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GOP lawmakers in Georgia are facing a tough question when they reconvene Monday: Should the state continue to do what nearly every other state in the US does — tax its hospitals?

Georgia collects what’s known as a hospital provider fee, also known as a “bed tax,” that’s set to expire halfway through 2017. The state’s health department takes in an estimated $280 million each year from its hospitals by levying a 1.45 percent tax on net profits (critical-access, psychiatric, and state-owned hospitals are exempt). The state then uses those funds to draw down nearly $600 million in matching federal Medicaid funds.

Most hospitals, especially ones that treat lots of Medicaid patients, consider it a no-brainer — pay a small tax, get buckets of federal dollars in return. And some Republican state lawmakers agree. But a small army of zealous anti-tax advocates — led by Grover Norquist’s group, Americans for Tax Reform— have vexed Georgia lawmakers on the issue.


“States across the country should reject the notion that bigger government, more spending, and higher taxes are the only solution to any state’s policy priorities,” Paul Blair, a state affairs manager with Americans for Tax Reform, tells STAT.

Health care advocates believe that it’s not just dollars that are on the line, but the amount of care available to patients. Some of Georgia’s rural hospitals could be forced to close, just as six others have done since 2012.


Losing the bed tax “would be devastating for hospitals,” said Cindy Zeldin, executive director of the consumer advocacy group Georgians for a Healthy Future. “It would hurt hospitals’ ability to deliver care, and particularly harm ones that serve high Medicaid and uninsured populations.”

Laura Harker, a policy analyst with the Georgia Budget and Policy Institute, said fewer than half of all states had taxed hospitals in this manner in 2003. But once the Great Recession hit, states like Georgia approved such fees to close budget gaps and help hospitals that heavily rely on Medicaid reimbursements. Now, every state except Alaska relies on hospital provider fees to obtain matching federal funds.

Despite having the support of the Georgia Hospital Association, the bed tax has faced ardent opposition from Norquist, a grizzled anti-tax crusader who lives outside Georgia.

A free-market advocate who founded Americans for Tax Reform in 1985, Norquist has long pressured conservatives nationwide to sign a pledge to oppose any and all tax hikes. Those who break his pledge face potential political retribution come time for re-election.

In 2013, the last time the bed tax was extended, Norquist raised hell about it. He fired off a letter warning lawmakers in the GOP-controlled statehouse that supporting it would violate the pledge they had signed.

“Fiscal conservatives should not be looking to Washington for more federal aid,” he wrote.

The bed tax extension ultimately passed. But the anti-tax advocates have continued to pressure Republican lawmakers.

“We are opposed to any tax increases,” said former state Representative Michael Harden, now the director of the conservative advocacy group Americans for Prosperity-Georgia. “If a lawmaker says they’re opposed to expanding Medicaid, they need to vote no on the bed tax. It’s nothing more than a backdoor attempt to draw down federal dollars.”

Norquist’s group is entering the latest bed tax debate because, as his group tells STAT, it “remains opposed to the gaming of the Medicaid system whereby states like Georgia raise taxes on hospitals just to get paid off by Uncle Sam with matching funds.”

Governor Nathan Deal’s office didn’t respond to requests for comment. During a press conference Thursday, Republican House Speaker David Ralston didn’t seem to flinch at the potential backlash that could come from anti-tax advocates. Instead, he told reporters that “it’s important we pass it” — and pass it fast.