Prairie State Wire

Health care premiums and costs will go up if Illinois Gov. J.B. Pritzker's idea to slap a tax on Managed Care Organizations (MCOs) sees the light of day, a tax expert with a Chicago-based Conservative think tank said during a recent interview.

"If the tax is applied to private sector Managed Care Organizations – which is necessary to comply with federal law – it's likely that premiums would increase," Illinois Policy Institute Budget and Tax Research Director Adam Schuster said during an email interview with Prairie State Wire.

Details about the proposed tax on Managed Care Organizations, which Pritzker told state lawmakers last month would generate about $390 million in revenue earmarked for Illinois' Medicaid costs, currently are thin on the ground.

Illinois Policy Institute Budget and Tax Research Director Adam Schuster | Courtesy of Illinois Policy Institute

"Unfortunately, Pritzker has not yet indicated exactly how his new tax would be structured or provided the details necessary to provide a full analysis," Schuster said. "Additionally, premiums are affected by both state and federal regulations, as well as state and federal market conditions, making it difficult to estimate exactly how much this tax would affect premiums."

However it's structured, the bottom line is that a tax on Managed Care Organizations would not be good for Illinois, Schuster said.

"Ultimately, the new tax is a bad idea for Illinois that is likely to increase health care costs to some extent," he said.

In addition to a tax on Managed Care Organizations, the governor also has said he wants to legalize recreational marijuana and sports betting to help fund his fiscal 2020 budget for Illinois, which includes increases in education, social services and public-safety funding.

"In the past, it has been the practice of too many politicians to be short-sighted about slashing costs and then to bemoan the state of the state when those cuts have long-term consequences on the economy," Pritzker said during his address before the Illinois General Assembly last month. "So let's not hollow out vital government services anymore."

The state's budget for fiscal 2020 is expected to include a structural deficit of $3.2 billion.

The tax on Managed Care Organization, in addition to bringing in more money, also would free up money the state currently spends on Medicaid that could be used elsewhere, in a rob-Peter-to-pay-Paul sort of way, Pritzker told lawmakers.

"This would be a smart way to increase our federal match," Pritzker said.

There are better ideas to raise revenue for cash-strapped Illinois, Schuster said.

"A better path forward is to look to federal waivers that would enable Illinois to reduce the cost of Medicaid while maintaining quality care," Schuster said while referring to an already existing plan in a neighboring state. "The Health Indiana Plan implemented in 2015 is a model the Illinois Policy Institute is studying to see how a similar program could affect the cost and quality of Medicaid in Illinois."