South Carolina hospitals may pay to expand Medicaid

abeam@thestate.comJanuary 29, 2013 

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— South Carolina Republicans say they do not support Obamacare because its cost to the state would be more than $1 billion, cumulatively, by 2020. But what if Palmetto State hospitals agreed to cover that tab?

That is just one of the proposals put forward by South Carolina supporters of the Affordable Care Act, commonly referred to as Obamacare.

“It would, essentially, be the health care industry taxing itself to pay (it),” said Bob Coble, a lobbyist and attorney who represents several hospitals and medical providers. “It’s something that will be on the table.”

A “provider tax” will “certainly be part” of the efforts by S.C. Democrats to expand Medicaid, the joint federal-state insurance program for the poor and disabled, said state Rep. Harry Ott, D-Calhoun, a member of the S.C. House’s budget health care subcommittee.

But Ott said the hospital tax will not pass unless GOP Gov. Nikki Haley agrees to it.

“If the governor is going to veto it and we don’t have enough votes to override the veto, (Republicans) are going to take a hit twice” from conservative GOP voters if they vote for the tax, Ott said.

Haley said Tuesday that she opposes the idea.

Hospitals would pass along the cost of the tax to their paying patients, she said, adding, “I’m not going to allow patients to pay for a tax on Medicaid expansion we can’t continue.”

“This is an expansion that would require us to take on people faster than we can,” she said. “I appreciate that hospitals have to watch out for their bottom line. I have to watch out for taxpayers’ bottom line.”

State Rep. Murrell Smith, R-Sumter, chairman of the House health care budget subcommittee, said he would “probably not be in favor” of the hospital tax, citing the governor’s opposition.

But Coble and others say Haley’s reasoning is flawed.

The former Columbia mayor and others argue that hospitals cannot raise their rates unilaterally to cover the tax because they have to negotiate what they charge with private insurance carriers.

“Hospitals don’t raise rates and just get a return, like a regular business,” Coble said. “It’s much more complicated than that.”

Hospitals would volunteer to pay a provider tax because it would put them in line to collect billions of added federal Medicaid spending in South Carolina.

While Haley has long opposed expanding Medicaid, some of the state’s most influential Republicans and Democrats have not made up their minds on the issue. Advocates say the expansion would bring billions in new federal spending into the state – money that otherwise would be spent in other states – and employ thousands. The expansion also would provide health care insurance to 500,000 South Carolinians, or one in every eight residents of the state.

Senate Finance Chairman Hugh Leatherman, R-Florence, said the provider tax is not a new idea, adding that he is “going to look at that issue when it comes up.”

“I haven’t decided whether I’m going to support the expansion, but I’m willing to look,” said Leatherman, one of the state’s most powerful senators.

State Sen. Vincent Sheheen of Camden, the Democratic Party’s nominee for governor in 2010 and likely again in 2014, said Senate Democrats have not discussed the provider tax as a way to pay for the expansion. Sheheen added he has not decided whether to support the expansion.

But, he added, “Generally, when we pay federal tax dollars, I like to see them come back to South Carolina and not go to other states. But I don’t know what the ... long-term repercussions are at this point, so I’m going to examine that when it comes over here and then make a decision.”

Hospitals proposed a provider tax two years ago as a way to avoid steep Medicaid cuts to stem deficits at the state Department of Health and Human Services. But Haley rejected the plan.

This year, the S.C. Hospital Association says it has not proposed a provider tax. Spokeswoman Rozalynn Goodwin said the idea is “worth discussion,” adding that the expanded federal Medicaid spending would offset about $2.7 billion in Medicare cuts that the state expects over the next seven years as part of the Affordable Care Act.

The idea for the latest provider tax comes from Arizona, a conservative state with a Republican governor known for resisting federal spending. But Arizona Gov. Jan Brewer surprised many earlier this year when she announced, during her State of the State address, that she supported the Medicaid expansion and using a provider tax to pay for it.

The Affordable Care Act allows states to expand Medicaid to anyone earning less than 138 percent of the federal poverty level – about $15,000. Tony Keck, the director of South Carolina’s Medicaid program, estimates the expansion would add about 500,000 people to the Medicaid program.

The federal government would pay for 100 percent of the expansion’s costs for the first three years. Federal support then gradually would decrease to 90 percent. South Carolina would have to pay for the other 10 percent, called a match.

“For those who are against any kind of Medicaid expansion at all, for reasons other than where would you get the match, this isn’t going to answer that,” Coble said of a provider tax. “But for those looking at where would the money come from, this (provider tax) is certainly an alternative being used in other states that needs to be looked at here.”

In her State of the State address, delivered two days after Brewer’s speech, Haley shut the door on any chance she would support the expansion.

“As long as I am governor, South Carolina will not implement the public policy disaster that is Obamacare’s Medicaid expansion,” she said.

The Medicaid expansion is expected to come before the House health care budget subcommittee next week, when it is scheduled to hold a budget hearing for the state Department of Health and Human Services. The full House budget committee will discuss the budget later this month, while the full House of Representatives is scheduled to debate the budget in early March.

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