‘Bed tax’ plan: practical solution or cop-out?

A proposal backed by Gov. Nathan Deal that would allow a state health department to levy hospital fees to shore up Medicaid funds insulates lawmakers from having to directly hike taxes. But it also shifts that burden squarely to the governor’s executive branch.

Deal appoints the nine-member board of the Department of Community Health, which under his proposal would shoulder the responsibility of levying the so-called “bed tax.” While sparing lawmakers from being branded as tax-hikers, the shift could focus the anger of anti-tax partisans toward Deal as he prepares for a re-election bid.

What to do about the two-year-old fee, which expires this year, is expected to be a defining debate of the 40-day legislative session that began on Monday. The fee was conceived to fill a more than $500 million hole in the state Medicaid budget, and advocates warn that hospitals could close and key services scaled back without the funding.

The proposal introduced on Monday by Deal’s allies in the Senate and House allows the department’s board to levy the fee — a small percentage of total patient revenue — and imposes stiff penalties on hospitals that fail to make payments on time. It would lapse in June 2018, providing a dedicated source of Medicaid funding for at least five years.

Resolving the future of the fee early would enable lawmakers to focus on plugging holes in Georgia’s budget and thousands of other proposals expected this session. It’s far from a done deal, though, and industry experts expect the debate to continue over the weeks to come.

It would not be a trailblazing move. The DCH has levied a similar nursing home fee for at least a decade. Yet giving the agency power to collect the “bed tax” still would represent a fundamental shift that gives a state department more leeway to change rates as it sees fit with little legislative oversight.

Many lawmakers on Monday were unwilling to immediately say how they would stand. Critics argued the idea is a stopgap for a dilemma that demands a long-term solution.

“We think it’s gaming the federal system, and we need to pass something this year that’s going to reduce Medicaid costs,” said Kelly McCutchen, the president of the Georgia Public Policy Foundation, a conservative think tank. “We can’t rely on this funding mechanism long-term.”

Virginia Galloway, state director of Americans for Prosperity, called the proposal a “cowardly move by our elected legislators to double-kick the can across the road to an unelected bureaucracy, and down the road to add to our federal spending and debt problem.”

Anti-tax crusader Grover Norquist had cited the Georgia hospital tax as a case where conservatives can draw the line. His group, Americans for Tax Reform, called the Deal proposal “a step in the wrong direction, attempting to absolve the governor and legislature of any potential blame for the looming tax increase.”

Democrats, too, signaled they see the hospital fees as part of a broader debate about taxes.

“This entire session is going to be about one thing: The current leaders cannot run the state the way they want to without additional revenue,” state Sen. Jason Carter, D-Decatur, said. “They want to pretend they’re not raising taxes and the question underlying the session is how far they’re willing to go to cover it up.”

Others saw the move as a political maneuver to guarantee funding for the Medicaid program at a time when the Legislature is dominated by conservatives unlikely to raise or extend taxes.

“This makes sense as a solution to the political issues,” said Tim Sweeney, a health care policy analyst at the Georgia Budget and Policy Institute.

“The agency surely wouldn’t do it without the permission of the governor, and you’d expect if he has the ability to do that, he would do that,” said Sweeney. “And it provides more flexibility for the agency to set the rate where it needs to be set.”

Under the “bed tax,” most Georgia hospitals pay a fee of 1.45 percent of net patient revenue, and the state uses the money to leverage federal funds doled out to hospitals based on how much Medicaid care they provide. Some hospitals that treat disproportionately large numbers of Medicaid patients received millions more as a result of the fee, while others end up losing money.

The Georgia Hospital Association and its members spent months working out tweaks in the hospital plan in hopes of easing the pain of hospitals that lost money while still gaining more federal matching money. With Deal’s plan, their proposal could be in jeopardy.

Kevin Bloye, a spokesman for the association, said to expect modifications to the measure when it’s taken up at a committee hearing on Tuesday.

“We’re extremely pleased with it and we appreciate the governor’s leadership on this very challenging issue,” said Bloye. “And we’re very optimistic that it will pass the Senate and the House.”

Matt Gove, an executive at Buckhead’s Piedmont Hospital, which lost more than $6 million from the fees in fiscal 2011, said the hospital assumed that the changes worked out within the industry would be part of legislation addressing the fee’s future.

“We hope that it still can be,” he said.

David Tatum, a Children’s Healthcare of Atlanta vice president, suggested the measure should allow lawmakers to reconsider before 2018 and pursue a longer-term solution when the economy recovers.

“Based on what we’ve seen so far we think it’s a good solution,” he said.

If the proposal passes, the nine-member health department board will be in the spotlight. The group includes several physicians and health executives along with former state Rep. Clay Cox, a Lilburn Republican who runs a corrections company.

Federal regulators would likely have to approve Deal’s plan before it can take effect. That’s considered likely unless federal health officials object to changes in state policy until after Congress and the White House reach a deal on tax reform, said Matt Salo, executive director of the National Association of Medicaid Directors.

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