"Don’t cry for me, Argentina."
About 10 of the largest hospitals in New Hampshire have filed suit against the state because of the "new tax" that the recent budget imposed on them. These large hospitals are the same ones that have regularly reported profits in the multimillions of dollars and have invested in seemingly unending expansions of their physical plants – often leading to the duplication of services offered at nearby hospitals. Many of their CEOs are paid northward of a $1M a year and the hospitals are the ones we see regularly on TV spending millions of dollars advertising their benefits over their competitors such as duplicative expensive equipment, special neonatal facilities and care, etc.
OK, they have a considerable amount of money, but weren’t we told that the budget imposed no new taxes? What’s the story? First of all, this is not a new tax. It has been around since 1991. It was all part of a scheme developed to get more money from the federal government to pay for Medicaid. Anyone who has been a resident in New Hampshire for more than 10 years probably remembers the plan. It was aptly called Mediscam in the popular press.
Here’s the background: Twenty years ago, when Judd Gregg was governor and the state was in the middle of a real estate collapse, a Department of Health and Human Services employee learned how to milk the federal Medicaid system to help balance New Hampshire’s budget.
The scam worked like this: Medicaid reimburses hospitals for 50 percent of the money they spend to care for a large number of Medicaid recipients and people who can't or don't pay. Since the reimbursement is based on what hospitals spend, states figured out that if they taxed hospitals based on their net revenue, the federal government would match half the amount of the tax money. The state then gave back to the hospitals what they paid in the so-called "bed tax" and put the Medicaid money in the general fund. It was all perfectly legal, if a bit sneaky.
The feds were, of course, knowledgeable regarding what was going on. We were not the only state that had figured this scheme out. It took Uncle Sam a few years to fathom how to counteract this "scam" and they did so by tightening up on the Medicaid reimbursement.
Last year, at the demand of federal Medicaid officials, the state was forced to separate the tax from the payment system, meaning that hospitals no longer received the same amounts that they had paid. Accordingly, the Governor and the legislature, in the budget process, chose to use revenues from the tax on net hospital patient receipts for Medicaid payments to hospitals, in large part to offset a significant drop in enhanced federal Medicaid funds that stopped with the end of the stimulus.
These changes include walking away from efforts to make government the health care savior. Next is making hospitals and other providers compete in an open and free market — not one regulated into oblivion.
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Contact: ken.s+sunacom.com (replace "+" with "@")