That the latest version of Arnoldcare has been lambasted by both free-market and single-payer advocates suggests that the plan has serious problems. And it does indeed offer the worst of both worlds: heavy-handed government interference in the health care market and preservation of private insurance monopolies.

But, being a hospital finance type, I was really taken aback by the proposed 4% tax on hospital revenues. This would be an exceptionally bad idea in an industry with a healthy bottom line. It borders on insanity for California’s community hospital system. More than 50% of the state’s acute care facilities are already operating in the red.

Which is why I nearly choked on my coffee when I read that this proposal has the support of the California Hospital Association. That’s right. The CHA has endorsed a $2.7 billion tax on its members in the full knowledge that many of them are already on the verge of bankruptcy.  Here’s how the CHA justifies this position:

California’s community hospitals have long supported the goal of health care coverage for all Californians. That is why they have stepped up and taken a leadership role in the health reform debate, announcing their support of the governor’s reform proposal despite the fact that it comes with a new 4 percent fee on hospitals.

CHA leadership has apparently convinced itself that the same bureaucrats who crippled California hospitals by underfunding Medi-Cal are going to change their stripes under Arnoldcare. They actually seem to believe that all of the revenue generated by the tax (and federal matching funds as well) will be set aside by the bureaucrats for payments to providers.

The folks at the California Hospital Association are either very gullible or suffering from Stockholm Syndrome. 

Comments 2

  1. Alan wrote:

    The California Hospital Association signed on to Governor Schwarzenegger’s health care reform not because they’re gullible, but because it makes financial sense for most of their members.

    In a deal worked out with the Governor, the tax dollars raised from hospitals must first be spent on increasing Medicaid reimbursement levels. California current reimbursements are the lowest in the nation. Higher reimbursement rates will result in more federal matching dollars flowing to the hospitals. At the end of the day, most hospitals are expected to come out ahead.

    Additionally, the CHA made sure the 4% tax rate was built into a funding initiative tied to the Governor’s reform package, assuring that the rate won’t increase in the future.

    Posted 03 Jan 2008 at 4:06 am
  2. Catron wrote:

    All you’re doing here is repeating the CHA talking points.

    The best case scenario for California hospitals under this deal is that they break even. More likely, the things they have asked for will get thrown over the side when it becomes expedient for the politicians to do so.

    Then, the hospitals will be worse off than they were before.

    Posted 03 Jan 2008 at 8:12 am

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