Fee on HMOs could provoke legislative fight
Brandon Larrabee, Morris News Service
October 14, 2008
Efforts to avoid slicing health care for children and other low-income Georgians could test
lawmakers' pledges to avoid a tax increase.
A plan to prevent cuts to state-run health-care plans for low-income residents has set the
stage for a legislative battle next year, with managed-care corporations vowing to fight what they
say is a tax that will ultimately punish consumers.
The proposal from the Department of Community Health would require all commercial
managed-care organizations to pay a fee currently charged only to those companies who run the
state's Medicaid program for low-income Georgians. The fees are used to create a "state match" for
federal Medicaid dollars, after which the money is returned to the companies.
But under the new program, the fees would not be returned to companies who don't participate
in the Medicaid program, leading insurers to say they're being hit with a tax increase in the
middle of an economic downturn.
"The tax that they are proposing is going to hit individual health insurance consumers and
small businesses, and right now, we know that that's the toughest part of the market," said Kirk
McGhee, executive director of the Georgia Alliance of Health Plans, an industry trade group. "It's
where we're losing people."
State officials counter that many Medicaid patients end up on the state rolls because they
can't afford private health-care coverage or get inadequate benefits from the plans they do have --
meaning insurance companies aren't necessarily in a position to complain.
"I don't think it's unreasonable for them to help us," Community Health Commissioner Dr.
Rhonda Medows said when the plan was unveiled earlier this year.
Ultimately, the fight is likely to end up in the General Assembly, where leaders have
repeatedly pledged not to raise taxes as they deal with a budget deficit that could approach or
even surpass $2 billion.
Avoiding a cut
The expansion, which would bring in $112.2 million in the fiscal year that begins July 1, is
actually only partly a response to the state's darkening budget outlook. It also flows from a
change to federal rules ordering any state charging the fee to apply it to all providers -- not
just those handling the Medicaid plan.
McGhee says that change was aimed at cutting back on "a lot of shell games being played in
states" like Georgia that were essentially using the money just long enough to get federal funding.
"(Federal officials) were trying to discourage states from using these provider taxes to draw
down matches for Medicaid programs. ... They thought that this would be kind of a discouragement to
states to continue these provider taxes," McGhee said.
Instead, Georgia officials see it as an opportunity to offset the 5 percent budget reductions
ordered by Gov. Sonny Perdue. Trimming a bit of state spending and expanding the fee gives them
more than enough to meet Perdue's instructions, which cut Medicaid by less than most other parts of
the budget.
The consequences of not charging the fee, state officials and advocates for the poor say,
would be to trigger deeper cuts in Medicaid and PeachCare for Kids, which provides health care for
children in families who earn too much to qualify for Medicaid but not enough to afford private
insurance.
That's because the state would lose the $89.9 million it currently earns from current level
of matching funds, the ones currently generated by charging the fees to the Medicaid managed-care
organizations. Without the match, the program's deficit would rise from just shy of $92.1 million
to almost $182 million.
To make up the shortfall, the state would then have to cut eligibility for PeachCare, cap
enrollment in the program, eliminate dental benefits and take an array of other steps -- and would
still come up short by tens of millions of dollars.
"It would be a dreadful outcome," said Linda Lowe, a consumer-health advocate who follows
Medicaid and PeachCare issues.
Ready to fight
But it's not clear that Perdue, who gets the first crack at the recommendations, or state
lawmakers will go along with the plan.
Perdue press secretary Bert Brantley said the governor would review the proposal as he crafts
his budget recommendations over the next few months. Brantley said Medows and Perdue have discussed
the fee but that the governor has not made up his mind.
"He understands where they're coming from and what a difficult situation it would be to have
to replace the federal funds if you were to eliminate the fee," Brantley said.
Perdue will unveil his spending blueprint in January.
It's unclear which aspects of the plan would require legislative approval. Medows' department
maintains that the revenues from the new fee only need to be recognized in the budget, which must
be approved by the General Assembly. Insurers want to force a vote on separate legislation allowing
DCH to charge the fee on all managed-care organizations.
"It's just a bureaucrat deciding that that bureaucrat wants to collect this tax,
fundamentally," McGhee said.
Rep. Mickey Channell, R-Greensboro, said he doubts the General Assembly would approve a plan
to expand the fee.
"That's the last thing folks need is a tax increase or a fee increase," said Channell, who
chairs the House subcommittee that handles Medicaid funding.
Even Channell, though, said it would be difficult to make up for the funding generated by the
fee.
"God knows where it would come from right now," he said.