A proposed tax on doctors and hospitals demonstrates the complexity and political turf battles that legislators will face if they try to modernize North Carolina's tax system.
The proposal was aired recently before a legislative committee that is trying to control the state's growing Medicaid bill. Current projections say that the state's share of Medicaid, the federal-state health program for the poor, will be $475 million over budget next fiscal year. Some legislators say that the idea is worth considering because they have to balance that budget.
A special tax on hospitals and doctors is almost politically unimaginable, but some of these providers would actually benefit. And state taxpayers, in general, might be spared either a general tax increase or budget cuts in other areas as next year's shortfall is closed.
The tax is politically plausible because it would raise money that could then be used to draw down greater federal financing for Medicaid and help close the budget shortfall.
Some medical providers would also benefit from the tax because the state could then increase the rates it pays to doctors and hospitals that treat Medicaid patients.
According to The Associated Press, doctors and hospitals are officially opposed to the tax. They feel that they already provide enough to the cause in the form of lower fees for Medicaid patients.
But unanimity within the ranks of these providers is unlikely. Those who serve Medicaid patients -- and get paid reduced rates to do so -- would get raises.
Legislators, therefore, will have to consider the official positions of these two provider groups and the informal opinions of doctors and hospital leaders who disagree with those positions. At the same time, they will have to wonder how to close a $475 million budget gap when state revenues are lagging and other critical state programs -- such as the public schools -- are struggling to deal with last year's cuts, let alone more this year.
Legislators must keep the general good in mind. If they determine that the provider taxes are best for the general population of North Carolina, they should adopt them in some form. But that decision must keep in mind that the financial health of physicians and hospitals cannot be undermined. It will be a delicate balancing act.
North Carolinians can only hope that somehow legislators will find a way to increase Medicaid payments so that more doctors open their practices to these patients, especially as the new health-care system evolves. If they find that the provider taxes will do so, they will have a strong argument for instituting them.
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