NJ Bed Tax Scuttled

Published August 1, 2006

A proposal to impose a bed tax on all 74 hospitals that operate in partnership with the New Jersey state government failed in June when state Senate President Richard Codey (D-West Orange) declared to reporters, “The hospital bed tax, it’s in the morgue and it has a tag on its toe.”

Gov. Jon Corzine (D) had proposed taxing the hospitals an average of $1,444 a month per bed. The tax would have generated about $430 million and might have brought in matching Medicaid funds from the federal government, to help close a $4 billion budget deficit.

Corzine would have sent half the $430 million back to hospitals at rates depending on their Medicaid utilization. The other $215 million would have gone into the state’s general fund to seek the federal matching funds. The plan drew a chorus of complaints from the health care industry, who cried foul because it would have hurt large hospitals with relatively few Medicaid patients and unfairly benefit small hospitals with large numbers of Medicaid patients.

Letters, Emails Flood Capitol

“There were nearly 40,000 letters, emails, and postcards from hospital workers to lawmakers. Those lawmakers are telling us this was by far the biggest outpouring of opposition to any of the controversial issues in the budget,” said Kerry McKean Kelly, a spokesperson for the New Jersey Hospital Association.

Kelly said if the hospital bed tax had gone through, it could have resulted in the closing of some hospitals and cuts in programs and services at others.

“This is an industry in New Jersey where the average operating margin is 1 percent, and 40 percent of hospitals lost money last year,” Kelly said.

Hospitals Absorb Charity Costs

Another hospital association spokesperson, Ron Czajkowski, pointed out New Jersey law requires all residents to be taken care of, regardless of their ability to pay.

“It’s like mandating restaurants provide free food to all customers and then taxing them [restaurants] for providing it,” Czajkowski said.

The state has budgeted $583.4 million to reimburse hospitals for charity care, but those cases cost New Jersey hospitals more than $1 billion, Czajkowski said.

Cosmetic Surgery Tax Controversial

Another controversial bill proved to be a sticking point in budget negotiations the last week of June.

Two years ago, Assemblyman Joseph Cryan (D-Union) sponsored a bill that ultimately resulted in a 6 percent tax on cosmetic surgery procedures, believing it would generate between $25 million and $40 million for the state.

But rather than pay the tax, patients began seeking their cosmetic surgery in New York, Connecticut, and other nearby states, and the projected revenues never materialized. This spring, Cryan sponsored a bill to repeal the tax.

When the state legislature failed to reach a balanced budget by July 1, Corzine shut down the statement government until the issue was settled eight days later. The cosmetic surgery tax was put on a back burner, said Cryan’s chief of staff, Tom Lynch.

“It was not heard, but we have a commitment from the governor and the speaker and the Senate president that by this fall or next year, we should have it passed,” Lynch said. “[The cosmetic surgery tax] will be repealed at some point.”

Steve Stanek ([email protected]) is managing editor of Budget & Tax News. Karla Dial ([email protected]) is managing editor of Health Care News.