Yes, a budget cut may increase taxes

Ever wonder how a budget cut could result in a tax increase?

It’s not really that difficult, if you take time to think about it, and listen to others who can shed light on a rather complicated subject and raise some points that perhaps have been ignored in the past.

Gov. Dennis Daugaard has proposed $127 million in cuts to the state budget for fiscal year 2011, asking for 10 percent cuts across the board. Those cuts include education and the category of “helping people,” which encompasses Medicaid, state hospitals, state Health and Human Services, and other health assistance programs.

About 36 percent of the state’s budget goes to the “helping people” category, with a budget of $437 million in 2011.

Medicaid, which is funded by states with matching federal money, is a large portion of the $437 million. Medicaid funds medical care and programs for people below the poverty level who meet specific requirements. In South Dakota, 57.33 percent of all nursing home residents are Medicaid recipients.

At the end of 2010, 114,429 people in South Dakota were eligible for Medicaid, compared to 110,734 a year earlier. Daugaard said the growing number of Medicaid recipients has continued to stretch the state’s budget.

During Saturday’s legislative cracker barrel meeting in Vermillion, Charles Yelverton, MD, who has practiced family medicine in Vermillion for several years now, noted that a survey recently conducted by the South Dakota State Medical Association noted that 80 percent of private medical practitioners in the state have noted that they potentially may either have to stop treating, or perhaps cut back in the number of Medicaid patients they treat.

It’s pure economics. If the state pulls it financial backing from Medicaid patients, doctors would lose money every time they treat one.

Yelverton noted that Medicaid patients would then have to seek medical care in hospitals’ emergency rooms. “As you know, that’s going to be much more expensive,” he said.

He added that the governor’s notion of a 10 percent reduction in Medicaid funds “is a tax increase in various, indirect ways on all of us.”

Yelverton noted that his clinic doesn’t plan to turn away Medicaid patients, “but that doesn’t mean that some other clinics in the state won’t do that.”

Medicaid patients forced to receive treatment in emergency rooms likely will start from square one during each visit. There’s a chance they will be treated by someone different during each visit. There will be no continuation of care; each visit will demand the running of similar tests over and over again.

“It’s just going to jack up the costs, not to everyone, but to people who have private insurance,” Yelverton said. “Their premiums will go up and their costs for drugs will go up.”

And, a very high percentage of nursing home patients in South Dakota are paid by Medicaid. When Medicaid is cut, that will mean a substantial increase in the fees paid by other nursing home patients.

“I would call that a tax on private-paying nursing home patients,” Yelverton said. “Why do they have to suffer more than anyone else?”

Yelverton said lawmakers must educate the governor’s office about all of the indirect problems the proposed cut in Medicaid likely will bring.

It’s a responsibility, really, that falls upon all of us. You now know how a proposed budget cut can ultimately raise your taxes.

What are you going to do about it?