ELKRIDGE – The Maryland Hospital Association is urging the state to spread a hospital tax evenly among providers and the self-insured to avoid hitting its members too hard, a position highlighted last week during a Medicaid briefing at the group’s headquarters in Elkridge.
“As the House and Senate leadership try to close the historic gap in the state budget, we want to be very clear: Spending is due to Medicaid enrollment,” said Carmela Coyle, president and CEO. “As they look to a hospital tax as a solution, we need to look to spreading it to the broadest base possible and not have the 46 community hospitals in the state shoulder that burden.”
Also known as hospital rate assessment, the tax is a state law that authorizes the collection of revenue from hospital providers.
The association’s leadership highlighted the tax as part of a 39-page study of health care costs. Coyle kicked-off the meeting by explaining what it all means.
“So, how about hospital assessment — does that make sense?” she said, amid a couple of chuckles and confused faces. “It really is a strange creature.
“I once saw a headline (about this issue) that read, ‘Hospitals would get a pay raise,’ and I thought, ‘Oh my goodness.’ When the state raises rates, we don’t get to keep that money,” she said. “When there is a hospital assessment, we have to write a check back to the state.”
The Maryland General Assembly is debating a 2.5 percent hospital assessment as part of HB 72, the Budget Reconciliation and Financing Act of 2011. The fee would be imposed on net patient revenue for Medicaid operations, according to its fiscal and policy note on the Maryland General Assembly website. Assessment costs, the note says, must be shared “equitably” among hospitals and purchasers of hospital services.
If the budget passes both chambers, the Health Services Cost Review Commission will implement the hospital fee.
As Medicaid spending grows in Maryland, it becomes a growing share of the state’s budget, the association’s study showed. It includes a chart projecting dramatic growth of Maryland Medicaid enrollees from 2008 to 2012, including a 30,000 beneficiary jump in 2009. The association expects the numbers to near 1 million by 2012.
Hospital assessment fits into the budget equation by raising revenue through Medicaid. Maryland’s Medicaid system is funded on a 50-50 basis. For every dollar the state spends on Medicaid, it receives a matching dollar from the federal government. And closing the budget by raising assessment keeps federal dollars flowing in, Coyle said.
Maryland is the only state where a commission sets the rate of increase by which hospital charges can go up each year, she said. That means that hospitals could only recover a new assessment if the commission allows the facility to charge higher rates. Otherwise, the hospital would have to find other means to cover the assessment.
The General Assembly predicts the new fee would raise $370 million, making it the largest amount the state has ever put on the table for hospital rate assessment, Coyle said.
Jim Reiter, MHA senior vice president of communications, said hospitals should carry a portion of the load.
“We have 93,000 employees,” said Reiter. “Hospitals are one of the largest employers in the state. We will be sharing our burden of the cost of this and will be paying our share as any other employer would. This would not just be water off of our backs.”
But Simon Powell, a budget analyst for the Department of Legislative Services, said an “equal” spread of the assessment exists in theory alone.
“The hospital association favors the tax being spread to ‘the broadest base possible’ because they have a vested interest in making sure they pay as little as possible. So, from their perspective, it is the best option,” said Powell.
Historically, there has been a 70-30 percent split, Powell said, with those with insurance paying the most. The real question, he said, is how this will play out in the future.
“Will there be a similar split or will the tax be allocated differently?” Powell said. “We won’t know until after session. That’s the big debate.”
The legislature is scheduled to end on April 11.
Rate-setting commissions determine how high hospital rates can increase, with insurance companies playing a crucial role in the process.
“As the rate-setting commission determines how much of an increase there should be in hospital charges, one argument offered by the insurance companies is, ‘If we have to pay higher charges for hospital care, we’re simply going to pass all of this on to consumers in terms of higher premiums,'” Coyle said.
“That hasn’t happened. Last year, we had insurance premiums that were going on at double-digit rates of increase anyway. And when we brought hospital rates down, we didn’t see insurance premium rates come down (simultaneously),” she said.
America’s Health Insurance Plan’s Robert Zirkelbach disagrees.
“Medical costs drive premium increases. Data show that the growth in health insurance premiums tracks directly with the growth in underlying medical costs,” said Zirkelback, the company’s spokesman. “In order to make health care coverage more affordable for families and small businesses, the focus needs to be on the soaring cost of medical care, which is rising at an unsustainable rate.”
Mike Robbins, senior vice president of finance, echoed his colleague.
“We clearly have seen for the last several years, a bending of the cost curve, a trending down in looking at total revenue of hospital growth,” said Robbins. “Last year, that growth was only at 2 percent. I don’t think we’ve seen premiums growing at the level. We’ve been seeing double-digit rates of growth in insurance premiums of 12, 13 or 14 percent.”
So the question then becomes, Robbins said, if the hospital portion of those costs only grows at 2 percent, what makes premiums grow at a much higher rate?
“Our concern is that other costs are growing at a much higher rate, maybe at 20 percent, where there is no rate-setting,” said Robbins. “We then start using the hospital rate-setting process to solve a much larger problem, which is growth in total health care costs as opposed to hospital costs.”