It goes like this: states tax hospitals (who are begging to be taxed), use those funds to qualify for federal Medicaid funds, and then turn around and give the hospitals back the money — now legally laundered — and then some. The losers? Federal taxpayers, who shell out Medicaid bucks without even the slight restraint of a small state funding requirement, and Medicaid patients themselves, trapped in substandard health care.
According to Obama, prohibiting these bed taxes or “provider taxes” to cover state obligations under Medicaid would save $21.8 billion. And Obama has vociferous agreement from the right on this issue. As the Wall Street Journal editorial board put it: “This is real waste, fraud and abuse, not the talking-point version.”
The problem is getting worse. Arizona is using the scam to finance a massive expansion of its Medicaid program — even after leading the charge to the Supreme Court to successfully secure its legal right to opt-out.
The political pitch? This won’t cost Arizona taxpayers a penny. Which would be wonderful, except that Arizona taxpayers are also federal taxpayers. Republican governors who are keen on expanding Medicaid are almost certain to follow Arizona’s lead and use this trickery to put the entire cost on the back of federal taxpayers.
At a minimum, states should not be allowed to use the bed tax scam to avoid paying even their legally required 7 percent share of the Obamacare Medicaid expansion. Think about it; if a state is unwilling to spend even 7 percent, why should federal taxpayers pay 93 percent? Or 100 percent via the bed tax scam?
The saddest thing about the expansion of Medicaid, which will cost federal taxpayers at least half a trillion dollars over the next decade, is that it isn’t likely to improve health outcomes for new enrollees.
Medicaid pays doctors below-market reimbursements and burdens them with extensive paperwork and bureaucracy. Adding 12 million people to Medicaid rolls, which is CBO’s current projection of the impact of the expansion, will only exacerbate the shortage of primary care physicians and specialists who can afford to take Medicaid patients and add significantly to emergency rooms’ workload.
While the question of whether or not to expand Medicaid is intensely polarized politically, the issue of ending the bed tax scam is not. President Obama proposed closing the loophole. He’s right, and Republicans should take him up on the offer in the next package of spending cuts they pass.