Arizona to tax hospitals to pay for Medicaid

By Bob Christie

Associated Press

Published: Sunday, Jan. 20 2013 2:55 p.m. MST

Among the supporters of a tax is Dignity Health, which has three Phoenix-area hospitals, including one of the biggest in the state, St. Joseph's Hospital. Suzanne Pfister, Dignity's vice president for external affairs, said St. Joseph's alone has seen a tidal wave of uncompensated care since 2010, rising from an average of $8 million a month to an "unsustainable" $17 million a month now.

Others, like the Mayo Clinic in Scottsdale, are opposed to the taxes. Mayo argues it provides specialized care for cancers and transplants and shouldn't have to pay to support general care hospitals with high numbers of indigent patients.

Mayo CEO Dr. Wyatt Decker said it would be extremely difficult if the not-for-profit had to pay the tax, which a 2009 state study estimated at about $38 million for his hospital.

"We do applaud the governor's commitment to helping provide access to health care for more Arizonans. It's a good thing," Decker said Thursday. "But we, in general, do not support provider taxes as a solution because it is ultimately a tax on patients."

Virtually all states are looking at ways to pay their share of the expansion, said Dr. Daniel Derksen, a University of Arizona public health policy and management professor who helped design New Mexico's health insurance exchanges in 2011. Many have looked at provider taxes in recent years, he said, and they could again.

Provider taxes aren't new. Thirty-nine states already use some form of hospital provider taxes to help cover their share of Medicaid costs, according to the Kaiser Commission. And all but Alaska have taxes on nursing homes or other providers to help pay for required state matches to qualify for federal cash.

But Brewer is the first governor to propose a stand-alone hospital tax designed specifically to fund the Medicaid expansion.

The federal government puts a cap of 6 percent of hospital revenues on those taxes, and the 11 states without hospital taxes can put them in place. Most of the 39 already imposing hospital taxes have room to boost them.

California does not. It initiated a hospital provider tax in 2009 that is used to cover uncompensated care. The state might be able to redirect some of the estimated $2 billion in yearly revenues to its Medicaid program, called Medi-Cal, if uncompensated care drops. But shifting the funding is a complicated act, as complex as other aspects of federal health care funding, said Dylan Roby, an assistant professor and researcher at UCLA Center for Health Policy Research.

Such taxes can be compelling to lawmakers because the economics means health care providers are more willing to sign on.

"If the folks that are going to be taxed say, 'Well, we really need to do this,' that's a lot easier lift legislatively than trying to force something on a reluctant group," Derksen said.

Arizona began covering many low-income childless adults after voters required it in 2000, but Brewer trimmed the ranks covered by the state plan, the Arizona Health Care Cost Containment System, or AHCCCS, when the Great Recession hammered state revenues. She proposes restoring that coverage as part of the expansion.

But there are costs to states, even at first, depending on their current plan. In Arizona, the state expects to be on the hook for $256 million by 2016, when its expansion if fully rolled out.

Try out the new DeseretNews.com design!
try beta learn more
Get The Deseret News Everywhere