Georgia Rural Hospital Tax Credit

By October 24, 2018Sales Tax

Georgia Rural Hospital Tax Credit

Georgia lawmakers may consider boosting the state’s annual tax credit for rural hospitals from $60 million to $100 million when the new legislature arrives for work in January. The effort to bring more money to financially struggling rural hospitals is commendable, but evidence points to greater financial benefits for rural hospitals and higher return on investment by focusing instead on putting an insurance card in the pocket of every Georgian.

Launched in 2017, the rural hospital program offers a tax credit to individuals or corporations that donate to a qualifying rural hospital designated by the state health agency. This credit was originally set at 70 percent of the donation amount. When donations through the program did not reach the cap, lawmakers increased the value of the credit to 90 percent and most recently to 100 percent. With donors now receiving a dollar-for-dollar match on their contributions to qualified hospitals, the program quickly reached its ceiling this year. The total cost of the program is currently limited to $60 million a year until 2021.

There are 58 eligible hospitals and each can receive up to $4 million a year through the program. The Georgia Department of Community Health has not released official data on which hospitals have benefited or to what extent. However, the amount of donations received by hospitals appears to range from about $543,000 to $1.4 million, based on media reports. But some hospitals are gaining much less from the program, such as Miller County Hospital which only received $2,000 this year.

By contrast, evidence from other states shows expanding Medicaid brought rural hospitals larger amounts of money. In states that expanded Medicaid, the average rural hospital saw a 33 percent increase in revenue. This equates to about $2 million a year in higher revenue. At the 2018 Rural Healthcare Symposium held at the University of Georgia, Vicki Lewis, CEO of the Coffee Regional Medical Center, estimated that an expanded Medicaid program would mean about $3.5 million a year for that hospital.

Increasing state spending on the tax credit from $60 million to $100 million comes closer to the net costs of expanding health coverage. Lawmakers have rejected Medicaid expansion, saying it was too costly for the state. Georgia is now one of 17 states that have not expanded the Medicaid program. GBPI estimates the net cost to the state would be around $136 million a year if Georgia expanded Medicaid in 2018, once accounting for increased revenues from insurance premium taxes and income and sales taxes. That state investment would be matched with about $3 billion in federal money each year, a strong 9-to-1 return on investment. Compare that to the rural hospital credit, which brings with it zero federal match.

Rural Georgia continues to face a health care crisis as seven rural hospitals closed in Georgia since 2010 and others face financial challenges. A number of factors contribute to this challenge, including changes to the health care industry, health insurance payment rates, local population decline and aging. One significant source of financial instability for hospitals is uncompensated care, or services that hospitals do not receive payment for due to the patient’s inability to pay. Often these patients lack insurance coverage that would help cover the cost of their care. Georgia ranks fourth-highest among states in the rate of uninsured, making uncompensated care an even greater challenge for the state’s hospitals. Georgia’s uninsured rate increased slightly in the past year and the Georgia Chamber of Commerce estimates the uninsured rate in rural Georgia will increase to 25 percent by 2026.

Continuing to invest additional money in the rural hospital tax credit program does not reduce the growing number of uninsured Georgians. Spending toward expanded health coverage has the potential to provide even greater benefits to rural hospitals than they are currently seeing under the tax credit program. As lawmakers consider spending even more on the rural hospital tax credit, it is worth considering spending the additional money toward putting an insurance card in more Georgians’ pockets with a stronger return on the state’s investment.

Georgia Rural Hospital Tax Credit

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