Ramsey, Chance: tax would prevent hospitals from closing

Senator Ronnie Chance of Tyrone (L) and Rep. Matt Ramsey of Peachtree City.

Legislators say tax would shrink Medicaid provider cuts from $300M to $55M

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)

AL87South
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All Wrong!

Translation:

We are short on money for our state budget because we have been living off the stimulus money (federal tax dollars) and the tobacco settlement (transfer of wealth from the shareholders of tobacco companies ( a lot of which were institutional pension funds for individuals, ironically enough)-as punishment for past transgressions -to the states for various programs related to prevention of tobacco use and treatment of tobacco related illnesses)for the past couple of years.

Therefore we are going to take money away from Piedmont (our local, not-for-profit, healthcare system) and others in order to draw more federal dollars (paid by federal tax payers) into GA and give those dollars to hospitals that treat a heavier load of Medicaid patients (some of these hospitals are in dire financial condition, others are very profitable and have huge cash reserves). Some may see Piedmont in great shape economically, look at all the growth in services, facilities and technology. Alternatively, how can that be sustained with a change in funding formula ?

This is polically expedient because there are more hospitals that are winners than losers. And the alternative presented was a massive medicaid funding cut that would likely close many hospitals (many of the same ones that now become winners).

It is also more politically acceptable than a "Variety of broad based taxes imposed directly on Georgia citizens and small businesses". Codewords for increasing tobacco taxes - (ie - Smokers Vote!)

Meanwhile we also protect the Insurance industry's oligopoly profits and the beuracrats at Medicaid, who contracted out the program, without reducing staffing.

So yes,"Georgians deserve responsible and thoughtful leadership, not empty political rhetoric". Georgians also deserve an open and honest debate of the real issues, not this smokescreen.

The real issues are:

1) Are we in favor of leveraging our ability to attract more federal dollars, knowing that the ultimate source of these dollars isn't the federal government but the federal taxpayer? You can't say - we are just going after our "fair share" and support the anti-tax / tea-party -type movement at the same time - you have to choose one or the other.

2) Are we in favor of shifting resources away from hospitals that treat less medicaid patients to those that treat more? This is purely an economic redistribution argument, see it however you like.

3) Who do we believe pays the ultimate burden of the shift of resources ? Individuals and businesses via premium increases, health care consumers via out-of-pocket increases, the general public via availability of technology and services, health care workers via salary reductions? All of the impacts are valid - at issue is when, where, how much, etc

4) Do we believe that a new tax will ever really go away ? Seems unlikely

5) Do we believe that tobacco producers, sellers and users should pay a heavier burden of the costs of care ? This is at the very core of our national healthcare debate. Lifestyle choices (or addictions, depending on whose definitions you use) are responsible for a huge portion of national healthcare spending. Those who are most likely to be making some of the worst choices (or sucumbing to the worst addictions) are also on the low end of the socio-economic scale. Which is the cause, which is the effect ? Should they be paying more for these choices/addictions ? What is the mechanism to make this happen?

6) Do we believe that state government could be shrunk in order to preserve funding for actual provision of care vs beuracratic functions ? When has government ever shrunk?

7) Do we believe that the insurance industry, that (other than Kaiser) doesn't actually provide any care themselves, is overusing its market power deriving excess profits from Georgians ? If so, what is the solution to this?

These are the real issues, that have very good arguments on both sides and should be debated in order to arrive a conclusion where voters can choose what/who they support.

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AL47SOUTH

Very thought provoking.

cogitoergofay
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Chance and Ramsey are wrong on this proposed tax hike

Chance and Ramsey are wrong on this proposed tax hike. GOP Sen. Preston Smith of Rome apparently has it right, though. See article at http://blogs.ajc.com/political-insider-jim-galloway/2010/04/12/preston-s....

Apparently Coweta Sen. Mitch Seabaugh may have it right as well. I am not entirely sure on that though.

At its most fundamental level, HB 307 is a TAX INCREASE, proposed and supported by the Governor, a former Democrat.

Even more fundamentally, however, it is a disproportinate tax increase that taxes those that are unfortunate enough to need health care. What is the impact of this tax? To increase the charges passed on to insurance companies who will pass the charge on to the ultimate patient in the form of a co-pay.

But wait a minute--- if I am healthy why would I be exempt from this tax increase? It is a dishonest means of solving the problem and Preston Smith was right to object.

I truly hope that our Senator and our Representative will change their minds on this issue and defeat it in conference.

PTC Observer
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Chance and Ramsey

As I said in an earlier post, these guys are caught between a rock and a hard place. There are no good answers when it comes to government involvement.

The only good answer is for government to get out of the health care business all together. The realization that health care is broken because of government will ultimately be accepted, because the money will run out.

We're broke folks and our representatives know this.

Bonkers
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Chance & Ramsay 2

I can't believe what I am reading!
A new tax on the revenue of hospitals for the state of Georgia to use to return to the state of Georgia hospitals, with the FEDERAL GOVERNMENT MATCHING THE NEW TAX MONEY!
This allows Georgia to give some of that pile of new tax money to smaller hospitals in the state and SAVE them!
Obviously the smaller inefficient hospitals are to receive a disproportionate
amount of the new tax.

Now if I have been reading the TEAS and the republicans correctly, they would say Taxed Enough Already!!!!
Also, they would say it is another President Obama scheme to put in Socialism!!!

You really covered it up well by saying that the government being involved in the health program is at fault. WOW.
Are these small hospital folks going to finance their own hospitals for old people and everyone without Medicare?
Is that what you want?

This sort of chicanery by conservatives is what got them defeated last time.
The fact is....the don't really want to finance their own health care nor have the government help either.

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