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Michigan physicians fighting 1% Medicaid tax plan

Such assessments haven't proved popular in the past, but states might consider them now to avoid making deeper cuts into the program, experts say.

By Joel B. Finkelstein, amednews staff. April 25, 2005.

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Washington -- Michigan Gov. Jennifer Granholm has proposed taxing physicians to raise Medicaid funds -- a relatively rare tactic that could become more common if a budget-cutting step offered by President Bush passes.

Under Granholm's plan, physician practices would be charged a 1% assessment on gross revenues. The move would raise an extra $96 million in state funding for the program, which covers one in seven of the state's residents at a total cost of about $7 billion a year. The state tax dollars would be augmented by $70 million in federal Medicaid matching funds.

The plan is laid out in the governor's 2006 budget proposal and would require the introduction and passage of new legislation.

The state would net about $40 million of the total raised by the new tax, and $120 million would go back to physicians in higher Medicaid reimbursement, according to T.J. Buckholz, spokesman for the Michigan Dept. of Community Health.

"We think it's a pretty good deal for the physicians," he said.

But the state's physicians don't agree.

It's a public program and should be funded by the public, said John MacKeigan, MD, president of the Michigan State Medical Society.

"Why should physicians fund Medicaid?" he asked.

A few states, including Kentucky, New Mexico and West Virginia, have tried imposing similar Medicaid taxes on doctors. But all three have stepped back from the approach because of physician resistance.