Medicaid: Report The Taxes Along With The Growth

Expansion tracking on the Virginia DMAS website. Click to expand, web version is here.

Virginia makes is easy to track the growth of Medicaid enrollment since the decision a year ago to expand coverage but tracking the tax dollars behind the scenes is another matter.

The new enrollment expansion dashboard on the Department of Medical Assistance Services website is updated every couple of weeks, with the April 4 report showing just under 260,000 people added to the program since late last year.  The City of Salem has added the fewest, only 34 new recipients, while Fairfax County has added the most at 18,220.  The advertised goal for expansion was 400,000 persons, so probably there are more to come. 

The state share of the cost to serve them is being paid by a provider tax on the revenue of large private hospitals in Virginia, which also started being paid late last year.  There are two provider taxes, in effect taxes on gross receipts, one to pay for expanded enrollment and the other to pay for improved payments to the service providers.

The normal dashboard for tracking state tax receipts is the monthly report provided to the public by the Secretary of Finance, and you will not find the Medicaid provider assessments totaled or mentioned there.  Yet another update came out April 11, with nine months of the fiscal year completed.

You won’t find the provider fees tracked among the ten pages in the standard release, which cover the general fund taxes and fees, the various transportation-related taxes and fees, the lottery’s sales and transfers, interest on state investments and the revenue stabilization (a.k.a. rainy day) fund.

DMAS illustration of the eligibility rules before and after expansion. Click for clearer view.

It is time add a page to that monthly report covering the Medicaid program, providing a focus on the details of income from the various sources.  It is just as important now as the other topics covered in the report, and recent forecasting errors show it poses the most risk.   The report could look like the existing running summary for transportation programs, which combines several revenue streams, including federal.

Such a report may already exist and simply isn’t being published.  If it were readily available, comparing fiscal years 2018, 2019 and 2020 would provide a good feel for the growth in revenue and expenses authorized by the 2018 General Assembly.

The General Assembly voted to create the new provider taxes, which the industry supported, with language in the state budget, not direct legislation.  The budget language included an estimated two-year $376 million revenue total for only one of the provisions, the smaller of the taxes related to the coverage expansion.

On request, the Secretary of Finance’s staff provided the two-year revenue estimates for the second and larger levy, $486 million over two years, to help pay for the higher provider payments.  It is unchanged from charts used in pre-session meetings and reported by Bacon’s Rebellion late last year.   A query to the Senate Finance Committee staff last month also elicited the combined estimate for fiscal year 2021, $860 million.  That’s getting to be real money.

How much has actually been collected month to month is only available to anybody with access to the state’s internal accounting systems and knowledge of the account codes, who compiles and publishes it.  That of course would not be most people.

This method of taxing Medicaid providers to draw down matching money from the federal government, with the combined dollars then paid back to the providers, goes on in 49 states at last count.  Many tax a wide range of providers, not just hospitals.  Virginia is likely to expand the practice beyond hospitals eventually.

The amended state budget projects that over the two years ending July 2020, Medicaid services in Virginia will cost more than $28 billion – from state general funds, federal funds and now these new hospital taxes, presumably classified as a non-general fund (same as college tuition).  The new budget proposed next December will likely push the two-year total well past $30 billion, with almost $2 billion of it coming from those two hospital taxes.

Every budget decision process now starts with the question, how much is left after we fund Medicaid? It is time to bring the state’s largest activity and this growing revenue stream into full view with monthly updates.

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9 responses to “Medicaid: Report The Taxes Along With The Growth”

  1. I am focused on the “provider” tax, which I’m astonished to see could amount to $860 million yearly. We can be assured that that sum will not come out of hospital profits. Who, then, will pay that sum? To whom will the hospitals shift that cost, and how will they do it? I cannot help but think that the tax will be paid mostly by privately insured patients in the form of higher charges. The beauty — from the politicians’ viewpoint — is that the ordinary Virginians won’t view it as a “tax” — they will view it as a higher hospital charge or insurance payment. Thus, Virginians will direct their wrath at hospitals as insurers, not the politicians.

  2. Steve Haner Avatar
    Steve Haner

    To the extent the hospital tax is collected, matched by the fed funds, then returned to the hospital to cover previously un-reimbursed care, it may not have an impact on other customers and may be a benefit. But as I understand it the hospital taxes are also funding services from non-hospital providers on the system for these new patients (family docs, lab services, therapy) and funding higher payment rates. Money seems to flow from the hospitals to the other elements of the system. That has to be extracted from paying customers eventually.

    A deeply complicated action by the General Assembly fully explained to no one…..

  3. Reed Fawell 3rd Avatar
    Reed Fawell 3rd

    “A deeply complicated action by the General Assembly fully explained to no one…..”

    This in a nutshell explains most of the deep seated corruption rampant in our society today – whether that corruption infest the Deep State, Congresses, health care, higher and lower education, booming profits for non-profits and, yes, even the military.

  4. TooManyTaxes Avatar

    It would be interesting to see who (probably many who’s) pays the tax in the end. I suspect big buyers of health care, Blue Cross-Blue Shield, Aetna, United Health Care, Medicare, will not pay for much, if any, of the tax. Smaller buyers will likely pay more, as will anyone without insurance or with high deductible plans.

    Lower-skilled employees of health care providers will likely pick up some of the tab in the form of lower wages (in real terms) and maybe fewer hours. But some of the costs will likely be eaten by the providers themselves if and when they have no one to pass on all the costs of the tax increase.

  5. LarrytheG Avatar

    So, the same folks who are paying the provider tax are also paying for the 90% the Feds are providing for Medicaid. Anyone know what those taxes are?

  6. Steve Haner Avatar
    Steve Haner

    Business pays no taxes, none whatsoever. It collects and remits them. Business of any kind passes the tax costs to 1) customers, 2) stockholders or 3) employees. Whatever tax you are going to say they are paying, I will tell you it gets paid by a human being.

  7. Dick Hall-Sizemore Avatar
    Dick Hall-Sizemore

    In addition to getting the federal share for previously unreimbursed (indigent) expenses, hospitals will also be treating patients that would not have come in previously because they could not afford it. Finally, their reimbursement rates will have increased. In theory, they will be “giving back” to the state some of this additional revenue in the form of assessments to pay the state share of the Medicaid expansion. So, again, in theory, these additional taxes should not be passed on to other patients.

    The report that Steve rightly says is needed will be provided later in the year. The budget language requires DMAS to submit by September 1 of each year a report to the Dept. of Planning and Budget and the money committees showing for the previous fiscal year the following regarding the hospital assessments: total revenue collected, expenditures of that revenue, and year-balances. The revenue is to be deposited into two separate fund codes that will make it easy to track.

    Based on the data on the website of the Auditor of Public Accounts, the revenue collected so far in this fiscal year 9two quarters) is $138 million.

  8. Steve Haner Avatar
    Steve Haner

    Actually, Dick, I would like to see a full spreadsheet on Medicaid revenue from all sources, compared to the budget, compared to expenses, similar to the spreadsheets posted monthly on the transportation programs and shared in open meetings. A stand alone report on the provider taxes is not sufficient. Putting this in the standing monthly update would highlight Medicaid as the budget driver it would become. No question, the point is to highlight How Medicaid Ate The Budget, a process I’ve been watching since the early 80s.

  9. […] the Northam Administration’s monthly financial reports.  (Including them seemed like a good idea when I suggested it back in […]

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