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were previously categorized as charity care. In that regard the tax, itself, would add to totalcost, while the Medicaid expansion could actually reduce revenues.Who Bears the Cost?For providers who will not receive tax-offsetting reimbursement increases, the impact seemsclear. It is a known consequence of business taxes that all tax increases, like all other costincreases, are ultimately borne by the users of the business’ services. In health care however, itis also clear that not all buyers of services will bear a share of the increased costs. Medicaredoes not prospectively factor state or local taxes into fees, or does so only indirectly and after adelay of several years as historical data are available. Furthermore, Medicare spending growthis limited by budgetary considerations, without regard to actual provider cost increases.Medicaid payment methodologies are often completely unresponsive to provider cost increases.So government payers will generally not bear the increased costs. Commercial payers areunlikely to increase fees to cover increased tax burdens, or will do so only for selected providerswho have some form of negotiating leverage. If government and commercial payers do notcarry a share of the tax burden, all of the increased cost will fall on uninsured, self-pay patientsand others who are not protected by network pricing or negotiated discounts. Thus, a tax at 3percent of gross receipts, which would yield a 3% increase in cost if borne equally by all payers,could become a 15 percent to 20 percent cost increase when borne only by the uninsured andself-pay patients in outpatient settings. Such a policy also could provide a financial disincentivefor the uninsured and self-payers to seek needed care.A Better MousetrapThe fact remains that federal match dollars are an attractive way to reduce losses to charitycare for some health care providers. But generating state funds by taxing providers will add tototal healthcare costs that fall disproportionately on sick and vulnerable patients who pay fortheir own care. At a very minimum, providers should be allowed offsetting deductions or credits,so that the government-paid portion of their revenues that is unresponsive to cost increases willnot be subject to the tax. It would be far more equitable to identify a broad-based tax source forthe necessary funds, thus spreading smaller shares across a broader population base. AnyMedicaid expansion should be funded by all taxpayers, not borne disproportionately by healthcare and long-term care users who are taking financial responsibility for their own care.From a public policy standpoint a more widely distributed tax burden with appropriatecredits/cost offsets makes sense in pursuing improved access to health care. That type of focusyields a more equitable and less constitutionally risky tax policy, generates needed revenuesand provides important incentives for providers to deliver services to vulnerable populations andthe uninsured.K-2