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Hospitals want to pay new fees but may not get the chance

Levies would make medical centers eligible for $2 billion in federal funds as Medi-Cal subsidies. Anti-tax groups' opposition to the bill, which is on the governor's desk, centers on the 'fee' label.

October 07, 2009|Evan Halper

SACRAMENTO — A proposal is sitting on the governor's desk that would smack state hospitals with billions of dollars in new fees -- and hospital officials are begging Gov. Arnold Schwarzenegger to sign it into law. In fact, they thought it up.

In the latest test of anti-tax groups' clout in the Capitol, however, fiscal conservatives are trying to persuade the governor to block the new levies on the institutions that want them.

At the root of the dispute is a plan by the hospitals to access $2 billion in federal funds. A new "provider" fee would make them eligible for the money as subsidies for Medi-Cal, California's health insurance program for the poor. The cash would more than offset the new fees.

The alternative, hospitals say, is leaving the federal money on the table -- and California last in the nation in its reimbursements for doctors and hospitals through Medicaid, the national umbrella program under which Medi-Cal operates.

Hospital officials say existing reimbursement rates cover only a fraction of treatment costs, forcing some hospital networks and county-run facilities to absorb hundreds of millions of dollars in losses and leading more private providers to leave the program.

"The hospitals are virtually unanimously begging the governor to sign this," said Conway Collis, a lobbyist for the Daughters of Charity Health System in Sacramento. "At stake here is life and death for Medi-Cal patients and the hospitals that serve them."

The governor has not taken a position on the bill, according to a spokesman. But those involved in negotiations say the administration has signaled an inclination to veto it, pointing to concerns raised by anti-tax groups.

Hospital officials are frustrated at being trapped in the politics of taxation. The proposal would not raise Californians' tax bills, but the spirited opposition of the anti-tax interests may be enough to derail it.

The "fee" label is their biggest objection; fees can be approved by a simple majority of the Democrat-dominated Legislature. Under state law, they must be levied on specific programs and paid only by users of that program.

Legislators, activists and lawyers have been battling for decades over how strictly the state should interpret that rule. The sparring intensified in December when Democrats pushed through the Legislature a budget plan that would have closed a gaping deficit with $9.3 billion in fees.

The plan involved a dizzying array of revenue shifts and swaps that allowed Democrats to classify as fee increases a series of changes that looked to some like a broad-based tax hike. The governor vetoed the proposal.

The California Chamber of Commerce, the Howard Jarvis Taxpayers Assn. and the California Taxpayers Assn., the state's most prominent anti-tax organizations, have all weighed in against the hospital measure, AB 1383 by Assemblyman Dave Jones (D-Sacramento).

"Even though some folks support the policy, for the California Chamber of Commerce it is a threshold question," said Marc Burgat, a lobbyist for the group, which is fighting the bill on principle. "All taxes need to be approved by a two-thirds vote."

The chamber has a close relationship with Schwarzenegger, who rarely signs bills it opposes. The group is against the proposal even though one of its bigger members, the California Hospital Assn., champions it.

The hospitals had corralled enough votes to pass the measure as a tax, but state law guarantees about 40% of any new tax revenue to schools. That would not have left enough for the hospitals to qualify for the federal funds.

A file in Jones' office contains letters the Assembly has received in support of and in opposition to the bill. Correspondence from the anti-tax groups and a single letter from a healthcare company, insurer Anthem Blue Cross, opposing the proposal are dwarfed by a thick stack of letters from desperate hospital systems.

Pamela George, senior director of St. Joseph's Medical Center in Stockton, wrote that her facility was forced to close its community home care department, which treated 63,000 Medi-Cal patients a year.

"Our mission is to care for the poor and vulnerable," she wrote, "but the current situation is not sustainable."

Other letters of support came from local government officials and advocacy groups.

Los Angeles County Supervisor Don Knabe wrote that the bill is "critical for the survival of the county's hospitals, as well as public and private safety net hospitals throughout the state."

Liz Kniss, president of the Santa Clara County Board of Supervisors, said the bill is "desperately needed."

Jones said he can think of "no rational reason to veto this bill. . . . It is baffling to me that the governor would even consider it at a time [when] our healthcare system is on the verge of collapse."


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