Facing a health care crisis in which Medicaid, the government program providing health care coverage for low-income individuals, is becoming increasingly insolvent, Gov. Jennifer Granholm and other state officials are considering raising doctors’ taxes in order to increase Medicaid’s revenue. Because Medicaid funding at the state level is matched by federal funds, this tax would be exceptionally effective at raising revenue. In addition to funding the greatly depleted Medicaid program and ensuring doctors receive adequate compensation for treatments they provide to Medicaid recipients, this new tax would bring the added benefit of freeing up state money to fund higher education. It should be enacted.
Some may argue that doctors should not need to pay for the cost of providing health care to Medicaid recipients; simply providing health care services is enough. However, this tax promises to actually increase the amount of money doctors receive for treating Medicaid patients. Currently, doctors who treat Medicaid patients are only reimbursed for 60 percent of the bill, leaving the other 40 percent as a cost for the doctor. Consequently, doctors have no incentive outside of social responsibly to treat those who rely on Medicaid to pay the bills. By increasing the amount of money available to Medicaid, this tax will actually increase the percentage of costs that the program reimburses. In order to eliminate the current gap that exists between the treatment and reimbursement costs for Medicaid recipients, only a 2.3 percent tax would be needed. Even if doctors are only levied with a 1 percent tax, the reimbursement rate would go up by 10 percent. According to Paul Reinhart, the state’s Medicaid director, the proposal would see net gains for doctors if a mere 3.5 percent of their patients treated were Medicaid recipients.
Furthermore, the tax proposal would free up money that could be used to fund higher education. As Granholm has repeatedly mentioned, higher education is the key to this state’s long-term economic health. Unfortunately, a severe budget crisis has forced the state to cut back funding for higher education. The ever-increasing costs of medical care have magnified this problem, and decreased support from the federal government for Medicaid has forced the state to devote a growing percentage of its annual budget to financing it. Often, this funding comes at the expense of competing state initiatives, including higher education. With this tax, the cost of the Medicaid program could be adequately covered, leaving other programs that draw from the state’s general fund with more money. Considering that higher education has sustained a series of damaging cuts, any funding increases would be welcome.
This tax, with its low cost and numerous benefits, must be approved. We must simultaneously be able to provide our least fortunate citizens with the basic right to health care, while ensuring that higher education — the engine for future economic growth — is not marginalized. These two programs, which should both be funding priorities for the state government, must not compete for the same scarce funding. Granholm and state legislators need to make sure this tax is approved.