Tennessee hospitals agree to temporary tax to help Medicaid

Tennessee hospitals have agreed to endorse a one-year "coverage fee" that will levy a temporary 1 to 2 percent tax on hospital revenues to help alleviate a hospital funding gap for the state's TennCare Medicaid program, reports The Tennessean.

Similar to a funding mechanism used by 26 other states, the fee is meant to prevent the "potentially catastrophic impact" that Medicaid cuts would have on hospitals, patients and communities across the state, says the Tennessee Hospital Association, which voted to endorse the coverage fee.

The coverage fee wouldn't be passed on to patients, "but would be utilized to draw down additional federal dollars for the TennCare program," says the THA. The association also is asking state leaders to reduce the slated TennCare cuts by using "any available dollars, including reserve funds, surplus and unused federal Medicaid stimulus dollars."

Government-owned hospitals would not have to pay the tax under the association's plan, and revenues would go into a trust fund designated solely for hospital services (e.g., indigent care, graduate medical education, and inpatient services). The specific amount of the tax would be linked to which programs it funds, but hospitals estimate the tax will need to raise $200 million, says the THA.

TennCare cuts proposed by Gov. Phil Bredesen total some $380 million, but the associated loss of federal dollars could take away as much as $540 million from hospitals alone and up to $1.5 billion from the state's healthcare system.

The state legislature will hold budget hearings this week and has a June 30 deadline to approve a new spending plan. The THA expects the fee to become effective July 1. While the THA notes that at least 26 states already have such a tax in place, the idea has not gone over well in Georgia, where a similar tax was proposed recently.

For more information
  - read these Tennessean articles: here and here
  - read THA's statement

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