Physician revenue tax draws heat in California universal care proposal

The plan also includes individual and employer mandates to purchase health coverage.

By Doug Trapp, AMNews staff. Jan. 29, 2007.

Washington -- California physicians commended Gov. Arnold Schwarzenegger for proposing a universal health care plan but expressed alarm at several of its provisions, among them a 2% tax on doctors' gross revenues.

"We think this is a regressive tax," said California Medical Assn. President Anmol S. Mahal, MD. "We think this is a tax that physicians cannot stand." The tax is expected to raise $1.3 billion.

But Schwarzenegger said the package's increase in Medi-Cal reimbursements and elimination of the problem of the uninsured would generate $10 billion to $15 billion in new money for hospitals and physicians. This would offset the levy on doctors and a 4% tax on hospitals, he said. The extra $4 billion in Medi-Cal funding would boost physician payment by 37%.

The CMA is pleased that the plan recognizes that reimbursements for the state's Medicaid program are unsustainably low, but it voiced displeasure over the governor's decision to place conditions on the boost in rates.

"These increases would only be available to providers who meet certain pay-for-performance, IT and cost-containment requirements," states the group's analysis of the plan. In addition, all doctors would be taxed, although not all doctors take Medi-Cal.

The tax would hit physicians with high overhead expenses especially hard, Dr. Mahal said. A physician revenue tax is essentially a tax on the sick, which adds to its unfairness, he said.

The California Hospital Assn. withheld judgment on the hospital tax until it could better understand the plan's overall impact on its members.