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Hidden health care tax: Businesses beware

In Arizona, policymakers have encouraged economic growth by keeping taxes low and sweeping the field of unnecessary regulations. It seems a direct approach, but in reality, it can be a mine field. In the coming months, legislators will search for ways to restore our state’s economic health and address its enormous budget deficits. Further cuts in Arizona Health Care Cost Containment System (AHCCCS) provider payments and reducing eligibility as well as services will appeal to some as a way of shrinking the state’s deficit. Such decisions, however, would be the equivalent of setting off a mine in the field that our state is committed to clearing for business.
The state currently pays hospitals 82 percent of their total costs for providing services to AHCCCS patients. That figure has dropped three points since October 2008, when a payment rate freeze — instituted during the previous legislative session — went into effect.
Cuts in AHCCCS hospital payments are not just painful for hospitals and the patients we serve — they hurt Arizona’s economy. Hospitals are a unique blend of economic catalyst and community benefactor. Historically, hospitals have weathered economic ups and downs better than other industries. For example, since 2000 Arizona hospital building projects have created more than 4,440 construction jobs each year and infused $1.7 billion into Arizona’s gross economy, according to a study conducted by the W.P. Carey School of Business at Arizona State University’s L. William Seidman Research Institute.
Arizona’s hospitals also generate a total of 192,100 Arizona jobs, create high-paying jobs (employees earn an average of $54,400 annually, compared to the state average $46,200) and contribute $11.5 billion to Arizona’s gross state product.
Even during these difficult economic times, health care is one of the only sectors that continue to positively impact the economy. In its January 2009 report, the Bureau of Labor Statistics noted that health care employment — hospitals and ambulatory services — continued to grow in December 2008.
Like all industries, however, hospitals are tightening their collective belts in this economy. They have slowed construction, eliminated physician training programs and, in some cases, even implemented hiring freezes. These necessary actions coupled with AHCCCS payment cuts only impede the positive role that Arizona’s hospitals could play in the state’s economic recovery.
Beyond their direct impact on hospitals’ economic activity, cuts in AHCCCS payments increase the “hidden health care tax” on businesses and make it more difficult for them to perform in these already challenging times. Arizona’s business leaders understand that cutting AHCCCS hospital payments is equivalent to imposing a tax on business. If the state does not pay its share of the health care tab, then private payers—businesses and consumers that purchase commercial health insurance—foot the bill and we all pay in the form of higher healthcare premiums. Consider that a recent study by Milliman, Inc., showed government underpayment for health care services adds 10.6 percent, or $1,512 annually, to the average health insurance premium for a family of four. Of this, employers pay an average of $1,115 while the employees’ share is $397. Additionally, this hidden healthcare tax adds $276 to coinsurance and deductibles.
It’s information like this that has brought together Arizona’s chambers of commerce, business organizations and healthcare providers to form Arizonans Against the Hidden Healthcare Tax (AAHHT). This coalition opposes cuts in AHCCCS, KidsCare and KidsCare Parents, which add to our uninsured population and increase hospitals’ uncompensated care. The group also supports lifting the AHCCCS hospital payment rate freeze imposed during the 2008 legislative session. They believe such cuts are bad for business and only will exacerbate the hidden health care tax as well as hamper their ability to survive, much less thrive, in this economy.
As legislators begin their very difficult discussions about the state’s budget and scan the field before them for possible cuts, we urge them to recognize that an AHCCCS cut is a tax on business.
The field is treacherous. We urge lawmakers to step carefully.
— Tom Dickson is the chairman of the Arizona Hospital and Healthcare Association and CEO of Banner Thunderbird Medical Center in Glendale.
— John Rivers is president and CEO of Arizona Hospital and Healthcare Association of Phoenix.

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