Prairie State Wire

A renowned expert on health insurance and public policy stands opposed to an insurance tax that would generate hundreds of millions of dollars to be allocated for Medicaid to obtain matching federal funds.

The Illinois House GOP has reportedly expressed its support for House Bill 272, called the Medicaid Managed Care Organization (MCO) Tax and a significant piece of Gov. J.B. Pritzker's state budget proposal. But C. Steven Tucker, principal broker at HealthInsuranceMentors.com and a sought-after subject matter expert on health insurance reform, is calling on House Republicans to vote against the 1-percent tax on claims paid by health insurance carriers or third-party administrators to be solely used for funding Medicaid services.

“Because the federal government provides states with an open-ended reimbursement to cover Medicaid spending, very similar to a blank check," Tucker told Prairie State Wire. "This open-ended federal Medicaid reimbursement arrangement provides states with a perverse incentive to artificially increase Medicaid expenditures, and by doing so win a larger 'reward' from the federal government in Medicaid reimbursement amounts.

C. Steven Tucker | HealthInsuranceMentors.com

"How do states do this?" Tucker continued. "By imposing taxes on insurers, hospitals, nursing homes and now the proposed MCO tax. When the state imposes increased taxes, that increases the cost outlay of the entity being taxed. In this case it's the MCOs. When their costs increase, the amount the federal government must reimburse for also increases. This has an end result of shifting much of the cost burden from the state general fund to the federal government. Many hospitals, nursing homes and MCOs support this shell game because they know the dire fiscal situation of the State of Illinois.”

Credit rating agency Fitch recently called the MCO tax “the most significant” recurring revenue stream in Pritzker's proposed budget. According to administration officials, the tax could bring in close to $400 million.

“State legislators also know that when Medicaid costs are inflated they can then rely on a significantly larger reimbursement amount by tapping into the federal government's resources,” said Tucker. “It is a vicious cycle that does nothing to lower the overall costs of Medicaid. In fact, it increases the cost of Medicaid on the whole exponentially. In the end, those who pay federal income taxes, many of whom reside in fiscally responsible states, are left holding the bag. Many local politicians support provider taxes because it makes them look like heroes by shifting state burdens to the federal taxpayer.”