The Medicaid Expansion Funding House of Cards


January 26, 2015 1:05PM

Gov. Haslam is adamant that his proposed Medicaid expansion under Obamacare “won’t cost Tennessee taxpayers another dime.” That’s because the state’s share of the plan will be paid for by the state’s hospitals via an “assessment fee.” But while this may sound good in theory, the reality is much less appealing. First off, what is a “hospital assessment fee”? In order to obtain federal Medicaid dollars, the state must first show that it has collected its share of funding locally. It’s the whole, “you put in a dollar and I’ll give you three” approach that has become customary in Washington. Rather than directly tax Tennesseans to obtain the state’s share of the funding for the proposed expansion, Gov. Haslam is asking the hospitals to pony up the money via a provider tax. Through this provider tax, the hospitals will forward the state money, which the state will then use to draw down more federal dollars. Once the state obtains the federal money, it will then kick more money back to the hospitals via reimbursements for seeing Medicaid patients. So in effect, the hospitals will get their money back, plus much more. State law prohibits the hospitals from passing the costs of the provider tax onto their other patients, but nothing is really illegal unless there’s an enforcement mechanism to make it so. And here, there is really no way to prevent hospitals from shifting those costs now or in the future, meaning that in the end, those hospitals’ other patients will wind up footing the bill for this expansion. What’s worse is that this funding scheme has come under attack by Congress in the past, including by our own two U.S. senators. As recently as 2012, Sen. Bob Corker proposed ending provider taxes, and Sen. Lamar Alexander signed onto the bill as a co-sponsor. If Congress ever moves forward with a ban on these assessment fees, state taxpayers will have no choice but to step in and pick up the tab. And that tab will only grow over time, with the state’s share of Medicaid expansion rising to at least 10 percent of total costs by 2020, and we have no assurances that a bankrupt federal government will continue to pay its share into the discernable future. Even if the provider tax scheme is not outright eliminated, it has been capped in the past, and a future cap could serve to limit how much Tennessee can raise from hospitals to cover its costs, forcing the state to turn to taxpayers for the rest. This house of cards is not the way to fund the expansion of an entitlement program to more than 200,000 able-bodied adults. While there is plenty wrong with the proposed Medicaid expansion, the funding mechanism alone should make the whole plan fall apart. State Sen. Brian Kelsey, chairman of the Judiciary Committee, will hold hearings on the provider tax tomorrow afternoon. Funding a Medicaid expansion this way warrants not only careful scrutiny, but outright objection by the legislature. -Justin Owen