CABL's shoddy analysis pushes sick tax onto people

Usually, the Council for a Better Louisiana makes solid policy recommendations. But sometimes it comes up with a clunker when the prejudices of the organization’s members come to the forefront, and such is the case with an item in its 2015 Election Agenda.

Among the various salutary ideas in this appears a real stinker, that in early 2016 the state should opt to institute a “sick tax” on users of health care in most state hospitals. A one percent assessment on these institutions’ net patient revenues (in most cases) will get passed along to consumers, causing rises not only in health care premiums they pay but also in taxes to support health care insurance made available to state employees.

This taking more of what people earn seems not to trouble CABL, which advocates for the trigger to be pulled that would have to happen prior to the end of the first quarter of 2016 by assent of the new governor and by the newly-constituted Joint Legislative Committee on the Budget. Instead, it justifies this new intrusion on liberty by painting a picture of financial desperation.

While admitting that the costs to Louisiana would be great – had expansion begun in fiscal year 2014, it would have cost the state $2.08 billion extra through 2023, and actually would be higher if starting in FY 2017 through 2023 because of the cost-sharing formula that front-weighs federal participation – CABL asserted that these costs would be offset by the sick tax and because disproportionate share hospital payments would decline, DSH payments being extra payments by the federal government for care of the uninsured. Because of its historical tendency to provide free care to the indigent not enrolled in Medicaid or any other insurer in state-owned hsopitals, Louisiana receives relatively high DSH payments, ranking fourth in absolute terms among the states.

Yet that claim ignores both financial and political reality. As Louisiana received in 2014 $732 million in DSH payments and from 2017 to 2024 these payments nationally are presently scheduled to be cut in half, this implies a loss of $366 million a year. CABL assumes the state would pay a 40 percent match on this, meaning a loss of $220 million in federal assistance annually. But the state’s estimate of DSH payment reductions is far lower, only about $310 million in the entire period. CABL provides no figures explaining why DSH revenues reductions would be so crippling.

Perhaps because they know they may never come. The DSH payment drawdown was supposed to begin in 2014 but Congress kicked back the date to 2017, not only because the 22 states that have not expanded Medicaid would have been hurt (pardon the pun) disproportionately by a DSH cut, but also because even in those states that did expand safety-net providers complained that such reductions – surprise, surprise, given that costs have been underestimated consistently and participation rates over estimated – would put them in the red. And this deferral probably will happen again, and again. Chances are when all is said and done DSH payment cuts either will be much less than originally scheduled, or never will happen. Yet CABL completely discounts a scenario already proven likely.

It also whiffs completely on the underlying reason why DSH payments have such a significant impact in Louisiana – because the state insists on retaining a hybrid safety net indigent care system, where the state own nine hospitals and contracts out eight of them for operation. While CABL pitches the expansion idea to assist the operators of these hospitals, it seems blissfully unaware that financial problems operators may be having stem from this unwieldy, inefficient model in the first place. To solve for it, Louisiana simply should do what every other state does – get out of the business of direct provision of health care by selling its state-owned hospitals – and this concern evaporates, instead of foisting cost increases onto the people.

Missing these obvious aspects begs the question of why, then, did CABL overlook them? In all likelihood, it boils down to who runs it. The group has membership – for nonstudents starting at $100 a year – open to anybody, but packaged to induce corporate support. Among them, as indicated by its officers and board of directors, are a healthy smattering of health care providers, administrators, and ancillary firms with a vested interest in expansion.

In the mad rush to inject government direction into health care, only two winners have emerged: those who receive heavily-subsidized health care that ends up discouraging their work contribution to society and health care providers, who now have a huge chunk of taxpayer dollars redirected their way. It’s not hard to connect the dots to understand why certain interests inside CABL would stump for Medicaid expansion.

But having a pecuniary agenda does not substitute for good policy analysis. By shilling for Medicaid expansion, in CABL asking the people to pay more to get less, regrettably it violates its stated mission of “improving the quality of life for all citizens of Louisiana.”