Health Care Provider Taxes

by Tom aka Rusty Rustbelt

Health Care Provider Taxes

An under-the-radar tax funding scheme is the prevalence of health care providers taxes. Our most current information indicates 44 state have some variation of a provider tax (in addition to various schemes to use or misuse tobacco settlements allegedly earmarked for health care spending).

Most of the taxes are assessed on specific providers and then used to provide match for federal Medicaid dollars (limited in percentage). This creates a sort of a money loop, causing the feds to provide extra subsidy to the states, the states then returning the funds to providers..

Some of the taxes work out to provider advantage, e.g., due to the populations of nursing homes much of the tax is returned either directly or indirectly (this does in effect levy an extra tax on private pay residents).

Physicians tend to resist these taxes because the docs end up subsidizing other providers. A recent attempt to impose a physician tax in Michigan died a quick death.

Ethics aside for a moment, is this “money loop” the best way to finance Medicaid services? Should private pay patients be “taxed” indirectly to subsidize government programs? Do we need an entirely new model for Medicaid funding?
Tom aka Rusty Rustbelt