State News

Medical tax getting look from N.C. lawmakers

Posted April 11, 2010
Updated April 12, 2010

— The legislature socked it to retail customers, smokers, drinkers and big earners with higher taxes last year to help close a budget gap calculated by Democrats at more than $4 billion.

Could hospitals or doctors' offices be next?

Hospital generic, surgery, generic, operating room generic Hospital tax could bring in federal matching funds

Legislative leaders are returning to Raleigh early to begin adjusting the second year of the state's two-year budget, and they are intrigued by a hospital or provider tax or fee because it could draw down three times as much extra money in federal matching funds for Medicaid.

The state deficit is expected to be $787.9 million for the 2010-11 fiscal year, which begins in July.

"We do have some major, major problems in being able to fund our Medicaid health care needs," said Dr. Bob England, D-Rutherford. "Everything's going to be looked at. Has to be."

Medicaid, the state-federal health care program for the poor, is on track to be $475 million over budget in North Carolina next fiscal year as more – and apparently sicker – patients enroll, legislative staff members told budget writers last week.

"It's worth considering," said Senate Majority Leader Martin Nesbitt, D-Buncombe. "Medicaid is there to serve the people, and we've gone past the point, in my opinion, of being able to serve people appropriately. We've cut to that point."

Hospital and doctors' lobbying groups in North Carolina oppose the idea, although they would receive higher Medicaid payment rates as part of any bargain.

"Our track record of getting hospital funds back has not been good," said Don Dalton, vice president of the North Carolina Hospital Association.

Hospitals statewide already give plenty to the state, Dalton said, noting that their financial losses for treating Medicaid patients alone have gone up 50 percent between 2006 and 2008, to $411 million, and charity care has increased 77 percent.

"Hospitals earn their tax exemption because we serve a charitable purpose," he said. "We're doing our part, and to tax us further sends us down a road of jeopardy."

England, a physician, said he would support the idea only if hospitals and doctors got back at least what they put in, if not all of the federal dollars as well.

"Knowing how physicians think and those of us who are providers, I'm not really surprised (by the opposition)," he said.

While discussions are preliminary and final revenue decisions at least two months away, the idea Democratic lawmakers would ponder openly more taxes in an election year after raising them by $1 billion last year shows they see a dwindling number of options to fix the state's fiscal problems.

"The aversion to increasing taxes right now is at full-bore odds with cutting a program that's already been cut too much," said Rep. Pryor Gibson, D-Anson, co-chairman of the House Finance Committee. "This is way beyond the lesser of two evils."

The concept isn't entirely new in North Carolina, one of 44 states that have at least one kind of Medicaid-related provider tax, according to the National Conference of State Legislatures.

A state usually levies the tax on a broad class of medical providers. All Florida hospitals, for example, are charged 1.5 percent of their annual net operating revenues, according to documents presented to legislators on the topic and obtained by The Associated Press.

The revenues help the state qualify for additional federal Medicaid funds. The 2009 federal stimulus law raised the match of federal money North Carolina can receive from $1.78 for every $1 from the state to $3.

North Carolina will collect $132 million this year in taxes and fees from nursing homes and intermediate care centers for the mentally retarded and nursing homes, leveraging into $396 million when Medicaid is added.

All of that revenue goes to increase reimbursement rates to treat patients, state Health and Human Services spokesman Brad Deen said. Any new tax probably would only earmark a portion of revenues to raise other Medicaid rates. The rest would let the state fill the budget hole by shifting more medical costs to the federal government - and federal taxpayers.

With giving providers the tax back through provider fees, "it seems like a fair and equitable thing to do," said Rep. Mickey Michaux, D-Durham, senior co-chairman of the House Appropriations Committee.

Federal law prevents guarantees that each hospital would recoup the tax, leading to the possibility hospitals with small percentages of Medicaid patients would give up more from the tax than taking in higher rates.

Dalton said the tax would probably not be passed on to patients because insurance companies have negotiated rates for certain services.

Michaux isn't sure fellow House Democrats would buy into the idea. Republicans, the minority in the Legislature, have been attacking the majority for the broad-based tax increases approved last year, instead of prioritizing spending, to balance the budget.

Nesbitt said he's believes there can be an open discussion of whether such a tax makes sense: "I'm not scared to look for good choices, whatever they're called."

63 Comments

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  • Dollars-and-Sense Apr 13, 2010

    affirmativediversity - This is not my plan. I am trying to explain how this "tax" levied on hospitals will play out. You're right, the feds do not pay state taxes. The 'tax' being discussed is levied on the hospitals and other healthcare providers. In fact some tax avoid calling it a tax. NC uses the term "assessment'. The 'tax' is an an expense to the hospital just like medical supplies and nurses salaries. This tax will draw down from the federal government $2 for every $3 deemed as a Medicaid cost. John Q. Public is the ultimate payer. My explanation does not address private pay patients...only those needing public assistance (Medicaid). These are two different payor sources.

