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March 25th, 2009 NIGEL JAQUISS | News Stories
 

Gray Anatomy

The prognosis for Gov. Ted Kulongoski’s proposed hospital tax: Uncertain.

     
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IMAGE: Jonathan Hill

A proposal that would cover as many as 180,000 uninsured Oregonians is bouncing around the Legislature like a patient left to bleed while two dueling doctors fight over treatment.

On one side of what’s among the biggest issues roiling the 2009 session: Gov. Ted Kulongoski’s proposed 4 percent tax on hospitals and 1.5 percent tax on health insurers.

An analysis released last week by the state Office for Oregon Health Policy and Research shows Kulongoski’s numbers would cover far more currently uninsured Oregonians than a competing plan pushed by hospitals and insurers.

And the governor’s point man on the issue says the hospitals are blocking what could be a big and needed expansion of coverage for uninsured patients.

“That’s going to have to change,” says Tim Nesbitt, Kulongoski’s deputy chief of staff. “They’re going to have to do more.

The latest state figures show Kulongoski’s proposal would cover 100,000 adults and 80,000 kids, while an alternative plan covers just half to two-thirds of that number.

As with any discussion of healthcare policy, the issues, acronyms and formulae involved are migraine-inducing. But the impact of one in six Oregonians being uninsured is huge. And the basics behind the problem are actually fairly simple.

Oregon currently levies a .63 percent tax on hospitals’ net revenue and a similar 5.5 percent tax on premiums collected by a small subset of managed care companies. The money goes to the Oregon Health Plan to cover low-income Oregonians, but both taxes expire Oct. 1, 2009.

Both taxes differ fundamentally from taxes on things like property or income, where the amount of money raised is the amount of money raised. In the case of the hospital and managed care taxes, the federal government will match every dollar Oregon raises with two dollars in Medicaid funds.

The governor’s plan would raise about $634 million in taxes over the 21 months beginning in October and yield an additional $1.14 billion in Medicaid funds. Neither figure is small change given the estimated $5 billion shortfall the state faces in the next two-year budget cycle.

But Rep. Mitch Greenlick (D-Southwest Portland), the Legislature’s top health policy expert and one of the lawmakers carrying Kulongoski’s bill, says the big hospitals and insurers have pushed back strongly against what he says amounts to free money for a budget-strapped state.

That’s probably because the new tax creates winners and losers. John McConnell, an Oregon Health Science University medical economist, evaluated the impact of the governor’s tax proposal on each of the state’s 57 hospitals.

He found that 32 hospitals with fewer than 50 beds are exempt from the current tax and would not pay the new tax. Those hospitals would be big winners under the proposal, collecting an additional $8.5 million annually.

Hospitals that serve relatively affluent populations, such as Providence St. Vincent Hospital in Southwest Portland, however, would pay out more in new taxes than they would receive for uninsured patients.

Despite such disparities, Greenlick says the Oregon Association of Hospitals and Health Systems is united.

“Somehow the hospital association has managed to whip up opposition, even from those who would only benefit,” says Greenlick, a past chairman of public health and preventive medicine at OHSU. “The little hospitals are sure acting weird. They ought to be demonstrating on the Capitol steps in support of the governor’s plan.”

Even though Democrats control both the House and Senate, the hospital tax opponents could triumph because of their economic muscle.

Hospital association lobbyist Kevin Earls says his members are unified because small hospitals feel they are part of a larger system with their bigger brethren. Earls says Kulongoski’s plan is an unfair tax on hospitals and people who can afford health insurance.

“It’s irresponsible to embark on a new program before the state can meet the obligations it already has,” Earls adds.

As an alternative, the hospitals and insurers have proposed a “claims tax” that would essentially impose a sales tax of 1 percent on all processed medical claims.

In addition to raising less money, however, the claims tax brings powerful opposition in the form of self-insured corporations such as Intel and Nike and the powerful building trade unions, who say it shifts costs to them.

Greenlick says his goal is to have a bill on the governor’s desk by the end of April. He plans more hearings on the issue the week of March 30 and hopes to get industry players focused on the big picture.

“They all agree we should have taxes as long as they don’t have to pay them,” Greenlick says. “But if the hospital tax goes down and nothing happens, everybody loses.”


FACT: John McConnell’s study shows Providence St. Vincent earned net operating income of $42 million in 2007. That number would decline by $7 million to $15 million under Kulongoski’s plan.

 
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