There have been several media reports over the last week highlighting a proposed “hospital tax plan” for the 2010 Iowa General Assembly to consider.

In fact, what Iowa hospitals are proposing is not a “tax” at all. It is a voluntary assessment for a limited three-year period that enables the Iowa Medicaid program to draw down millions of federal dollars to help provide health care services for our poorest citizens.

The proposal is similar to ones that already exist in more than 20 states. Medicaid is a state/federal partnership program. Generally speaking in Iowa, whenever the state invests $1 in Medicaid, the federal government matches that dollar with approximately $2 of federal money. The trouble is that the current Iowa budget environment means the state doesn’t have enough money to invest fully in the program. Under the proposal being considered, hospitals would voluntarily assess themselves $40 million to act as the state portion for the Medicaid match. That results in the state getting a total of more than $130 million in total Medicaid funds…without Iowa taxpayers footing the bill.

Iowa then increases hospital Medicaid payments to the federal limit to return money to Iowa hospitals. This means hospitals would see roughly $68 million in increased Medicaid payments; but remember hospitals originally invested $40 million into the plan, so the net gain for the industry is $28 million. And in fact, the way the proposal is structured, not every hospital will see a net financial gain under this plan. However, the overall dollars returned to hospitals will help protect the more than 70,000 hospital jobs in Iowa that would be at risk if the state were forced to reduce hospital Medicaid payments as part of overall budget cuts. The remaining $65 million goes to Iowa’s Medicaid program and allows Iowa government to cut more than $20 million from its expected state share of Medicaid needs.

This proposal is a “win-win-win” for hospital employees, the patients they serve, and Iowa state government.

For more information about the plan proposed by the Iowa Hospital Association, click here. Also, feel free to leave your comments about how you think Iowa hospitals are proactively trying to protect Iowa’s overall Medicaid program.