Hidden State Tax Behind High Health Insurance Costs | Chris Powell

A long time ago, a Sunday installment of the “BC” newspaper comic strip depicted a caveman leering at a sleeping dinosaur from behind a rock. The caveman pulled a thorn from a bush, crawled up to the dinosaur, stuck the thorn in its foot, and dashed behind the rock. The dinosaur woke up in terrible pain and jumped on its other feet. The caveman then reappeared, calmed the dinosaur down, and removed the thorn, earning the dinosaur’s gratitude and undying devotion.

Another caveman, who was watching from behind another boulder, called out: “No, you’re ready for politics.”

This cartoon should have been Exhibit A at last week’s State Department of Insurance hearing on two health insurance companies’ request to raise rates by 20%.

Politicians denounced the increases as unfair and unaffordable, as if almost everything wasn’t exploding in price, and as if the real inflation rate wasn’t at least double the much-manipulated official rate of 9% amid the creation of extremely excessive money from the US government.

The irony of inflation is even greater with health insurance in Connecticut. That’s because for 10 years the state government has imposed a tax on hospitals that has taken hundreds of millions of dollars more from them than the state government has reimbursed them for care of the indigent. The additional revenue from the hospital tax has been used for general state government purposes.

To recoup losses imposed by the state government, hospitals have raised prices to paying patients, most of the bills are paid by insurers, which in turn have raised their premiums.

Unlike state sales tax, hospital tax never appears on patient or insurance bills. People wrongly assume that all the money they pay goes to those horrible hospitals and insurance companies. The tax burden is hidden in the prices.

That is, the state government has used the hospital tax to deflect political blame from the government’s own costs to hospitals and insurance companies, just as the state government has long used its “tax on the gross income” of petroleum products. While state and federal retail gasoline sales taxes are well known and publicized, the “gross receipts tax” is not. People have no idea it’s there and wrongly assume that the terrible big oil companies are getting all the money they spend at the pump apart from the retail tax. Again, the “gross receipts tax” is hidden in the prices.

To Governor Lamont’s credit, to settle a potentially costly lawsuit from hospitals, two years ago the state government acknowledged that its hospital tax racket had gone too far, and the state began reducing the tax and increasing hospital reimbursements for patients in welfare, just as this year the state government temporarily curtailed retail trade. gasoline taxes when gas prices soared.

But the state government continues to use the hospital tax to raise money for general purposes—estimated this year at $49 million more than state reimbursements to hospitals for indigent patients—and thereby deflect blame from hospitals and insurers. the government’s own costs.

Although most Connecticut hospitals are not-for-profit, they remain a large source of state tax revenue. Yale-New Haven Hospital recently claimed to be the state’s largest contributor. But it’s a fair question whether nonprofit hospitals should be taxed at all, except for the ease of hiding the tax burden.

Connecticut hospitals have another financial complaint against state government. It’s just that their reimbursements for welfare patients (people with Medicaid) are only about half of what Medicare pays and far less than the actual cost of treatment. Hospitals estimate that underpayment for Medicaid patients last year was more than $900 million. This underpayment is essentially another hidden tax, ultimately paid in large part by health insurers.

Yes, insurance company and hospital executives they are often paid extravagantly. But when they are, they pay high income taxes, and the extravagance of their salaries is small compared to the state government’s hidden taxes on hospitals and health insurers.

The state government’s shift to hospitals, which should be their own costs, should be part of the discussion about health insurance rates, even if insurers won’t raise the issue, too afraid of the reprisals from elected officials if the secret of their hidden taxes ever comes out. outside

Chris Powell is a columnist for the Journal Inquirer. Their views are not necessarily those of the newspaper.

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