Hospital Groups Blast New Jersey Bed Tax Plan

Published June 1, 2006

As New Jersey’s July 1 deadline to adopt a state budget looms, hospital groups and some legislators are fighting to stop a new tax that Gov. Jon Corzine (D) has proposed in an effort to reduce the state’s $4 billion deficit.

In his budget proposal this year, Corzine suggested imposing a bed tax on all 74 hospitals operating in public-private partnership with the state. The measure is expected to raise approximately $430 million by forcing hospitals to pay an average of $1,424 a month per bed and might bring in some matching Medicaid funds from the federal government.

Corzine wants to split the $430 million in half, giving $215 million back to hospitals at rates dependent on their Medicaid utilization and putting the other half into the state’s general fund in order to seek the federal matching funds. The plan has the health care industry crying foul because it hurts large hospitals with low rates of Medicaid usage and unfairly benefits small ones with large numbers of Medicaid patients.

Forcing Closures

Not only is it a bad idea that could cause division in the hospital industry, said New Jersey Hospital Association spokesman Ron Czajkowski, it’s an example of horrible timing because the industry is on “spongy, if not fragile, financial turf.” The average nonprofit hospital in the state has an operating margin of 1 percent.

“We have a high charity-care caseload,” Czajkowski said. “Medicare and Medicaid don’t pay dollar for dollar, and we’re dealing with the impact of the illegal immigrant population that costs $250 million a year. In addition, we have the same problems the rest of the country has with managed [care], where they are still slow or no-pay contributors to hospitals.

“Forty-two percent of the state’s hospitals operated in the red last year, and if a tax like this goes through, there will be cutbacks on services and layoffs,” Czajkowski continued. “Some of those that are already in bad shape might close down.”

Shortchanging Hospitals

Under current New Jersey law, hospitals are required to care for all patients seeking medical attention, regardless of whether they have insurance. In 2005, the state budgeted $583.4 million to reimburse hospitals for those charity-care cases, said Department of Health and Senior Services spokeswoman Gretchen Michael–an amount Corzine proposes keeping the same in the FY 2007 budget.

But Suzanne Ianni, executive director of the Hospital Alliance of New Jersey, pointed out in her April 3 testimony before the state Senate Budget and Appropriations Committee that the amount is inadequate because it’s based on 2002 data. Over the past four years, the state’s charity-care costs have risen from $778 million to more than $1 billion, she said. Medicaid doesn’t reimburse dollar for dollar, so the 2002 estimates were low to begin with.

“People receive care whether or not they have health insurance because of hospitals’ public-private partnership with the state,” Ianni said. “We know that Gov. Corzine wants a responsible budget this year but ignoring the substantial increases in charity-care delivery is irresponsible of this budget. Our government must meet its responsibility to ensure health care for its citizens.”

Raising Costs

The Trenton Times pointed out in an April 9 editorial that if the tax is approved, it will most likely result in even higher health care costs for consumers as hospitals pass the cost along to their patients, ultimately through higher insurance premiums.

State Sen. Paul A. Sarlo (D-Wood-Ridge) opposed the tax.

“We can’t solve our charity-care problem on the backs of hospitals who serve our working residents who have health insurance,” he told on April 8.

At press time, the state legislature was still in discussions with Corzine. The governor’s press office referred calls for comment to Ms. Michael at the Department of Health and Senior Services.

Karla Dial ([email protected]) is managing editor of Health Care News.