Area Officials Oppose Hospital Tax

Gov. Sonny Perdue’s plan to plug a budget hole by taxing hospitals and health insurance plans has its first hearing.


Reporter: Jennifer Maddox Parks
The Albany Herald
February 21. 2010

ALBANY — Some health care officials here agree that imposing a hospital tax is not the appropriate way to fix Georgia’s ailing budget.

Gov. Sonny Perdue’s plan to plug a $274 million budget hole by taxing hospitals and health insurance plans received its first hearing before skeptical House members Wednesday as hundreds of health care lobbyists looked on—which ended with the conclusion that many were cool to the idea.

Tommy Chambless, senior vice president and general counsel for Phoebe Putney Health System, has found himself in the same position. If the tax passes, it would cost Phoebe a net of roughly $900,000.“This will have an impact on every health care facility in the state,” he said. “If you impose a tax that will take out $1 million out of the organization, that revenue flow to the state has to be made up somewhere.”

In order to make up for the financial impact, facilities like Phoebe may have to eliminate some services or increase costs in order to re-balance their books.

“Many hospitals are literally hanging on by their fingernails,” Chambless said. “All facilities will have their cost structure impacted. It’s a extremely negative thing to impose taxes on sick people.”

The governor says the tax increase, which would impose a 1.6 percent fee on revenues from hospitals and insurers, is needed to avoid steep cuts to Medicaid. Perdue has warned that he could push for a 16.5 percent cut in Medicaid reimbursements to hospitals if they don’t support the tax.

One alternative gaining a lot of attention would be to boost the tax on cigarettes by $1-a-pack instead. The last time Georgia boosted its cigarette tax was in 2003 when Perdue pushed through a 25-cent increase, earning criticism from some conservative anti-tax groups.Georgia has the one of the lowest tobacco taxes in the country. Adding the extra dollar may make a $350 million impact to the state budget, Chambless said.

“The (impact) in states that have increased their tobacco tax has been an increase in state revenue, and that it has encouraged people to stop smoking,” he said.

When Palmyra Medical Center was reached for comment on the issue, officials there deferred to the Georgia Hospital Association—who also feels there may be better ways to solve the problem.

“There are other alternatives out there,” said Earl Rogers, GHA senior vice president of government relations. “Ninety eight hospitals in the state will lose money in the deal. They should tax things that make people sick.”

Experts say the lost money may ultimately result in job cuts in the health care industry, which has been one of the shining stars in the state’s economy during the ongoing recession.

“Health care is one of the very few industries not impacted by economic problems,” said Carie Summers, GHA vice president of financial services. “That would seem to be one of the last places you would want to cut.”

Other alternatives, such as pursuing uncollected sales tax, may also help Georgia’s financial doldrums, Rogers said.

“The state ought to take advantage of that,” he said.

In the end, some officials say they don’t anticipate the tax going through.“I don’t believe the people of this state will allow a sick tax to be imposed,” Chambless said.

Others are hopeful it will fail, but are hesitant to predict the future.“The legislature has a lot of tough issues to deal with,” Rogers said. “I think they will be looking at everything.”

The Associated Press contributed to this report.

Email Address: mailto:jennifer.parks@albanyherald.com?subject=Area

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