Georgia’s Proposed Hospital Tax

February 19, 2010

Georgia Gov. Perdue is reportedly having a tough time selling a tax on hospitals in his state:

Hospital executives, insurance professionals and representatives of business groups Wednesday assailed Gov. Sonny Perdue’s plan to make up a Medicaid shortfall with a tax on hospitals.

Speakers at a public hearing on the proposal warned that the 1.6 percent “bed tax” would cost hospitals millions of dollars, forcing some to lay off employees and others to close their doors.

Beyond his own formidable opposition, state House Speaker David Ralston (R-Blue Ridge) said, “I don’t see any real support for a hospital tax.”

Added House Appropriations Chairman Rep. Ben Harbin (R-Evans), “It’s probably not going anywhere.”

In a past Fiscal Fact I explained the process by which states increase Medicaid matching from the federal government by taxing hospitals. The federal matching system for Medicaid provides bad incentives for states to continually grow their programs at the expense of the rest of the country and doctors that choose not to take Medicaid patients.

Today the New York Times has a good round-up of state’s current and looming Medicaid problem. Right now many states are surviving off stimulus dollars—that require states to not decrease eligibility criteria—and when that trough dries it might be ugly (assuming Congress does not extend benefits or with future health care legislation cover state’s costs permanently like what the Senate was ready to do for Nebraska). So states will need to cut “optional benefits” in their Medicaid programs or pass new taxes. Or maybe the stimulus money ending will help states by enabling them to cut eligibility; though the demand for Medicaid does not look like it will soon abate.

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