Misconception: Mississippi Hospitals Get a 6:1 Federal Match on Every Dollar They Pay

Misconception: Mississippi hospitals get a 6:1 federal match on every dollar they pay to Medicaid.

First, Mississippi hospitals do not receive the federal match, the Division of Medicaid does.

Second, the federal match rate withoutthe stimulus funds is still 3:1. With the stimulus funds, which expire in December 2010, the adjusted rate is 5:1. When the stimulus funds expire, the rate returns to 3:1.

The increased federal matching rate under ARRA means, in effect, that a $4.3 Billion State Budget would require approximately $270 Million less in Mississippi General Fund dollars, with the increase coming from the federal government. This additional funding eliminates the current Medicaid budget shortfall in Mississippi.

Lawmakers can test the validity of this “6:1 Myth” very easily. Offer to tax Mississippi hospitals at any amount of the Governor’s or the Senate leadership’s choosing, provided the State does get a 6:1 match and then guarantees the hospitals a 3:1 return on each of the dollars the hospitals put up. Let the State keep the other 3:1.

Misconception: The more hospitals pay in taxes, the more they get back in payments.

This goes along with the “6:1 Myth”. Regardless of how much more hospitals pay in taxes, their reimbursement or payment rates will not increase. Mississippi hospitals are currently receiving the maximum allowable reimbursement rate under federal law. Changing the tax rate on hospitals will not increase hospital reimbursement rates.

Lawmakers can challenge the veracity of this statement easily by calling the Division of Medicaid and asking, “What can I (or my hospital) do to increase the reimbursement rate paid to the hospitals for treating Medicaid patients?”

Misconception: The Mississippi Hospital Association (MHA) devised the hospital taxation plan and now they are not supporting that plan.

MHA did devise the intergovernmental transfer (IGT) model that worked very well for Mississippi and 25 other states for over 15 years. That plan, however, was disallowed by the federal government in 2005.

The MHA-designed IGT program WAS NOT a taxation model. It was the equivalent of a Guaranteed Loan Program for the Division of Medicaid.

The current taxation model being proposed by the Governor and the Senate leadership is not, and never was, a proposal supported or designed by MHA.

Misconception: All hospitals “gladly” paid the $90 Million tax before 2005; they should all pay it now.

Again, the pre-2005 program was not based on taxes. It was based on intergovernmental transfers (IGT’s) and not all hospitals participated in the program.

Pre-2005, some 28 public hospitals “loaned” the Division of Medicaid millions of dollars. Those few hospitals then received their IGT back PLUS a 28 percent return on their payment, usually within two weeks of making their payment. The other 80 or so hospitals did not pay any of the IGT’s, but they also did not receive any of the 28 percent windfall payments.

Lawmakers can test the validity of this “myth” by calling the hospitals in their districts. Ask what portion of the $90 Million each paid prior to 2005. Then ask, under the Governor’s and Senate leadership’s taxation model, how much “return” each hospital will receive.

Misconception: By not paying the $90 Million tax proposed by the Governor and the Senate leadership, hospitals are receiving a $90 Million tax credit.

Again, only 28 or so public hospitals participated in the IGT program in place prior to 2005 and their payments to the Division of Medicaid were not taxes. (Ever heard of the government collecting a tax and then refunding 100 percent of the tax amount PLUS 28 percent to the taxpayer-- within two weeks?)

There was no tax before, so this is a $90 Million tax INCREASE on hospitals. It would be levied at a time when hospitals are treating an increased number of uninsured patients and an increased number of Medicaid patients due to the economic downturn. And remember, according to Medicaid’s own estimates, hospitals are paid approximately 13 percent less than their allowable costs to treat Medicaid patients.

Lawmakers can test the validity of this “myth” by asking the hospitals in their districts, “How much tax, not IGT’s, did you pay to the Division of Medicaid before 2005 and how much do you pay now?”

Misconception: Hospitals are not paying their “fair share” of the Medicaid program.

Aggregately, Mississippi’s hospitals send the Division of Medicaid some $150 Million each year to assist in funding the state matching portion of the Medicaid program—more than any other provider group.

Lawmakers need to step back on this “myth” and ask themselves the questions: “What is each provider’s (e.g. doctors’, pharmacists’, drug companies’, nursing homes’) “fair share”? And “Why is it a provider’s responsibility to fund the state’s obligation to the Medicaid program?” Lawmakers could also ask the politically unpopular question of, “If the provider groups and the state can no longer afford to pay for the Medicaid program, is it time to reduce some of the services contained in Mississippi’s program?”

Misconception: There is a $90 Million shortfall in the Medicaid program that, if it’s not replaced by hospitals beginning in 2010, will result in thousands of state workers being laid-off in 2009.

