Hospitals say provider tax will generate $264 million in revenues to Vermont
Hospitals in Vermont contribute significant dollars to the State general fund. This year, hospitals will pay $94 million in hospital provider taxes to the State. The State spends these tax dollars on the Medicaid program, qualifying the revenues for an additional $169 million in Federal matching funds. In addition, as a result of the 14,718 jobs created by hospitals, hospital employees contribute more than $34 million to the State in tax revenues.
“The provider taxes that hospitals pay to the State is essentially a sales tax that supports the Medicaid program,” commented Michael Del Trecco, Vice President for Finance at the Vermont Association of Hospitals and Health Systems. “Combined, the provider tax and Federal matching funds total $264 million and are critical to the stability of the Medicaid program.” Mr. Del Trecco added, “The State uses these funds to pay hospitals and other providers for the care they deliver to Medicaid patients. The provider tax is like ‘growing our own food.’ After paying hospitals, there is $90 million left over, a contribution the State uses elsewhere within the Medicaid program. ”
Despite this $90 million contribution to State coffers, net Medicaid payments to hospitals have steadily declined in recent years. Care related payments to hospitals this year will not cover the cost of delivering that care. According to the Banking, Insurance and Health Care Administration’s 2010 hospital budget report, hospitals expect to be underpaid by $99 million by Medicaid this year. Known as the Medicaid cost-shift, hospitals absorb some of this shortfall but much of it will be made up by the privately insured, fueling already high premium increases.
“From the State’s perspective, the provider tax is a very efficient way to raise Medicaid funds. From the hospitals’ perspective, the combined pressures of the provider tax, Medicaid underpayments as well as new restrictions on revenues place hospitals in significant financial jeopardy,” concluded Del Trecco.
Recent market research conducted by VAHHS indicates that the majority of Vermonters surveyed were not aware of or do not understand this issue. The Association’s top priority this legislative session will be to educate lawmakers and the public about this unsustainable decline in net Medicaid payments, particularly in light of ongoing health care reform efforts.
Source: Vermont Association of Hospitals and Health Systems. 10.6.2010