Community Benefit of Georgia’s Hospitals in Jeopardy
Despite Public Support of a Tobacco Tax, Legislators Continue Considering Deep Budget Cuts for Georgia Hospitals

Lawrenceville, Ga. (March 16, 2010) – A recent poll released by the Georgia Alliance for Tobacco Prevention (GATP) of Georgia voters revealed 73 percent support a one dollar tax on tobacco to cover the state’s budget deficit. Even among smokers, the support is strong: half of smokers (50 percent) support the tobacco tax increase to preserve health care funding. Despite broad-base support of a tobacco tax as a source of revenue for the state, legislators are still considering deep budget cuts to hospitals in the form of a 10.25 percent reduction in Medicaid reimbursement rates and removing nonprofit hospitals’ tax exemption status. This announcement comes on the heels of a proposal to increase taxes paid by hospitals, a choice that could compromise the health of Georgians. 

Whether hospitals are asked to pay a tax of 1.6% of their general revenue to the state, or absorb more of the costs to care for Medicaid and PeachCare patients – hospitals are paid about 80 cents for every dollar they spend caring for these patients – the result is the same: hospitals will have to increase costs to patients who have insurance or pay for their own care and reduce services they provide. 

“The impact of any of the proposed taxes or cuts on hospitals would be devastating,” said Monty Veazey, president of the Georgia Alliance of Community Hospitals, a group representing more than 75 nonprofit hospital systems across the state. “Many hospitals speculate that they will have to cut staff, reduce services or shut their doors altogether. We should be looking for solutions that help increase our ability to care for Georgians and create a healthier state.”

One of the latest notions being considered is removing the tax-exempt status for Georgia’s nonprofit hospitals. While nonprofit hospitals do not pay taxes to the state, all of their profits go to the care they provide their patients and the community. These hospitals engage in community outreach, care for the uninsured, operate community clinics and provide educational programming to protect the health of their communities. The financial investments the nonprofit hospitals make far exceeds the tax revenue the state would get; however, with the loss of the tax exemption, these hospitals would not have the resources to maintain these services and programs. 

“As we consider the proposed budgetary cuts that will impact us and the community at large, Gwinnett Medical Center will need to evaluate the potential reduction in scope and availability of services to include those that we provide through our community clinics as well as other non-emergent and non-acute services that we offer,” said Phil Wolfe, president and CEO of Gwinnett Medical Center.

One potential solution to the budget crisis that seems like a win for health care providers and consumers alike is House Bill 39, which proposes a $1 increase in the state’s current tobacco tax. A recent poll released by the Georgia Alliance for Tobacco Prevention (GATP) shows that 73 percent of Georgia voters and 50 percent of smokers support raising the tobacco tax by $1 as well, demonstrating it as viable solution for legislators to consider. Georgia’s Medicaid program currently spends an estimated $537 million annually in costs attributed to smoking. According to GATP, increasing the tobacco tax by a mere dollar, would prevent an estimated 79,600 Georgia kids from smoking, save 38,400 state residents from premature smoking-related deaths and would save $1.8 billion in tobacco-related health care costs.

“Our community hospitals and physicians are already overtaxed with daily-increasing numbers of uninsured patients walking through the doors,” said Veazey. “Increasing the tobacco tax would be a much better solution than continuing to strain our hospitals. It would serve as a wake-up call to smokers to quit and would work toward lessening long-term costs on our state’s health care system. It’s time we tax what hurts us, not the hospitals that heal us.” 

For more information: 

Visit www.nogahospitaltax.org and send a letter to your state legislators asking them to OPPOSE HB 307, OPPOSE Medicaid cuts and SUPPORT an increase in Georgia’s tobacco tax by voting for HB 39.