First, Medicaid funding comes through the General Fund. There is a shortfall in General Fund pools of money. With the influx of ARRA funds, there is no longer a shortfall at the Division of Medicaid, except in the budget approach taken by Governor Barbour and SenatorNunnelee.

The Senate leadership has chosen to draw its budget leaving Medicaid unfunded. They could just have easily drawn a budget with the deficit in any other state agency or program. It is, after all, a General Fund shortfall.

It’s been expedient, though, for some politicians to say, “There is a $90 Million budget hole; hospitals used to pay $90 Million in taxes that they no longer pay; therefore, tax hospitals to make up the shortfall.”

While it may be expedient to say that and to make the hospitals “easy targets”, it is just not true.

Lawmakers need to compare the provisions for budget cuts in the proposals made by the House of Representatives and by Senator Nunnelee. The House of Representatives has presented its budget with full disclosure and “in the light of day”. Senator Nunnelee (speaking supposedly on behalf of the Senate and echoing Governor Barbour) has chosen to propose drastic cuts across-the-board-but-still-on-paper that have scared state employees into thinking they will lose their jobs if a $90 Million tax on hospitals isn’t imposed.

Misconception: Most hospitals are government-owned or are non-profits and pay no other taxes. Most pay no income tax, no property tax, and no sales tax.

Like most “good myths”, this is partially true. It’s the part that is untrue or unsaid that’s important.

There are presently some 108 non-state hospitals in Mississippi.

Thirty-nine of those are publicly-owned and don’t pay taxes—just like public schools, post offices, fire departments, community colleges and universities don’t pay taxes. These hospitals do, however, pay employer taxes and are generally the highest wage-payer in the communities they serve.

Twenty-nine of the 108non-state hospitals in Mississippi are non-profits, a tax distinction that does not exempt them from sales tax on non-patient goods and services, or employer taxes.

All hospitals pay the Division of Medicaid a “bed tax” on every bed in their facilities, whether the beds are occupied or not. And all hospitals already pay a gross revenue tax that helps fund Medicaid.

Lawmakers can easily check the veracity of this “myth” by calling their hospital administrators, the Division of Medicaid, and/or their local tax assessor/collectors and asking, “Does my hospital pay any taxes or not?”

Misconception: The House proposal would expand Medicaid services at an additional cost of $45 Million per year.

Senators Nunnelee and Davis have claimed that MHA’s requested protections are an expansion of the Medicaid program. In fact, only one of the requested protections expanded the program and it has been withdrawn from the table for discussion.

The remaining protections are either yet to be implemented by the Division of Medicaid (and therefore are not expansions) or cannot be estimated by the Division in terms of fiscal impact.

Senators Davis and Nunnelee contend that, because the Division has included enactment of some provider cuts in the Division’s yet-to-be-determined-by-the-Legislature budget, to prevent those cuts from occurring is an expansion of the program.

Irony in this is that the Senate, in Special Session just weeks ago, adopted a CON bill that expanded the annual cost for Medicaid days $77,513,910.00. That does not include the estimated cost of the DeSoto County hospital also approved by the Senate, which had an annual estimated cost to Medicaid of $41,719,500.00.

It was the House of Representatives that killed that bill in the Special Session and yet it is Senators Davis and Nunnelee accusing the House (and MHA) of “expanding Medicaid.”

Lawmakers need only call the Division of Medicaid or legislative services in their respective chambers to determine the factual context of this “myth.”

Misconception: Mississippi can place ARRA funds in a “Medicaid Rainy Day Fund” to offset the impact of projected losses in fiscal years 2011 and 2012.

This is the proposal of Senator Nunnelee and the Governor. As best as can be determined by remarks from the Governor’s staff, it appears the Governor’s Office has requested a waiver from the federal government to do one of two things. The Governor and Sen. Nunnelee either want to place 60 Million ARRA dollars in reserve over the next two fiscal years or they want to tax hospitals $60 or $90 Million per year and put those funds in reserve.

Senator Nunnelee’s budget, however,doesn’t appear to restore the cuts to state agencies or prevent projected layoffs of state workers if either the waiver is granted or the hospital tax is implemented.

Hospitals and House leaders do not think federal law allows putting ARRA funds in reserve. (The Governor must not think so either or else he wouldn’t be reportedly seeking a waiver.) Hospitals and House leaders question the need to tax hospitals if the funds are not going to be used to fund Medicaid, reduce the budget deficit, or prevent state employee layoffs.

Lawmakers need to ask tough questions on the waiver, on federal intent behind ARRA, and on the wisdom of levying a tax on hospitals that they can’t afford, especially if proceeds from the tax go into a savings account and are not used to prevent employee layoffs.