Hospitals favor Prop. 100; critics call tax band-aid

2010-05-08T00:00:00Z 2014-07-30T17:26:03Z Hospitals favor Prop. 100; critics call tax band-aidStephanie Innes Arizona Daily Star Arizona Daily Star
May 08, 2010 12:00 am  • 

While it's not going to improve health care, a temporary state sales-tax increase would help stem unprecedented funding losses, Arizona hospitals say.

"Raising taxes is not the first thing we'd want to do. But the amount of this tax is small and temporary. It gives us a chance to get through the next few years," said Kevin Burns, chief executive officer of the nonprofit University Medical Center, Tucson's only Level One trauma center.

"Looming additional cuts post major problems to health-care providers, including UMC," he said.

State voters will decide May 18 whether to pass the proposal, which would raise the sales tax by a penny per dollar - to 6.6 percent from 5.6 percent.

With local taxes added on, the sales tax in Tucson is now 8.1 cents per dollar. If Proposition 100 passes, Tucsonans buying an item for $1 will pay a tax of 9.1 cents. Estimates of the tax increase's yearly cost for an average family range from $205 to $400. The temporary increase would expire in 2013, officials say.

About two-thirds of the extra sales tax is supposed to go to education. Plans call for the remaining third to go to public safety and health and human services.

Critics say the measure is a short-term fix for a problem that needs a long-term solution, and it would hurt small businesses.

But if Proposition 100 does not pass, officials with the Arizona Health Care Cost Containment System (AHCCCS) - the state's version of Medicaid - say they will have to cut their reimbursement rate to doctors and hospitals across-the-board by 10 percent, amounting to $114 million per year. That dollar amount climbs to about $300 million when federal matching funds are included, said Monica Coury, assistant director of intergovernmental relations at AHCCCS.

The current reimbursement rate is already low - about 75 percent of what it costs hospitals to provide care to patients on AHCCCS, Burns said. And AHCCCS rates have been frozen for the past two years.

Opponents include Tucson business owner Eric Ruden, who is part of Tucson First, a group of small-business owners campaigning against Proposition 100.

"No one is against education and health care," Ruden said. "That's a false argument.

He said the sales tax would unfairly burden business, particularly small-business owners who would be forced to pay thousands of extra dollars when they order materials.

"One of our problems locally in Tucson is that so many University of Arizona students leave to go to other cities because there are no jobs for them," Ruden said. "We keep damaging the private sector."

Similarly, the conservative Phoenix-based Goldwater Institute says passage of the sales-tax increase would cost Arizona 14,400 private-sector jobs. Also, it says the Arizona Legislature could have cut wasteful spending in other areas of the budget before resorting to a sales-tax hike.

But proponents say waiting for the economy to recover isn't going to help fix what one Arizona hospital leader says is the most serious economic crisis facing the state's health-care system in two decades.

"We're sliding backward in the worst way in terms of our ability to serve patients in the manner they expect," said John Rivers, president and chief executive officer of the Arizona Hospital and Healthcare Association.

Rivers, who has headed the association for 25 years, predicts recent cuts combined with a Proposition 100 failure would shrink the Arizona economy by nearly a half-billion dollars.

"Not only have I never seen it this bad, I never imagined it could get this bad," he said.

"There's a lot at stake," said Judy Rich, chief executive officer of the nonprofit Tucson Medical Center, Tucson's largest hospital.

AHCCCS is for the state's poorest residents - in general, for people living at or below the federal poverty level. That would mean an annual income of less than $10,830 for an individual, or less than $22,050 for a family of four. The program's rolls have swelled since the economy dipped and about one in every five residents is now enrolled.

In addition to a low AHCCCS reimbursement rate, funding for hospital residency programs was eliminated this legislative session. Also affected was "disproportionate share" funding for hospitals with larger-than-average numbers of AHCCCS patients.

Coury said budget bills passed in the recent legislative session allow AHCCCS to reduce provider reimbursement rates by up to 5 percent. So it's possible providers will face a 15 percent rate cut this year if Proposition 100 fails.

"These are healing institutions but also business enterprises that require minimal revenue to carry out their mission of services to the public," Rivers said. "It's not realistic to think you can keep cutting health care."

And although the Legislature saved KidsCare, a state-federal insurance program for children 18 and younger, enrollment is frozen. KidsCare allows for higher income limits than AHCCCS..

Critics say rather than raising the state sales tax, the solution should be spurring economic recovery, which would in turn buoy state revenues.

"If the economy recovers, then we will have the dollars for education, health care and the core services people rely on," Tucson First's Ruden said. "Penalizing the business community will only delay recovery and we will still face budget issues."

But some say that solution will result in too many other casualties.

A UA study found that while Proposition 100 would result in 7,400 private sector jobs lost - about half of the Goldwater Institute's estimate - additional resources provided by the extra sales tax also would save about 13,000 jobs, it said. And the added revenue would preserve more than $442 in federal matching funds, the study by UA economists said.

On StarNet: Stephanie Innes brings you the latest health information in her blog, Tucson Health and Wellness, at go.azstarnet.com/health

the numbers

Percentage of AHCCCS (Arizona Health Care Cost Containment System) patients at Tucson's largest hospitals:

• Tucson Medical Center: 30 percent

• University Medical Center: 34 percent

• UPH Hospital at Kino: 35 percent

the key effect

If voters don't approve Proposition 100, there will be a 10 percent across-the-board cut to reimbursement rates to health-care providers in Arizona for patients on AHCCCS, representing $114 million, officials say.

Contact reporter Stephanie Innes at 573-4134 or sinnes@azstarnet.com

Copyright 2014 Arizona Daily Star. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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