Sick tax resurrection requires vigilance to stop later

Don’t look now, and it may take while, but on top of increased premiums, pricing, and taxes resulting from imposition of the Patient Protection and Affordable Care Act (“Obamacare”), now the Louisiana Legislature is setting the stage for its own tax increase on health care.

HB 532 by Speaker Chuck Kleckley by itself is innocuous. It creates a special fund called the Hospital Stabilization Fund into which money may flow that state government then will use to attract federal reimbursements for Medicaid, at a claimed leverage of three extra bucks for every two thrown in. It has sailed out of two committees unanimously and got overwhelming support on the House floor.

But its consequences could turn ugly in two years. The master plan on this calls for legislation then that charges an “assessment” on hospitals that backers claim would come out revenues of hospitals. If this sounds familiar, take the cue from state Rep. Sam Jones who worked in the Gov. Kathleen Blanco Administration when they ran an identical idea into law in 2005 – a “bed tax,” as he so honestly if somewhat imprecisely termed it on the floor during debate; more accurately, this is a “sick tax.”

Jones pointed out that the concept exists now in nursing homes in Louisiana. There, it’s tolerated for two reasons: because roughly 85 percent of their revenues come from Medicaid (which also freezes their rate structure for these clients) and they can play off the “free federal funds” illusion and also because under law the state pays dozens of millions of dollars a year to the industry for empty beds, so they can afford to cut into their profits a little to game the system.

However, it won’t work that way with hospitals, the large majority of their revenues coming from outside of government in the form of private insurance. So if charged these assessments, they will pass them along to non-Medicare, non-Medicaid patients. Thus, you get sick, in essence you pay the tax.

Now, according to that 2005 law, that wasn’t supposed to happen, due to its provisions that claimed this would be prevented. Yet anyone who has worked in health care – including some legislators who spoke against the bill then – knows of so many different ways to pass along charges indirectly that it simply will happen. Hospitals aren’t going to deliberately eat into slim margins – further exacerbated by Obamacare – by ladling this out in the hope of drumming up more volume down the road that the state would have extra funds to pay for (that will cost Louisiana federal taxpayers anyway). They can have their cake and eat it too by finding these avenues, even if the presumed coming law prohibits direct charges.

That law after the 2014 referendum for this constitutional amendment establishing the fund is needed because the 2005 law lasted all of three months. Unpopular from the start, as soon as the special session commenced a month after Hurricane Katrina hit, Blanco and legislators quietly and unceremoniously repealed that law. In effect, this admitted the idea was not a clever ploy to vacuum up federal money for free, but a burden on health care provision that could be afforded only in a less stressful environment.

More cost pressure hitting the industry in the wake of the enormous additional commitments caused by Obamacare is the last thing needed. Yet Kleckley, who joined in the two-thirds votes needed for the tax increase then, seems entirely untroubled by this repeating of history. One shoe will drop if, as it seems, this current bill passes. It’s the one coming in two years – after presumed amendment approval in 2014 because next year raising taxes cannot be considered in a regular session – that could prove most worrisome.

Of course, 2015 is an election year, and this may make legislators loath to go on the record increasing taxes. Then again, many like Kleckley will be term-limited and without easy escape valves into the Senate (the big replacement will occur in the 2019 elections when a large coterie of senators will be term-limited) and willing to take the chance that people will forget a tax hike vote in four years – and this a relevant point really only for Republicans, as almost all Democrats should be expected to get on board.

File this away but don’t forget about it. As we are seeing in the ways to resurrect the wasteful Obamacare Medicaid expansion, bad bills and laws don’t go away without vigilance and effort.