Mississippi Corrects 2003 Accounting Error, Hospitals, Medicaid Providers Dodge New Tax

Published December 1, 2008

The correction of an accounting error has allowed Mississippi Gov. Haley Barbour (R) to withdraw a controversial proposal to make up a $90 million Medicaid funding shortfall by increasing hospital taxes and cutting reimbursement payments to providers who treat Mississippi’s almost 600,000 Medicaid patients.

An accounting error made in October 2003, during the administration of former Gov. Ronnie Musgrove (D), caused Mississippi to begin annually under-billing the federal government for Medicaid costs. The mistake was discovered by state auditors in May 2008, after the state had overspent on Medicaid by $92 million.

Went to Court

To cope with the shortfall, Barbour proposed an increase in hospital taxes to take back some of the money earned by hospitals that take Medicaid patients as a result of federal payments. Citing a July 2008 ruling by Mississippi Judge William Singletary decreeing only the state legislature can enact new taxes and fees, 14 state Senate Democrats filed suit in an attempt to prevent the tax increase from going into effect.

The fact that “the governor’s preference in the method of funding has been frustrated in the legislature does not grant the governor constitutional license to bypass the legislature and impose his tax plan by executive degree,” state Sen. David Baria (D-Bay St. Louis) wrote in the filed court documents.

In a move that surprised Barbour and the state Division of Medicaid, the federal government made the back payment of $92 million in early September, allowing the state’s budget to be “in balance for FY09,” according to a press release issued by Barbour’s office.

Barbour withdrew his tax increase proposal, though he will push for it once again in the fiscal year 2010 budget.

Democrats Prefer Cigarette Tax

Lawmakers are currently working on the FY2010 budget in preparation for the beginning of the 2009 regular session in January. Barbour said in a release he will once again push for an increase in hospital taxes and a decrease in Medicaid reimbursements during that budget debate, as part of his goal of finding “a fair, permanent, sustainable solution to funding the state share of Medicaid.”

Democratic lawmakers, who hold the majority in the state legislature, favor House Concurrent Resolution 68, a bill to increase the state’s cigarette tax from $0.18 to $1.18 per pack, to deal with future Medicaid funding shortfalls.

State Rep. George Flaggs (D-Vicksburg), sponsor of HCR 68, has proposed the cigarette tax increase several times in the past, but each time it has failed to pass.

No More ‘Rabbits’

“For the fourth consecutive year, because of federal funds—first from Katrina emergency health care monies and now from this refund and premium reduction—the deficit at Medicaid has been solved for one year, with one-time, non-recurring revenue,” said Barbour in an early September release.

“It would be irresponsible to think another rabbit will jump out of the hat for our next budget. It is therefore essential the legislature finally enact a fair, permanent, sustainable solution to funding the state share of Medicaid as it relates to hospital distributions and reimbursements,” Barbour concluded.

The problem is in more than the state budgetary process, said Michael Cannon, director of health care studies at the Cato Institute.

“As long as Medicaid allows states like Mississippi to raid the pocketbooks of out-of-state taxpayers [through federal money], no amount will ever be enough” to support their growing programs, Cannon said. “Congress needs to cap federal Medicaid funding, and let that be the end of it.”

J.P. Wieske, director of state affairs at the Council for Affordable Health Insurance, said the Mississippi situation “should be a warning sign to those who continue to push a government-care-for-all system. The Medicaid system across this country is imploding as governors seek even more money and increase taxes while patients face fewer choices.

“Gov. Barbour should look back to the welfare reforms of the 1990s and find a similarly private market solution to these issues,” Wieske added.

Joe Emanuel ([email protected]) writes from Georgia.