Americans for Prosperity-Michigan

Physician tax would be unhealthy

Editorial: Physician tax would be unhealthy
The Detroit News

Michigan doctors would be hit with a 3 percent gross receipts tax under a plan by House Democrats to create new state revenues and avoid some of the painful cuts in the 2010 state budget. This poorly considered plan to revise an already passed departmental budget for community health, shifting more of the cost of Medicaid from the state to the federal government, should be dropped.

The goal is to leverage additional federal funds with the state physician tax. The proposal is strongly opposed by the state’s two major physician organizations, which point out that doctors already pay income, personal property, small business and sales taxes.

They see it as a hindrance to physician recruitment and are rightly skeptical the promised federal bounty would materialize, once they’ve anted up the $300 million to $400 million this proposed levy is designed to raise. Skepticism is understandable when lawmakers continue to shift funds around and dream up boutique taxes to balance the budget without making needed government reforms.

The proposal, passed by the House last week, would levy what’s described as a quality assurance assessment fee on more than 28,000 doctors. To boost their federal Medicaid allotment, Michigan and other states already impose similar taxes on health maintenance organizations, nursing homes, hospitals and community mental health agencies.

But West Virginia apparently is the only state that also taxes physicians in this way. In a survey by the National Conference of State Legislatures, West Virginia reported that its 2?percent fee has declined gradually since 2001 and is to be phased out in 2010.

The arguments in favor of the new tax here are that it would net Michigan $525 million in added federal revenue, help to avoid an 8?percent cut in the community health budget for 2010 and allow a higher rate of return for doctors treating Medicaid patients.

Many Michigan doctors have become reluctant to treat Medicaid patients because — they say — they now are reimbursed for as little as 35 percent of their actual costs. The percentage of Michigan physicians accepting Medicaid patients has shrunk to 55 percent from 88 percent in the last couple of decades.

And that’s precisely the problem with this plan. Proponents claim that doctors whose proportion of Medicaid patients exceeds 4?percent would gain back more than the new tax would cost them. But the state also would have its hands in the pockets of many doctors who see very few Medicaid patients. They would have to absorb this costly new tax or pass its cost on in the form of higher rates for their services.

Could there be a bigger incentive to leave the state? Could there be a bigger disincentive for newly licensed physicians to set up practice here?

No doubt, doctors who care for Medicaid patients deserve better compensation. Given time, policy-makers perhaps can create a way of doing that without using an unfair doctor tax as their ATM. What Michigan doesn’t need is a reason for more of its professionals to flee to other states that have lower taxes.