March 25, 2011

Vermont Medicaid Hospital Taxes - FY 2012 Budget

"The Association does not oppose the fee bill (H.436). As you know, the fee bill contains, among other things, the hospital provider tax. The House Ways and Means committee supported the Administration’s recommendation to increase the hospital provider tax to the greatest extent possible. The $17.4 million proposed tax increase for SFY 2012 brings the total tax paid by hospitals to $111.5 million. These tax revenues, when matched with federal Medicaid funds, generate more than $230 million – $48 million more than the state eventually pays hospitals and employed physicians to care for Medicaid patients."
--Quote from open letter to Vermont Legislators on H.202 from M. Beatrice Grause, RN, JD

President and CEO,Vermont Association of Hospital and Health Systems

I'm no expert on Medicaid and health care funding, but let me be sure I have this right. Hospitals will be taxed more to help balance Vermont's FY2012 budget. This will mean that additional Federal Medicaid dollars will flow into the state to help pay hospitals for services to Medicaid patients. Meanwhile, our Federal government now borrows  about 42 cents of every dollar it spends, including Medicaid dollars flowing to the states.

So, if all states do what seems to be a cool deal to get more Federal dollars from Medicaid, the Feds are required to borrow more to pay for the additional Medicaid support. It seems to me this tactic will drive up Federal Medicaid spending and more deficit spending/borrowing, some of which apparently will flow back to hospitals, at least in Vermont.

This seems to me a scheme to 'rob Peter (Federal budget in dire deficit mode) to pay Paul (Vermont's hospitals)' and exemplifies one of the problems with our present U.S. health care system. I remain unconvinced that ObamaCare or ShummyCare will solve this problem.

Granted, this is fundamentally a national issue that requires deep restructuring of entitlement programs. But Congress seems to have little stomach for that. Despite the rhetoric, we have yet to see any real action from Republicans or Democrats to reduce deficits.

Meanwhile, states will continue to milk 'the system' for their own benefit. In Vermont's case, the budget will be balanced partially via increased federal deficit spending, not unlike the use of ARRA funds in the previous two budgets.
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