  • affirmativediversity Apr 13, 2010

    Dollars and Sense,

    Only one problem with your plan. The Federal Government NEVER pays State Taxes...they are exempt.

    They don't pay Tax on Food Stamps (neither State or Local) on heating programs...nothing...

    That tax would have to be passed onto the PRIVATE PAY or PRIVATE INSURANCE...and guess who pays that!

  • affirmativediversity Apr 13, 2010

    lorivalentine1,

    Heck yes you are correct. The amount of outright waste and abuse in medicaid is staggering...its actually built into the policies and programs.

    Example...NC Health Choice...medicaid for children 6 to 18. The income limit for a family of 4 is over $45,000.00 per year...there is suppose to be a $50.00 YEARLY fee per child, up to a max of $100.00 per family.
    That's a YEARLY fee AND most families don't pay it because a "trust fund" was set up to pay it.
    Oh and they are not permitted to have private coverage...this usually results in the parent dropping their child from their employer's insurance so they can get the taxpayer to pay for them.

    That means that people who REGULARLY pay more than $100.00 a month for their cell phone or cable TV have THE TAXPAYER pay their child's health insurance/medical expense AND don't even cough up a YEARLY fee!

    That is just ridiculious!

  • Dollars-and-Sense Apr 13, 2010

    Medicaid is a joint State/Federal program to pay for healthcare services for the poor. In NC, the Feds pay approx. 2/3rds of Medicaid expenditures and NC pays 1/3rd. To hospitals and other healthcare providers, this 'tax' is an expense, so if NC taxes the hospitals, the federal government will pay for 2/3rds of it. The extra money that the state collects from the feds is supposed to raise reimburement rates. From North Carolina's point of view, it's a "win-win" situation. The hospitals pay a $1 and get $3 back...and there is no tax increase to North Carolians. But the problem is that someone has to pay for this. If all 50 states did the same and 'taxed' all their Medicaid providers, the federal government would be paying out billions to the states to cover the fed's share of the Medicaid costs. Although state taxes may not increase, federal taxes are sure to increase to cover these aditional Medicaid costs. And there you have it.

  • Eduardo1 Apr 13, 2010

    take the illegals out of the picture, and the deficit shrinks in to the black hole.
    hey wildcat....get over the Bush bashing already. The Czar has been in office for 16 months. All we are under his socialist form of government is DEEPER in debt. You must be very happy with CHANGE= unemployment UP, companies going out of business UP troops murdered in Afgan UP, felonies in U.S. UP, Foreclosures UP. Oh, I guess these are some of the changes you want to still blame Bush. I guess you can not wait for Shira law in the U.S.!!!!

  • whatusay Apr 12, 2010

    Demcrats, that's all they know...tax, tax, tax, tax. Why not reduce the size of government and deport the illegal moochers???

  • lorivalentine1 Apr 12, 2010

    HHMM... Medicaid needs an overhaul.. There are millions of people who are able bodied who do not want to work and have access to benefits but as Medicaid is free they prefer those benefits..
    Case in point.. My husband's ex-wife. Has been remarried for 6 years. Stayed on Medicaid until (12/31/09)as it was cheaper for her and her husband. She does not want to work and hubby agreed he liked her home as well. She could get benefits from my husband or her current husband but refused either option as it was cheaper for her to let the state pick up the entire tab.
    We called the state and turned her in. Now she has benefits through my husband and pays her share.
    She took a critical spot others who are truly in need could have used but as she is selfish, she only thought of herself as always.

  • wildcat Apr 12, 2010

    because THAT WAS YOUR ORIGINAL (and constant, I might add) comment!

    Really! you think you did you work well. Read on............

  • affirmativediversity Apr 12, 2010

    Here's another hint for you ratherbnnc,

    You have to read the entire section.

    Start with the Family and Children's Medcaid Manual, Section 3330.

    Pay particular attention to Section 3330.XIII.D.5

    That's the part where they discuss ER visits that don't result in an admission...then cross reference that with 3330 definition of what constitutes an "emergency".

    Now you can attempt to argue this with me all day long if you want...or you can just admit that you were wrong when you said criminal migrants can't get medicaid...because THAT WAS YOUR ORIGINAL (and constant, I might add) comment!

  • wildcat Apr 12, 2010

    President Obama is doing a great job with the mess he has to deal with the second he walked through the doors of the office. Bush left a major mess and yet many are blind to that fact. WHY?

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