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Assembly GOP says no to hospital tax, blocks $125M budget plug

Steven Elbow  —  5/21/2008 6:18 am

So you're facing a $527 million budget shortfall and the federal government offers to hand you not only $125 million, but also to fork over hundreds of million of dollars to hospitals to help cover the cost of care they provide to the poor.

How could you possibly say no?

Well, Assembly Republicans did last year when they refused to consider Gov. Jim Doyle's plan to levy a 0.7 percent tax on hospital revenues as part of the 2008-09 budget.

And they said no again this year when they negotiated a budget repair bill after dismal economic conditions put that budget more than $500 million in the red.

"It's kind of irrational except from their perspective of political logic," said UW political science Professor Dennis Dresang.

Even though Republicans' opposition to the hospital tax made a bad financial situation worse, some of their Democratic colleagues are being charitable. They'd rather blame the Wisconsin Hospital Association, which blasted the proposal initially as a "tax on the sick" -- before it then decided it liked the plan.

"This is perhaps the stupidest decision I ever saw an interest group make in my 30-year career," said outgoing state Rep. Dave Travis, D-Madison. "They clearly shot themselves in the foot."

Here's how the tax plan would work:

The state would levy a 0.7 percent assessment on hospital revenues, amounting to slightly more than $200 million a year. The state would use the money to increase Medicaid rates to hospitals, which hospital officials have long complained are insufficient to cover the cost of providing care. Because the federal government provides states with matching funds for Medicaid costs, federal funds would flow to the state, about $1.40 on the dollar for the hospitals, for a $150 million a year gain. The state would garner about $62 million a year in reimbursements for Medicaid expenditures.

Complicated? You bet. But one of the services trade organizations supposedly offer members is the expertise to analyze and respond to such proposals.

In this case, legislators say, the Wisconsin Hospital Association failed to do the analysis part -- and went straight to the spin.

Doyle hadn't even announced the details of the plan in February of 2007 when Donna Sollenberger, former CEO of UW Hospital and Clinics who was on the board of the Hospital Association at the time, announced, "Ultimately, what you're saying is you're going to tax sick people."

It was a rhetorical shot that took on a life of its own, published in the group's newsletter and then adopted by the state's largest business lobby, Wisconsin Manufacturers and Commerce.

The phrase "sick tax" was embraced by the Republican leadership and became part of the political discourse.

In October the Hospital Association changed course. And Wisconsin Manufacturers and Commerce, which as a rule fiercely opposes any taxes, came out in favor of the hospital tax this past March.

"It's a very unusual instance where we come out on that side of the tax issue," said WMC spokesman Jim Pugh.

Travis says if the trade groups had done their homework before shooting off their mouths, Assembly Republicans wouldn't be in the position of opposing a measure that pretty much everyone else supports.

"By the time they had it figured out," he said, "they had the Assembly Republicans sitting out on the end of the branch and they were sawing it off."

Eric Borgerding, senior vice president of the Hospital Association and a lobbyist for the group, bristles at the suggestion that the group made a mistake.

"When it first came out, I don't think we could be guaranteed that was the way this proposal would turn out -- that it would be a benefit, that it would be a positive thing," he said. "But once folks started to roll up their sleeves and actually work together on the proposal it became something that was supportable and something we thought could work."

But he concedes that his group's initial opposition may have had unintended consequences.

"I think we put out one press release on it and that was the day we found out about it and the budget bill was announced," he said. "After that it kind of rolled into a big snowball."

He says the group wanted to make sure the federal funds slated for the hospitals would not be raided by the state and that the losses to a few hospitals that don't serve enough Medicaid patients to be reimbursed for the tax would be minimized.

But the damage was done, and the money that could have been gained during the 2008-09 budget is out the window.

"When you commit to a position, you commit to a position," said Rep. Pedro Colon, D-Milwaukee, who sits on the budget writing Joint Finance Committee. He is sympathetic to Republicans who, he says, took their position "in good faith," with the backing of the Hospital Association and WMC. The Republicans were essentially left stranded when these groups "changed their tune because they really didn't understand the issue to begin with," Colon added.

Dresang, the UW prof, says not all Republicans are on-board with the hard-liners, but the "no-tax Republicans" are powerful enough to silence dissent, even from Assembly Speaker Mike Huebsch, R-West Salem, who with Senate Majority leader Russ Decker, D-Weston, hammered out last week's budget repair bill.

"This in part comes from talking with some frustrated Republicans," he said, "and my understanding is that Mike Huebsch is frustrated with this particular element of his caucus. But he feels like it's a strong enough contingent that they can make enough trouble for him and the Republican caucus generally that he's got to cave in to them."

That's not the line out of Huebsch's office.

"We believe it's a tax on sick people," said Huebsch spokesman John Murray. "And even if they do recoup this money there is no guarantee from the federal government that those dollars are going to get passed along in the form of lower health care costs."

But he conceded that there is dissent among the ranks.

"Certainly maybe there are some people in our caucus that express an openness" to the tax plan, he said. "But as a policy option either now or in the future, I think it's pretty clear where our caucus stands -- they are against it."

Gov. Doyle told Hospital Association members last week that he plans to again introduce the plan when he crafts a budget next year.

"If there is any way to do this, definitely the governor would like to see the hospital assessment," said Doyle spokesman Lee Sensenbrenner.

Dresang says by the time Doyle crafts his next budget, Republicans could be out of the mix. Democrats are only three seats away from taking control of the Assembly in the fall election, which would give them complete control of the Legislature.

And, according to Dresang, this doesn't look like a Republican year.

"It's like Republicans are an endangered species," he said. "They're in worse shape than the polar bears."

Steven Elbow  —  5/21/2008 6:18 am