Hospitals Consider Picking Up The Tab For South Carolina’s Medicaid Expansion

South Carolina Gov. Nikki Haley (R) remains a vocal opponent of President Obama’s health care reform law, and she has refused to participate in its state-level provisions, including accepting its optional expansion of the Medicaid program. The governor says she won’t extend Medicaid coverage to an estimated 500,000 additional low-income residents in her state because it’s too expensive — but hospital officials are wondering if she would change her mind if they picked up the tab.

Hospitals seeking to expand Medicaid may propose a “provider tax” in order to cover the cost of the expansion. The hospital industry would be willing to tax itself in order to collect billions of federal funding designated for the states that choose to expand Medicaid, as the State reports:

While Haley has long opposed expanding Medicaid, some of the state’s most influential Republicans and Democrats have not made up their minds on the issue. Advocates say the expansion would bring billions in new federal spending into the state — money that otherwise would be spent in other states — and employ thousands. The expansion also would provide health-care insurance to 500,000 South Carolinians, or one in every eight residents of the state. […]

This year, the S.C. Hospital Association says it has not proposed a provider tax. But spokeswoman Rozalynn Goodwin said the idea is “certainly worth discussion,” adding the expanded federal Medicaid spending would offset about $2.7 billion in Medicare cuts that the state expects over the next seven years as part of the Affordable Care Act.

The idea for the latest provider tax comes from Arizona, like South Carolina a conservative state with a Republican governor known for resisting federal spending. But Arizona Gov. Jan Brewer surprised many earlier this year when she announced, during her State of the State address, that she supported the Medicaid expansion and using a provider tax to pay for it.

The governor has already said she opposes implementing a provider tax, claiming that hospitals would simply end up passing along the cost of the tax to their patients. But members of the industry that’s an oversimplification of the way that health care works. Because hospitals negotiate what they charge for their services with private insurance companies, they can’t just hike their rates across the board to cover the cost of the tax.

South Carolina’s hospital officials aren’t alone in their support of Obamacare’s Medicaid expansion. Hospitals across the country have come out in support of extending public insurance coverage to additional low-income Americans, explaining that “it only makes sense” to decrease the number of uninsured people who come to them for care. According to some estimates, states refusing to expand Medicaid cost cost safety net hospitals over $50 billion dollars.