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David Cox | Taxes by another name

Watch out. Here come the tax hikes. They won’t be called by that name, but they will have the same effect, only worse.
For years now, certain legislators have resisted any tax hikes whatsoever. Far be it from them to “take your hard-earned dollars out of your pocket” for state purposes. And, to be sure, Virginia ends up being fifth in earnings (thank you NoVa) and 39th in percentage of income paid in taxes.

But now that we’re in a horrific budget crunch, Richmond is scrambling around to find how to fill a multibillion-dollar shortfall. And, to be sure, it won’t be easy.

It is very likely that we citizens will be paying more. Not because of increased taxes, but because of cuts that we, as citizens or localities, will have to swallow.

Take Medicaid. This federal-state program alone takes up nearly all of the health and human resources budget which, at $8.5 billion for the biennial, is 25 percent of the total. Already some have called for cuts in Medicaid. No doubt, any program could suffer some trimming.

But let’s say Medicaid payments to health providers were cut by 10 percent. Not much, right? Just you wait. For one thing, Medicaid reimbursements rarely cover the actual costs to the provider. A nursing home might get $125/day for a Medicaid patient whose care actually costs the home $175.

Who makes up the difference? Private pay patients, who actually pay more than that $175. Insurance companies. Other sources of income. Charity.

In other words, other sources subsidize Medicaid patients, above and beyond what the government provides. So who pays for that 10 percent cut? We do, through higher costs to private payers, or higher insurance, or whatever.

An average company might slash its payroll or reduce its services. But health-care providers cannot do that. One reason is moral; they have the obligation to provide the best possible care. Another is legal; the state regulates, say, nursing homes and thereby insists on certain levels of staffing and care.

So what can they do? If Medicaid is reduced, some will simply go out of business. I ran into a valued community doctor a couple years back who ended his practice because he could not afford to continue. Others will cease accepting Medicaid patients; they can’t afford to take them on.

Where then would people go? Probably to the doctor’s-office-of-last-resort, namely, the local emergency room, which is also the most expensive form of treatment … and one that we citizens end up paying for.

To reduce Medicaid payments does not reduce costs; they remain, and one reason they remain the same is because of regulations the state itself imposes. To reduce payments without reducing costs, though, means inevitably that someone else picks up the tab. Those tab-pickers may themselves be patients who have the ability to pay; but that’s not fair. They may be insurance companies, who then pass along the costs to consumers.

In the end, no matter what, we all pay what amounts to a hidden tax on health care. The result is the same as if we sent money to the government: it comes from our pockets.

With that type of budget-cutting, wouldn’t it be more honest just to raise taxes?


– Column by David Cox

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