Georgia Considering New Tax on Hospitals

January 12, 2009

From Online Athens:

The state hopes to persuade the legislature to approve a new tax on hospital revenue. Although the governor’s people insist on referring to these measures as fees, let’s call them what they are: taxes.

The new hospital money would be spent on shoring up Medicaid to the tune of $208 million. It also would fund trauma centers and underwrite other health care needs. That is what we are told in the Capitol. In fact, the fresh cash – a percentage of each hospital’s net revenue – is expected to wind up in the state’s general fund to be spent as Georgia’s kook-led legislature desires.

Health care interests already are up in arms about the tax, which they say could cripple or even shut down smaller hospitals across the state. Some big hospitals are perplexed at being kept in the dark about a proposal that directly affects their bottom lines as well as the health of many Georgians.

Anyone familiar with hospital billing practices knows that medical pricing is a mess, with Medicaid reimbursements failing to cover its costs, consequently driving up costs for health insurance to be used as a cross-subsidy, and that in turn driving up prices for uninsured patients from which insurance companies obtain bulk discounts. On top of all that, some states tax purchases made by hospitals, whether or not they tax the final bill.

The solution proposed in Georgia is to impose a tax on hospitals, with the revenue used to subsidize hospital care. In one respect, this just formalizes the cross-subsidy that’s already going on. It may also be justified if health care services are currently exempt from sales tax. But since Georgia proposes shifting the revenue to the state general fund, not for health care spending, it may make things worse by imposing a tax on the very service that is supposed to be in short supply. Using the money for general state spending also demonstrates that it is no fee. It’s a tax.


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