The Mississippi Legislature is currently embroiled in a battle over the 2009 budget. Currently, budget negotiations appear to be stalled as a result of Senate and House disagreement over how to resolve the Medicaid issue. Governor Barbour wants Mississippi hospitals to pay $90 million to cover a deficit in the Medicaid budget rather than using federal stimulus money.  In support of this argument, Governor Barbour points out that the hospitals formerly paid this amount and argues that they should resume these payments.  He takes the position that it is an issue of fairness and maintains that paying the $90 million was originally the hospitals’ idea anyway.  Through the Senate’s lead conferee, Appropriations Chairman Alan Nunnelee, the Senate has adopted the governor’s position.  I happen to disagree with his position on this important matter.

There are two serious flaws in the governor’s argument. First, while Governor Barbour insists that the 2009 Medicaid budget has a $90 million deficit, in reality there is no deficit because the American Recovery and Reinvestment Act (“ARRA”) funds make up any short fall for two years.  That having been said, there is, generally speaking, a deficit in the 2009 budget which must be addressed.

Second, it is a bit misleading to leave the impression that nothing has changed since the hospitals originally advanced the idea that they could pay $90 million into the Medicaid program.  In fact, much has changed since that idea was promoted.  According to Sam Cameron of the Mississippi Hospital Association (“MHA”), “MHA did, indeed, devise the intergovernmental transfer (IGT) model that worked very well for Mississippi for over 15 years.  That plan, however, was disallowed by the Federal Centers for Medicare and Medicaid Services (CMS) in 2005.”  There is also an important distinction between the IGT model and the plan that the governor now proposes.  The MHA designed IGT model was not a taxation model. The current model supported by Governor Barbour is a taxation model which imposes additional taxes on Mississippi hospitals.  In direct contradiction of Governor Barbour’s statements on this matter, Mr. Cameron says that “the current taxation model being proposed by the Governor and the Division of Medicaid is not and was never a proposal supported or designed by MHA.”

I have been informed that aggregately, Mississippi’s hospitals send the Division of Medicaid approximately $150 million each year to assist in funding the State matching portion of the Medicaid program.  That amount seems fair.  Would an additional $90 million tax on our hospitals be more fair?  Perhaps.  How much of that $90 million in additional taxes would be passed on to patients?  If the answer to that question doesn’t get your attention, consider how Governor Barbour’s proposed hospital assessment would affect the bottom line of your local hospital’s budget.  Gulfport Memorial would see approximately $6 million in additional taxes, Biloxi Regional would pay an additional $1.8 million in taxes, and Hancock General would see about $330,000.00 in additional taxes.  I submit that these community-owned facilities with budgets already strained to the breaking point could not stand additional taxes of this magnitude.

It is important to note that with respect to the Medicaid funding issue, the Senate established its position over a month ago when it voted in support of phasing in a hospital assessment of $30 million in 2010, $60 million in 2011, and $90 million in 2012.  However, the Senate position was that these assessments would only become effective if Federal stimulus funds are not sufficient to cover the Medicaid shortfall. The MHA agreed with this proposal.  Now, the MHA appears ready to agree to pay $60 Million per year in additional taxes.  Likewise, the House appears ready to reach a compromise on an assessment in the neighborhood of $50 million per year.  One would think that given these facts, an agreement on the budget would be eminent.

Apparently, the dispute is about more than the amount of tax to be imposed on Mississippi hospitals.  The MHA wants legislative protections that would prevent the governor from changing reimbursement rates which, if implemented could result in the net payment made by hospitals being much higher than whatever amount they agree to pay initially.  The Senate’s (governor’s) position is that there should be no strings attached to the amount of tax imposed.  In other words, we will not agree that reimbursement rates will remain unchanged in the future.  Hospitals say they must have this protection and the governor says they can’t have it.  Until this issue is resolved, the only way a 2009 budget can be crafted is by cutting more from the budgets of individual state agencies, including education and law enforcement.