Georgia View: To Fee Or Not To Fee

This column discusses the more than $200 million in Medicaid provider fees charged to all Georgia hospitals. During 2010, at the behest of then-Gov. Sonny Perdue, the Georgia Gen-eral Assembly passed the Provider Payment Agreement Act, which imposes a 1.45 percent fee surcharge on all hospital net patient revenue. Trauma centers pay 1.4 percent. As a result of this act, in the 2011 fiscal year, $215 million in Medicaid provider fees were collected from Georgia hospitals.

This amount is matched by federal funds. About 67 percent of that total, which is collected by the Georgia Department of Revenue, goes toward the Medicaid budget, with the rest toward Medicaid reimbursements for hospitals.

This 1.45 percent “fee” is not to be confused with a tax, even though some call it a “bed tax,” as taxes apparently are only created, raised or levied during Democratic administrations. That said, who to “fee” or not to “fee” and how much is one of the larger and looming questions of this legislative session.

With Medicaid costs on an upward spiral and Georgia among a number of red states opting out of Medicaid expansion and its additional funding available from the U.S. Afford-able Care Act (ACA) – admittedly encumbered with significant later off-setting expenses – fund-ing options and solutions are increasingly rare, while indigent patient demand continues to soar.

Somewhat like Robin Hood, the current fee income redistribution disproportionately takes dollars from larger, sometimes private, hospitals and medical systems providing a small percentage of indigent care and gives those millions to hospitals with a larger percentage of Medicaid and indigent patient base. Thus a winners/losers scenario is created where, say, Atlanta’s Piedmont Hospital (with less than 3 percent indigent care) is a net contributor and Children’s Healthcare of Atlanta receives a net gain of nearly $22 million, because 55 percent of its patient base is on Medicaid.

The state uses this money to increase net Medicaid disbursements by nearly 12 percent. Since Medicaid is a state/federal co-funded program, the state’s higher contribution is thus matched by the federal government, with the fee, in effect, creating free money. At least free for now. The 2010 law, which authorized the fee for three years, sunsets in June of 2013. The General Assembly will need to reauthorize or replace the fee, or the revenue and mechanism that funds it evaporates on July 1, 2013.

The Georgia Hospital Association (GHA) is prodding its members to sign off on a compromise proposal, but individual members with millions to lose or gain are instead digging in with their own points of view.

Unfortunately, Georgia’s Medicaid funding gap is only expected to worsen. The current state budget for Medicaid and PeachCare for Kids is currently facing a shortfall of $374 million.

Some of the net payer hospitals find it un-fair that they are in effect subsidizing the operations of direct competitors, and many speak of polarization within the normally tight medical community, with a perception that better-managed hospitals are helping to finance the less successful.

Some are suggesting increasing “sin” taxes, such as a higher tobacco consumption fee, or raising the costs for some individuals with chronic medical conditions like diabetes, congestive heart failure and obesity.

Another solution would end the sales tax ex-emption allowed for nonprofit hospitals on their millions in purchases of medical supplies, equipment and pharmaceutical products. This, however, could create a new and different winners and losers list and cause many smaller county hospitals to indefinitely delay large capital expenses on expensive medical devices, due to the related sales tax expense – creating a tiered level of medical services available across the state.

The ACA contains another surprise that will significantly negatively impact Medicaid funding in Georgia. A federal provider reimbursement cut in excess of 20 percent begins to take effect in 2013, reducing payments for expenses for the treatment of Medicaid patients. This is the disputed $700 billion in Medicare/Medicaid spending cuts debated during the 2012 presi-dential election.

Congress has repeatedly punted this ball forward since President Clinton was in the White House. Regardless of which horse you are betting on to win this race for the lower fees, two words to the wise: Stay healthy.