Georgia Cuts Spending to Save Taxpayer-Funded Insurance Programs

Published December 1, 2008

Georgia health officials have implemented $1.6 billion in spending cuts in order to keep those enrolled in the state’s two key taxpayer-funded health insurance programs from losing coverage amid a statewide budget crisis.

The plan is expected to keep Medicaid and PeachCare, the state’s SCHIP (State Children’s Health Insurance Program) variation, which provides comprehensive health care to children who do not qualify for Medicaid, intact through 2010, according to the Georgia Department of Health and Human Services.

Raising Insurer Taxes

The bulk of the cut is coming from a 5 percent decrease in Georgia’s Medicaid and PeachCare programs, which is being achieved in part by delaying a planned increase in provider reimbursements.

State officials are also considering an additional 3 percent surcharge on commercial insurers operating managed health care plans (HMOs) in the state, an authority granted by the 2005 federal Deficit Reduction Act, which requires certain states to levy a tax on every managed-care provider by October 2009, regardless of whether they do any business with the state through Medicaid.

Budget analysts expect the surcharge to net the state $112 million in revenue, which would be supplemented by $90 million in matching funds from the federal government.

Gov. Sonny Perdue (R) is expected to decide whether to request this fee increase by January, when he is due to submit a proposed budget to the state legislature, an administration spokesperson said.

According to the Georgia state Web site, nearly two million Georgians were enrolled in the state Medicaid program in 2005 (the most recent year for which state-provided data are available), and nearly 240,000 were enrolled in PeachCare.

No Real Reform

Experts say without real reform, the budget revisions will have very little effect.

“Though [the spending cuts] appear to be good news for beneficiaries, Georgia will postpone an increase in PeachCare provider reimbursements, which will cause doctors to stop accepting PeachCare,” said Michael Cannon, director of health care policy at the Cato Institute.

This will make it even harder for PeachCare beneficiaries to find a doctor, Cannon said.

There is no justification for a fee on commercial insurers, added Cannon, especially a fee that would target only those offering managed care plans.

“Georgia politicians have no business punishing particular consumers and health plans, or picking winners and losers in the marketplace,” Cannon said. “Moreover, taxing those more-affordable health plans will drive more people into the arms of the state, pushing PeachCare enrollment and spending higher.”

Creating More Uninsured

Kirk McGhee, executive director of the Georgia Association of Health Plans, says state spending on health care is one of the biggest financial issues facing the Peach State, but legislators continue to refuse to address the problem.

“Georgia was given a time period to work through this,” said McGhee, “but instead it decided to levy a tax on HMOs to fill a hole in the Medicaid gap. And that’s just wrong.

“When you raise the cost of coverage, which a tax increase on insurance providers will do, people will drop off the rolls because they won’t be able to afford the higher premiums insurers are forced to charge to recoup that cost,” McGhee added. “There are fewer and fewer people with access to insurance” as a result of this “vicious circle that exists now.”

If the state of Georgia wants to help low-income residents gain access to health care, Cannon said, it should allow out-of-state clinicians to practice in Georgia and let residents purchase more-affordable coverage available in other states.

Maggie Goode ([email protected]) writes from Georgia.