Shumlin's Plan To Fund Medicaid Rankles Independent Physicians

Feb 5, 2016

In recent years, Vermont has dramatically increased the number of people receiving Medicaid benefits, and it’s resulted in this state having one of the lowest rates of uninsured residents in the nation. The problem is that it’s costing a lot more than elected officials previously estimated, and the governor’s new plan to cover the deficit isn’t sitting well with independent physicians.

About five years ago, Dr. Hannah Rabin and her two partners purchased an 1840s brick house in downtown Richmond, with the goal of transforming it into a local medical clinic.

“And we did a lot of the construction ourselves, kind of Vermont-style,” Rabin says.

Richmond Family Medicine now employs three doctors, two nurse practitioners and a nutritionist, among others, and serves 7,000 patients. The business model is a tenuous one, however. And Rabin told lawmakers this week that Gov. Peter Shumlin’s plan to backfill the Medicaid shortfall could sink her private practice.

“We feel that this proposed 2.35 percent tax really threatens to put us out of business. I do know that our margin is that small,” Rabin says.

The so-called “provider tax” on net patient revenue would hit independent physicians and dentists, most of whom are now lobbying hard against the plan. Shumlin says the tax would raise about $17 million annually, and would draw down about an equal amount in federal matching funds. 

Shumlin says the money would not only help balance the Medicaid budget, but also allow the state to increase reimbursement rates for doctors who treat Medicaid-eligible patients. 

"We feel that this proposed 2.35 percent tax really threatens to put us out of business. I do know that our margin is that small." - Dr. Hannah Rabin, Richmond Family Medicine

“We can’t keep signing folks up for Medicaid, being proud that we have universal coverage for health insurance, which we finally almost do, and say, ‘We’re not going to pay for it.’ We just can’t do it,” Shumlin says.

Rabin though says that even after the Medicaid reimbursement increases, her firm would end up losing about $40,000 a year on the deal. She’s not alone in sounding alarm.

Dr. Toby Sadkin is a physician at Primary Care Health Partners, the largest independent primary care practice in the state. Sadkin told lawmakers the company is already struggling, and has lost six doctors and two practice sites over the past five years. 

Hospitals, as well as the doctors they employ, already pay a 6 percent provider tax. But Sadkin says that unlike hospitals, private practices can’t mitigate losses by charging more to patients with generous health insurance policies.

“After giving all our entire lives basically to our education and practice and learning, it’s really demoralizing and sort of devastating to realize this is what’s going to happen to my practice and my career,” Sadkin says.

"The person who proposes the tax is never the hero. But if we don't solve this problem, we sink." - Gov. Peter Shumlin

Paul Harrington, executive vice president of the Vermont Medical Society, says Minnesota is the only state left that imposes a provider tax on private practices. Even that state, he says, has decided to let the tax expire in 2019.

“I would suggest there were good reasons why they’re letting their taxes expire,” Harrington says. “And it probably has to do with how hard it is to attract and retain physicians when you’re actually taxing their net patient income.”

Last year, Shumlin proposed a payroll tax on all businesses to cover the Medicaid gap. Since lawmakers rejected that plan, he says he came up with a different one this year. If lawmakers don’t like either of his plans, he says they need to come up with one of their own. 

“Listen, the person who proposes the tax is never the hero. But if we don’t solve this problem, we sink,” Shumlin says.

House Republicans say the state needs to scale back on costs, not raise new taxes.