Hospital tax draws lawmakers’ eyes

MIDDLEBURY — Local health care providers on Monday continued to warn lawmakers that their industry could soon be in critical condition if the state tries to balance its budget on the backs of hospitals and the medical community.
The subject of health care reform once again dominated discussion at the weekly Addison County Legislative Breakfast, held this week at the Middlebury Legion hall. Porter Hospital officials turned out in force to weigh in on state budget discussions and health care reform efforts under way in Montpelier.
Sue Ritter, a member of the Porter Hospital board of directors, voiced her concerns about funding trends in the health care industry during the past 20 years. She noted those trends include:
•  A provider tax, assessed to hospitals beginning in 1992, to help the state support the overall Medicaid program with a commitment that the tax dollars would be returned to the hospitals after a federal match. Gov. Peter Shumlin has proposed boosting the provider tax from the current 5.5 percent to 6 percent, a move that would increase Porter’s assessment from the current $3.1 million to $3.7 million.
“Now we are being taxed $2 million more per year than we receive back,” Ritter said.
•  Creation of a statewide tobacco cessation program from national tobacco settlement funds, through which hospitals were asked to create programs and hire staff.
“This funding is now being eliminated,” Ritter said.
•  Creation of the Catamount Health insurance program for uninsured and under-insured Vermonters. Ritter said the program was established with the understanding it would come with federal Medicaid reimbursement. But now plans calls for Catamount to be folded into the Vermont Health Access Plan for Medicaid clients. It’s a move that Porter officials said will cost hospitals hundreds of thousands of dollars for services provided to Medicaid clients. That’s because the Medicaid program reimburses at a rate of roughly $34.20 for every $100 in services provided by hospitals.
“Based on this track record, why wouldn’t we be concerned about the current health care reform proposal that does not offer any details about financing or provider reimbursement?” Ritter said.
“I think we are at a crossroads,” she added. “I think we are at a really critical time and I have been seeing changes at Porter Hospital that I don’t think anyone is going to want to see.”
Sen. Claire Ayer, D-Weybridge, is chairwoman of the Senate Health and Welfare Committee, a panel that will be on the front lines of developing healthcare reform legislation.
“I think there is good reason to be a little skeptical about the plans that we have for making health care better and be for everyone,” Ayer conceded. But she stressed that while times are looking tough for hospitals right now, the ultimate goal of this biennium’s health reform effort is to end up with a system that is based on a solid foundation of cost control, quality, technological advances for accounting and patient records, and an emphasis preventative medicine. All of these factors, Ayer believes, will result in medical cost savings that can be reinvested in hospitals.
“I am a believer we can do this,” Ayer said. “Many other countries have done this and we can do it too.”
Rep. Mike Fisher, D-Lincoln, is vice chairman of the House Health Care Committee. He noted the unpopular provider tax helps leverage $225 million — around one quarter — of the state’s Medicaid budget.
“We have to create a system that doesn’t allow for us to do hidden taxes as a system … to underpay providers, knowing that providers can shift the costs off to premium payers,” Fisher said. “What we are trying to do is close that door, and it is going to take some time for us to do it.”
If left unchecked, Fisher said health care costs for Vermonters are projected to go from the current $8,000 per capita to $9,200 by 2013.
“It’s unsustainable,” Fisher said.
The goal, Fisher said, is to come up with a “single, fair rate for providers. So that a provider who is serving a Medicaid patient or a Blue Cross patient — or maybe some day a single-payer patient — will get a predictable rate for payment for that service.”
Porter officials took little solace in promises for a brighter health care future.
“We live in the present,” Porter Hospital President James Daily said. “Our crisis is right now. This is going to cost us services and jobs in our community.”
Porter Hospital reduced its workforce by four people earlier this month.
“Someone else’s cost is our reimbursement, and it is dropping rapidly because we are treating more and more Medicaid patients. What we need is short-term help, now, with reimbursement.”
Daily said the proposed provider tax hike, coupled with the anticipated increase in Medicaid-related expenses, will likely cost Porter Hospital $1 million this year.
“It’s $1 million we can’t cost-shift,” Daily said, alluding to the hospital budget review process through state regulators.
Fisher acknowledged the current financial plight of hospitals, but added lawmakers are currently trying to plug a more than $170 million revenue hole in the fiscal year 2012 state budget, with few places to turn.
“We have a budget crisis,” Fisher said. “The governor’s budget has a number of proposals that are challenging for providers … There is quite a lot of pain around. Having said that, we’re applying ourselves to finding the flexibilities we can find to make it possible to come up with money to not hit providers as hard.”
Rep. Harvey Smith, R-New Haven, recalled concerns that many health care officials had voiced about the provider tax 14 years ago.
“It has been getting worse over the years,” Smith said. “We keep digging a deeper hole, and eventually it is going to come crashing down around us.”
Rep. Willem Jewett, D-Ripton, noted circumstances in Washington, D.C., don’t bode well for any extra assistance from the federal government. Federal stimulus money is running out. In the meantime, Congress has yet to approve a new budget for the fiscal year that started nearly five months ago.
“We are operating on continuing resolutions,” said Jewett, the House majority whip. “Typically, those resolutions have maintained level funding. This latest one, however, does not.”
Legislative leaders visited the capital last week and learned that Vermont might have to cut around 5 percent from this year’s state budget as a result of reduced federal dollars.
“At a minimum, we are told there is a $5 million to $10 million problem in this fiscal year,” Jewett said.
While Shumlin has pledged not to raise broad-based taxes to balance the budget, some residents said lawmakers should consider such a move. Weybridge resident Jeff Cobden said the state should consider extending the sales tax to items not currently covered, as well as raise the income tax on high-income residents.
“The very rich in Vermont got their tax cuts from Washington,” Cobden said. “The state could take a percentage of that money and work this budget very nicely by adding to the income tax on the top end.”
Rep. Paul Ralston, D-Middlebury, said he and his colleagues have their work cut out for them.
“We have choices to make, and those choices are terrible,” Ralston said.
He appealed to residents to help make those difficult choices.
“When you ask, ‘Please don’t cut the budget for tobacco education,’ you also have to tell us, ‘Please, instead, cut the budget for blank,’” Ralston said. “Because each program has its constituents and supporters.”
Rep. David Sharpe, D-Bristol, will be dealing with tax law this year as part of the House Ways and Means Committee.
“When I was growing up as a child, I was taught that taxes were a civic responsibility, that one paid taxes in order to support his great American culture that we have and the programs we expect to provide for our citizens,” Sharpe said. “Lately, taxes have been described as a ‘burden’; we have to get rid of them. I stand with my childhood upbringing — taxes are a civic responsibility. It’s true, there’s plenty of money in our society; it’s just risen to the top.”
Reporter John Flowers is at [email protected].

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