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Posted: 7:05 a.m. Tuesday, Jan. 8, 2013

New Medicaid debate: hospital ‘bed tax’ renewal

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By Misty Williams

The Atlanta Journal-Constitution

Georgia hospitals have agreed among themselves to support the extension of a special fee that bolsters the state’s massive Medicaid program. They now face a potentially larger battle — garnering the support of conservative lawmakers who balk at the idea of renewing taxes of any kind.

Under the state’s two-year-old hospital provider fee, commonly called the “bed tax,” hospitals pay a percentage of their total revenue to help prop up the state’s Medicaid program for the poor. The money enables the state to draw more than $500 million in new federal matching dollars to aid hospitals that care for large numbers of low-income patients.

Advocates say letting the tax expire in June could limit access to critical medical care for thousands of Georgians as urban safety net hospitals are forced to cut services and smaller rural hospitals face the threat of closing their doors. That would be a double blow to health care for the poor, they say, when coupled with the state’s refusal so far to expand Medicaid eligibility under the Affordable Care Act.

Last year, anti-tax activist Grover Norquist urged Georgia lawmakers to vote against any extension of the tax — saying it would break the promise many Republican leaders, including Gov. Nathan Deal, made by signing a pledge not to raise taxes.

But even lawmakers opposed to increasing or creating new taxes say ending the hospital fee would be too devastating to Georgia’s health care system.

Without it, some rural hospitals could be forced to shut down, said state Rep. Sharon Cooper, R-Marietta, who chairs the House Health and Human Services Committee.

Someone who has an allergic reaction to peanuts and goes into anaphylactic shock doesn’t have the luxury of driving to the next nearest hospital, Cooper said.

“Rural hospitals are often a person’s first line of defense,” she said. “We need to keep them open.”

Deal supports an agreement reached by hospitals to extend the fee, said Kevin Bloye, a spokesman for the Georgia Hospital Association. Hospitals had been divided over the way the fee is assessed and used but recently agreed to a compromise with some changes.

A spokeswoman for Deal declined to comment on the issue, saying the governor will address health care issues during his State of the State address on Jan. 17.

The state’s budget for Medicaid and PeachCare for Kids already faces a $374 million shortfall for the current fiscal year and an expected shortfall of nearly $400 million shortfall in fiscal 2014. Failing to renew the provider fee would deepen the budgetary hole.

Hospitals could face reimbursement cuts of 20 percent or more if the tax isn’t renewed, Bloye said.

“Losing is not an option,” he said.

Still, the association is bracing for an uphill battle in the Legislature.

It was a struggle to get the original law passed in 2010, and there are nearly 90 new lawmakers in the General Assembly who weren’t around then, Bloye said. The provider fee was created to help make up for a huge budget shortfall in Medicaid.

Most hospitals pay a fee of 1.45 percent of net patient revenue. The state then uses the money to draw federal matching dollars, which are doled out to hospitals based on how much Medicaid care they provide.

The fee is designed to help level the playing field for hospitals that treat disproportionately large numbers of patients on Medicaid, which pays less than the actual cost of care.

Grady Memorial Hospital, a safety net hospital in downtown Atlanta, received nearly $10 million as a result of the provider fee in fiscal 2011.

Hospitals with relatively small numbers of low-income patients, however, lose money. Piedmont Hospital in Buckhead, where less than 3 percent of its patients are on Medicaid, took the biggest hit in 2011, losing $6.4 million.

Hospitals spent months negotiating before agreeing to an extension with tweaks to the formula aimed at gaining more matching dollars while mitigating the pain for hospitals that lose money.

“We’re optimistic this plan will land us in a better place than we were initially, but we don’t know for sure how it’s going to work out,” said Matt Gove, a spokesman for Piedmont.

Georgia Public Policy Foundation President Kelly McCutchen said he has never liked the bed tax, but he understands there haven’t been any great alternatives discussed to save the program money.

“This was sold as a temporary tax and if they are forced to renew the tax, then they need to at least think about other cost saving measures,” McCutchen said.

State officials say they already are working to make the Medicaid program more efficient as demand grows.

Doctors and hospitals that care for Medicaid patients haven’t seen any reimbursement increases in years. Rate cuts would mean they would be less likely to serve Medicaid patients, said Tim Sweeney, a health care policy analyst at the Georgia Budget and Policy Institute.

“Georgia has not adequately invested in Medicaid the last few years to cover the growth that we’ve seen,” Sweeney said.

Debate over the extended bed tax comes after Deal refused to go along with expanded Medicaid eligibility under the Affordable Care Act, as part of the act’s goal of insuring all Americans. Even though federal money would pay for it initially, the governor has said the state can’t afford the added long-term cost.

Advocates, health care providers and other groups have joined together to form a new coalition called Cover Georgia, in part, to persuade Deal to change his position on the expansion.

“The bed tax and the fix for Medicaid go hand-in-hand with the Medicaid expansion,” State Rep. Pat Gardner, D-Atlanta, said. “If the hospital tax failed to get the required votes and we didn’t expand Medicaid, we would have a real crisis in our state.”

The ‘bed tax’ on hospitals

The state charges hospitals 1.45 percent of net patient revenue to help pay for Medicaid. Trauma centers pay 1.40 percent. That money enables the state to draw federal matching dollars. Dollars are redistributed to hospitals based on Medicaid services they provide. Hospitals that care for a lot of Medicaid patients can get back more than they pay, while those that don’t may have a net loss on the tax.

A new agreement among hospitals to extend the tax would add a second layer, with hospitals putting in more money to help draw federal matching dollars the state has never tapped into. The change should also mitigate the losses some hospitals see.

The issues: Georgia lawmakers must vote on whether to renew a hospital provider fee that brings in hundreds of millions of federal dollars for the state’s struggling Medicaid program. The fee was established in 2010. Legislators will also face how to deal with a more than $700 million Medicaid budget shortfall amid the state budget debate.

The players: The Georgia Hospital Association is a driving force in the effort to renew the state’s hospital provider fee, or “bed tax.” Piedmont Hospital and Children’s Healthcare of Atlanta were key players in the negotiations to tweak the program. A hospital association spokesman said it’s unclear yet which lawmaker will sponsor a bill in the Legislature.

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