Lawmakers consider plan to tax doctors for Medicaid boost

Shortly before concluding his second term this month, Democratic Gov. Gary Locke offered state legislators an unusual tax-increase proposal: To improve health care for the impoverished, nearly all Washington doctors would pay an additional 1 percent of their gross receipts in business taxes.

Lawmakers and Gov. Christine Gregoire are now considering Locke's plan to increase how much the state pays physicians to treat Medicaid patients, which largely lags behind what they are paid for the same services by private insurers or even other government programs.

And that increase, Locke predicted, would persuade more doctors to accept Medicaid enrollees at a time when demand far outstrips the number of willing physicians.

Today, some Medicaid clients in Washington simply can't get the treatment they need because health professionals aren't available.

The bonus of Locke's plan: The state could use the tax money to leverage more subsidies from the federal government.

The rub: Many doctors, most Republicans and some Democrats hate the plan.

"It's going to be very controversial," said Rep. Helen Sommers, D-Seattle, budget leader for the state House. Sommers said she'd vote for it, but acknowledged it's a political long shot.

Gregoire said she supports the goal behind Locke's proposal. "I can't imagine that it wouldn't get us more providers," she said. "I hope that means that those who are in need actually have access.

"I just want to make sure that that all works," the Democrat added in an interview less than a week after she was sworn into office. Gregoire said then she hadn't yet had time to fully review the plan or discuss it with doctors' groups.

The largest and most politically influential of such groups, the Washington State Medical Association, is "adamantly opposed" to the idea, said Tom Curry, head of the group. "You shouldn't tax the provider of the service to provide the service. If it's going to be a social program, it ought to be built on a social base."

Doctors were among the first to complain in recent years about the Medicaid crisis. As the program's caseload has grown, pay to physicians has remained stagnant. Politicians have largely frozen rates in recent years as health costs have drained the struggling state budget more than any other area.

Factor in overhead costs, and some physicians say they're caring for Medicaid clients at a loss. Some doctors, especially specialists, simply refuse to see them -- putting even more of a burden on those who still will.

"We have more and more providers that are choosing not to serve that population, and I think it's a creative way to keep those who are inadequately reimbursed -- and also maybe encourage some others to open up again," said Marty Brown, who was Locke's budget director. Gregoire has since hired Brown as her legislative liaison.

To gauge how Washington's Medicaid rates measure up, many bureaucrats and politicians use Medicare rates as a benchmark. Set by the federal government, Medicare rates tend to be closer in line with private care.

For Medicaid patients, Washington generally pays doctors roughly 45 percent to 65 percent what the feds pay for the same services for Medicare-eligible retirees, said Doug Porter, who oversees Medicaid programs for the state Department of Social and Health Services.

Locke's budget office told DSHS the goal was to get all Medicaid rates up to at least the 75 percent mark.

"The comment that I heard from his (office) was, 'We don't have any revenue source that grows as fast as health care (costs do) -- you might as well tax health care,' " Porter said.

Doctors already pay a state business tax of 1.5 percent of their gross receipts, although they can deduct some costs such as bad debts, officials said. While Locke has long complained that a tax on gross receipts -- rather than profits -- is unfair, he stuck to the existing structure for consistency. A relatively small number of salaried doctors would be exempted.

Locke's budget office projected that the tax increase would raise $94.4 million in revenue over the two-year budget cycle. Most of that would go to Medicaid raises. Add in the federal subsidies, and Medicaid doctors would receive $127.7 million in raises.

International Community Health Services in Seattle sees several thousand Medicaid patients, director Dorothy Wong said. As such agencies struggle to make ends meet, any help is welcome, she said.

"Although (raising) taxes is not a popular thing, given the revenue situation, if that helps sustain funding for the community clinics, we would support that," Wong said.

But others complain that the plan is unfair. Doctors already pay 60 to 65 percent of their revenues to cover overhead, said Dr. Elisabeth Anton-McIntyre, a Bellevue obstetrician and gynecologist.

"Why are we being singled out?" she said. "I wouldn't have a problem if there was some kind of general tax, but I find it horribly punitive that they're punishing doctors this way."

Anton-McIntyre said her office never refuses clients because of the kind of insurance they carry. "I don't know of any OB/GYN that declines to take Medicaid patients," she added.

Some doctors are able to care for Medicaid clients only because they make up losses with private-pay clients, said Curry of the Medical Association. Curry doubts the tax increase would produce enough money to make those clients profitable. "What's the difference between being totally under water or two feet under water?" he said.

And some legislators complained that the cost would simply be passed along to patients who are already carrying their own weight.

"It's actually a tax on the patients," said Rep. Bruce Chandler, a Republican leader from Granger. "People who are trying to carry their own insurance are going to pay the tax (too)."

Meanwhile, Locke's budget proposal does nothing to rein in the growing costs of Medicaid, Chandler said. Medicaid costs must be controlled through changes in enrollment and benefits similar to the national overhaul of the welfare programs of the 1990s, he said.

Sen. Margarita Prentice, D-Seattle, budget writer for the upper chamber, said she is reluctant to put the burden on doctors.

"I don't see that any one segment of the population should have to bear the brunt," Prentice said. "If we really pay so little, why would we want to force M.D.s to take that?"

Still, it will likely be several weeks before legislators begin serious budget talks. And Prentice said, "I'm not ruling it out."

POTENTIAL MEDICAID RATE INCREASES

Here is a look at average Medicaid rate increases that would be funded during the 2005-07 biennium under former Gov. Gary Locke's proposal to increase taxes on doctors:

Obstetrics and pediatrics: $30 million boost in state and federal pay

Effective increase:

Child visits and screenings: 9.9 percent

Obstetricians: 5.3 percent

Other services: $98 million boost in funds

Effective increases:

Hospital visits: 23 percent

Emergency room and critical care: 23 percent

General medicine: 21 percent

Surgery: 21 percent

Radiology: 19 percent

Adult office visits: 10.3 percent