chance of Tyrone said the general assembly was told that without the hospital tax preventing the huge cut in Medicaid provider payments, “at least 30 hospitals would be shut down.”
“Without this, those smaller market hospitals will be out of business,” Chance said.
The tax would expire in three years, according to the current legislation under consideration.
Ramsey said he doesn’t think patients will have the tax passed onto them because hospitals are locked into multi-year contracts with insurance providers.
“This is not a fee that is imposed directly on patients or an add-on fee that patients will see directly on their hospital bill,” Ramsey said.
House Bill 307 was previously approved by the House of Representatives and is now back up for House consideration after the Senate amended the bill to include a future tax break for insurance companies from state insurance premium taxes. That exemption would only be applied the year after the state’s revenue shortfall fund reserve reaches $500 million or more.
House leaders have objected to the Senate changes in the bill. It’s possible the House could vote down the amendment and re-send HB 307 in its original form back to the Senate for a vote, Chance said.
If that were to happen, Chance said he is not sure if there are enough votes in the Senate for the bill to pass without the insurance premium tax exemption.
Below is a letter authored by Ramsey and Chance as an effort to explain some of the background behind HB 307.
HB 307—Critical Legislation for our State’s Healthcare System
Thank you for the opportunity to provide additional information on HB 307, critical legislation aimed at shoring up our state’s healthcare system. There is a great deal of misunderstanding and misinformation surrounding this measure, largely due to election year rhetoric, and we hope to provide some clarity regarding the specifics of this bill. For the past few months, special interests have dubbed this measure the “sick tax” or “bed tax” in an effort to gin up opposition to the measure and support for their proposed alternative to plugging the Medicaid shortfall, a variety of broad based taxes imposed directly on Georgia citizens and small businesses. This is nothing more than political rhetoric by special interests that do not want to go through the same painful budget reductions and elimination of state benefits that every other segment of our state budget, from education to public safety, has had to endure to keep our state’s budget balanced without raising taxes on Georgia’s citizens. We, along with the other fiscal conservatives in the legislature, have repeatedly and consistently delivered the message that we will NOT support a broad based sales or income tax increase on a state struggling to recover economically.
In the way of background, Medicaid provider payments are the second largest expenditure (totaling roughly 12% of our state budget), behind education, in our state’s annual budget. Medicaid is truly the mother of all federally unfunded (more accurately inadequately funded) mandates. It is the federally enacted program that provides the healthcare safety net for our nation’s indigent citizens. The federal government requires the states to manage the program (similar to welfare) and provides matching payments to supplement the financial burden heaped on states through the program. The provider payments are simply the payments that medical providers (i.e. doctors and hospitals) receive for serving the Medicaid eligible population.
As the Governor and legislature began work on the FY 2011 budget it became clear one of the largest and most difficult shortfalls to fill would be in the area of Medicaid provider reimbursement payments, somewhere on the order of $300 million. Given the major cuts suffered by every other segment of our Georgia’s budget through the process of reducing our state’s spending by close to 30% over the past two years, it simply is not an option to hold hospitals harmless at the expense of education, public safety and other critical programs, by shifting monies from other parts of the budget. Given the fact that insufficient support exists among Republicans in the General Assembly to enact additional broad based taxes on Georgia citizens to balance the budget, the options to fill the gap in this area were simple, either a 15-20% reduction in provider reimbursement payments (which have already been significantly reduced in recent years) or HB 307. The hospital and medical community developed an overwhelming consensus that a cut of that magnitude would literally result in the closure of dozens of hospitals across the state and completely dry up the pool of providers willing to serve the Medicaid population in rural areas of our state. Given the fact our state’s citizenry already has some of the worst access to critical care medical services in the southeast, particularly in rural areas, this kind of result would unequivocally endanger the lives and health of large segments of our state’s population.
As an alternative to such a draconian result, the hospital and medical community quickly determined that the far better choice was to enter into a legislatively enacted three year provider payment agreement in the form of HB 307. The legislation provides that for a period of three years hospitals will pay 1.45% of its revenues to the state indigent care trust fund, which will give the hospitals access to additional federal Medicaid provider funds in an amount that will preclude the necessity to make additional reimbursement cuts. This is not a fee imposed directly on patients or to be passed through to patients, but a payment by hospitals based on a percentage of their revenues, which will then be returned to the hospitals in the form of additional provider payments. Further, this money is not being directed into the state treasury or general fund, but rather is 100% placed into the indigent care trust fund for use by Medicaid providers. Similar legislation has been requested and enacted on behalf of the nursing home industry in Georgia and at the behest of hospitals in other states and has been incredibly successful. The bottom line is simple, the federal government mandates that states manage this program and this measure will provide a mechanism through which Georgians will receive a greater return of its tax dollars in the form of Medicaid provider reimbursement. To illustrate the importance of this measure, a straight provider reimbursement cut of 16.5% would require our hospital/provider network to absorb a $275-$300 million dollar reduction, whereas, HB 307 will result in a much more palatable $55 million dollar net funding reduction.
The measure passed the House overwhelmingly (141-23), with the support of some of the most fiscally conservative members of the House. Unfortunately, when it crossed over to the Senate a coalition led by their Democratic leadership decided to play politics and engage in irresponsible election year political rhetoric rather than honest debate. Nowhere in their rhetoric did they offer alternative solutions or answers to questions about what their constituents were supposed to do when their local hospital closed. However, it is clear through their repeated words and deeds the alternative they would prefer is broad based tax increases on Georgia’s citizens so they don’t have to continue making the difficult budget decisions that comes with ever shrinking revenues. We oppose that course of action and will continue to do so. What we think they will find is an electorate that is sick of empty politician speak and is instead more focused on record and results. In that regard, we would put our past and future records as fiscal conservatives up against any of the individuals speaking out against this legislation. We continue to believe that the way out of our current economic slump is responsible budgeting and further belt tightening, the kind families and small businesses are engaging in every day in these difficult economic times. We and our colleagues have presided over the largest two year reduction in the size of Georgia’s government in our state’s history and will continue to support policies that promote that course of action. We will also continue to refuse to engage in the kind of cheap, election year political double speak that Democrats in the State Senate chose to engage in during this debate. None of the choices we are making in these difficult times are easy and Georgians deserve responsible and thoughtful leadership, not empty political rhetoric.
Ronnie Chance (R-Tyrone) Matt Ramsey (R-Peachtree City)
