OP-ED COLUMN – January 23, 2009

Rural health care on the line in debate over tax hike

By Sen. Tim Golden and Rep. Jay Shaw

The House and Senate Appropriations Committees met jointly Jan. 21-23 to hear details of the budget requests for Gov. Perdue’s proposed $20.2 billion spending plan for fiscal year 2010. It is well known that balancing this year’s budget in the midst of the current economic crisis will be the greatest challenge Georgia lawmakers have faced in recent memory.

To deal with the state’s revenue shortfall, estimated at up to $2.5 billion, the governor has recommended a number of drastic steps that would have painful results: higher local property taxes, further cuts in funding to our public schools and significant reductions in state services, to name a few.

One of the governor’s most controversial proposals is his plan to impose a new 1.6 percent tax on the revenues of hospitals and health insurance plans. Admitting the health care tax is a “tough option,” the governor said his plan would raise a projected $372 million, which would fill a $208 million Medicaid funding deficit as well as provide a revenue source for Georgia’s trauma care network. A small part of the funding would come from higher fines on speeding motorists.

While the governor’s plan would clearly benefit hospitals with trauma services and higher numbers of Medicaid patients, there is great concern over the effect of the new tax on smaller hospitals in rural areas around the state. Many of these facilities are already strapped for cash, and this is the worst possible time for them to take another financial hit.

According to the Georgia Hospital Association, more than a third of our state’s hospitals are operating in the red. Health care providers whose bottom line would be adversely affected by a new tax from the state would have little choice but to pass along that impact to their patients – their paying patients, that is.

Increased cost for health care and insurance often, unfortunately, keeps many families from going to the doctor when they are sick. Surely this is not a result the state government wants to encourage.

Georgia’s health care advocates have suggested that instead of taxing sick people when they go to the hospital, a higher burden should be placed on one of the root causes of the problem through, for instance, an additional tax on tobacco products. Last year, a $10 annual fee on car tags was proposed for permanent trauma care funding. Others have pointed to the $300 million Georgia would receive under the Obama administration’s plan to increase federal funding for Medicaid.

There is no doubt about the importance of our state dealing with the health care system’s financial challenges and the need to act now. Just last week, a hospital in rural north Georgia announced it was laying off 45 employees because of both the economic and “drastic Medicare, Medicaid, charity care and bad debt deficits from the state and federal governments.”

Another critical need is a reliable, sustainable funding source for Georgia’s trauma care centers, which are now able to handle only about 10,000 of the 40,000 severe injuries that occur annually in our state. The trauma coverage gap is particularly wide across south Georgia and other rural parts of the state.

The question is whether a new tax on hospitals, insurers and their consumers is the right way to make up for declining state revenues. Will the tax result in a net gain or a net loss for the majority of Georgia hospitals? Specifically, will struggling rural hospitals be able to survive? Are there other solutions that make better economic sense without restricting access to health care in our small towns and rural areas?

These answers will be the source of much debate at the State Capitol in the coming weeks. But with so much at stake, the time is now for legislative budget writers to at least ask the questions.

• Sen. Tim Golden (D-Valdosta) is secretary of the Senate Appropriations Committee. Rep. Jay Shaw (D-Lakeland) is a senior member of the Health Subcommittee of the House Appropriations Committee.