March 29, 2005

Potential for a Big Mistake: New Hampshire, Medicaid and Fiscal Honesty

When New Hampshire faces budget deficits, they don't have a lot of tools at their disposal. They're the only state in the nation with neither a sales tax nor a broad-based income tax. As a result, lawmakers have to get pretty clever about finding new revenue sources during recessions. This year lawmakers have outdone themselves, as Dan Barrick notes in a great article in today's Concord Monitor. Lawmakers are apparently considering introducing monthly Medicaid premiums to help balance the budget. This would be on top of the "co-pays" that NH already has in place for various services.

Supporters of premiums point to Oregon and Florida, where similar legislation has reduced state costs. But that point is obvious, if not redundant. Costs are reduced because, um, the state is deferring the bill. Small co-payments, on the other hand, which New Hampshire already has, have been frequently cited as a good way of reducing unnecessary visits to the doctor without preventing necessary medical care.

Premiums would be a shameful way of cutting costs for two reasons. First, Medicaid premiums (ranging from $120 to $240 a year, under this proposal) amount to a tax increase on the people with the least ability to pay. Second, it doesn't reduce health care costs. All the premiums do is potentially drive people away from regular, often preventative visits to the doctor. This leads to more costly emergency room visits and in turn a larger tab waiting to be picked up by the hospitals themselves--as well as people who have private insurance and will see their rates rise as the hospitals transfer the increased cost onto them.

And there are implications for federal funds flowing to New Hampshire as well. This article in the Union Leader addresses the compound problem of cutting the state's budget for Medicaid because of the lost federal funds that will go along with the potential cuts.

New Hampshire's budget process started auspiciously when the Lynch administration promised a budget which "funds all of the state's health and human service area agencies to strengthen the national model we've built for community support of people with disabilities." They still have a chance to get there. But the legislature would do well to avoid imposing backdoor tax hikes on the poor while also shifting increased health care costs onto providers and everyone with insurance.

There is a lot of talk in New Hampshire about balancing budgets and providing services without any new broad-based taxes. It would be a travesty if that promise is kept only by introducing a new tax targetted directly at the state's neediest citizens.


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