Group says tax reform can pay for Medicaid without breaking the state budget

FRANKFORT, Ky. (WDRB) -- A new nonprofit group has proposed a health care tax reform plan as a way to fund expanded Medicaid in Kentucky.

The group, which is supported primarily by hospitals, believes tax reform is the best way to pay the cost of Medicaid, which was expanded by former Gov. Steve Beshear under the Affordable Care Act.

“At the end of the day, we're going to provide health care for 500,000 Kentuckians,” said Riggs Lewis, a Norton Healthcare executive who is serving as president of Balanced Health Kentucky.

The federal government initially paid the entire cost of the expansion, but the federal contribution is shrinking. Kentucky’s share of the cost will increase to 10 percent in 2020, threatening to blow a $300 million hole in the state's budget.

“We have to find a way to fund that,” Lewis said during a news conference Wednesday in the Capitol Rotunda.

Balanced Health Kentucky wants to broaden the number of health care services that are taxed by the state.

Right now, a state tax on hospitals and nursing homes makes up 88 percent of the state's Medicaid fund. But there are a number of medical services that do not pay that tax, including dental, chiropractic, prescription drugs, pediatric and psychological services. Balanced Health said taxing more of those services would pay for expanded Medicaid.

“We believe in keeping the program, but having conservative tax reform is the only way to do it,” Lewis said.

Democratic Sen. Morgan McGarvey of Louisville supports the idea

“We can't take people off of their health care, and this gives us the means in which to fund the expanded Medicaid population,” he said.

But Sen. Chris McDaniel, the chair of the Senate budget committee, said he is concerned the plan would increase the cost of health care.

“If it's going to drive up health care costs on the citizens, we're going to have a hard time engaging in that,” McDaniel said.

Jim Waters, president of the Bluegrass Institute, a free market think tank, said he generally likes the idea of lowering taxes and broadening the base. But he said reducing the Medicaid rolls should be part of any reform plan.

“We need to look at reducing the number of people dependent on Medicaid, dependent on government programs,” Waters said.

But Balanced Health Kentucky said cutting Medicaid would cripple the state's hospitals, especially in rural areas.

“They've built their systems to serve those 500,000," Riggs said. "That's employment. That's training. That's nursing."

While Balanced Health Kentucky wants to broaden the tax base, the group said it will leave it up to lawmakers to decide which health care services get taxed and how much.

The organization has created a website to provide information and tax calculations.

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