Deny State “Fiscal Cliff” Rhetoric Over Hospital Bed Tax – By Joel Aaron

January 10, 2013

Georgia has its own fiscal cliff coming up on June 30 with the expiration of the Medicaid-funding “hospital bed” tax. The doomsday scenario goes like this. Governor Deal is projected to produce a budget on January 17 and many are saying it will carry another $1 billion dollar overall gap for the upcoming fiscal year. An expiring hospital bed tax would mean a nearly $500 million dollar additional gap because the tax also makes Georgia eligible for Federal assistance in funding the Medicaid gap. The formula is about 35% State, 65% Federal. Since the Medicaid funding gap is projected at $400 million for 2014 (with or without the tax renewal), we’re looking at an additional $1 billion Medicaid funding gap for the upcoming fiscal year. All told, it would nearly doubling the overall gap from $1 billion to potentially as high as between $1.5 billion and $2 billion dollars.

Governor Deal has gone to work on Day 1 of the legislative session, proposing a “solution” via his House and Senate floor leaders where this tax vote – a political football in itself – is effectively punted to the Department of Community Health. It seems to provide political cover at the expedience of a legitimate solution, handing over the reins of a tax vote to a state level bureaucracy.

SO what is the hospital bed tax? Technically, it’s called the Provider Payment Agreement and it was passed as a temporary fix to cover long-standing Medicaid gaps during Governor Perdue’s 2nd term. The way it works? The hospitals, themselves, pay the tax to the State on net patient revenue. Based on the number of Medicaid eligible patients the hospital takes in, the State sends payment portions back to the hospital in the form of reimbursements. The Fed deems the State eligible for additional assistance because they are taking in these revenues and kicks in outside dollars to the State Medicaid reimbursement program. Basically, because you have more money in the fund, you have more need for more money in the fund because the existence of funds seems to have a direct impact on the demand for those funds—imagine that. Begs the question of whether the way to reduce budget demands is to pass smaller budgets? We always scream austerity, and we always seem to find it.

So get ready to hear a lot of talk about how we can’t afford to cut the tax without losing the revenue and how hospitals, especially the ones catering to the Medicaid eligible who are receiving the lion’s share of the reimbursements, can’t survive without this tax in place and will have to cut jobs and services. In other words, a lot of red herrings will be swimming around the Gold Dome. Why be so fatalistic? Why accept that we have to fund things the way they are right now and fuel the rising costs of Medicaid with more dollars rather than finding ways to rein in the cost of health care? For that matter, why keep pushing the old way approach of conventional baseline budgeting where the focus is all on inputs—how much do we need to take in to sustain the current programs and expenses?, rather than outputs—how much of the current programs and expenses are even necessary? This means getting back to brass tacks and asking, what are government’s core functions in order of priority and how much do we need in order to fund them? This may require a deeper dive than the cut-and-dry “cost-plus” model where decades of spending and programs are stockpiled beneath the surface of the fractional spending increases that gobble up the political dialogue during session but it’s high time that cost and effectiveness factor more heavily into the discussion. Education funding alone costs $14 billion dollars out of a $19 billion dollar state budget (not including Federal subsidies) with few questions asked. Annual carryovers abound. Why not peel back the layers on departments and agencies and ask, how much of this is necessary to the core functions of government, or rather, how much is waste in fulfilling this core function of government?

AFP Georgia activists believe we should not fill the gap with tax hikes that fall on patients and Georgia businesses in the form of premiums and the like. We can fill it through smart cuts in State government waste and re-visiting to reform a few costly State spending priorities. There’s no better time than now to get started with the new tools and the new charge provided by the 2012 Zero Based Budgeting Act that Governor Deal signed into law. The General Assembly has the power to review and evaluate state agencies using the staff in the Senate Budget and Evaluation Office, the House Budget and Research Office, and the Senate and House Appropriations committees. Time to run the ball, not punt!

If you add it all up, Georgia already has a total state debt of over $94 billion including the total of outstanding official debt, pension and other post-employment benefit liabilities, Unemployment Trust Fund loans, and the budget gap itself. It’s time to approach the problem of budget gaps with the question, how do we re-purpose existing spending, rather than knee-jerk and go off chasing more tax revenue.

Governor Deal made a strong statement recently, refusing to institute state health insurance exchanges on behalf of ObamaCare that would swell state health care costs even further. When the State already receives nearly half of it’s annual spending dollars from the Fed, now is not the time to accept and extend a relationship of “If-Then” bargains for more Federal assistance, coming fresh off a move toward more fiscal conservatism and self-sufficiency in Georgia. We don’t need a hospital bed tax renewal, we need to make fewer assumptions on the resources we already have.

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