Nonprofit Newswire | Hospitals Ask to be Taxed

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February 7, 2010; The Tennessean | Remember discussions in Pittsburgh late last year regarding the Mayor’s search for deficit-plugging revenues? One of the ideas floated was a “sick tax,” a fee that nonprofit hospitals would pay on each patient. In Tennessee, hospitals are considering asking to be taxed by the state to stave off $1.5 billion in cuts to the state’s TennCare medical system (Tennessee’s version of Medicaid). The hospitals are concerned that cuts in the state’s program will cost two or three times as much in lost federal aid. The belief is that they would lose more in state and federal aid from the TennCare cuts than it would cost them to pay in new taxes. The governor has proposed a nine percent cut in TennCare. The program would have been cut 15 percent last year but for the one-year infusion of federal stimulus dollars. In 1992, Tennessee hospitals did pay a sales tax of 6.75 percent of the cost of hospital services. The hospital association is open to reviving the tax, though at a lower rate, but only with the assurance that the revenues would be used to pay for TennCare payments to hospitals. It will be interesting to see if nonprofits in other states and other sectors “volunteer” to pay limited taxes or fees with the understanding that the result will be programs saved and federal matching funds secured.—Rick Cohen