How Obamacare Could Affect Your State

July 19, 2012 — 1 Comment

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The Supreme Court ruling on the constitutionality of the health care act, known as the Patient Protection and Affordable Care Act of 2010 if you’re into formal titles or Obamacare if you’re a bit more casual with legislative nomenclature, continues to reverberate.

The high court’s split decision stating that the individual mandate is OK, but states can’t be forced to participate in the health care law’s expanded Medicaid program is causing problems for some states on both political and financial fronts.

The Medicaid expansion is expected to extend coverage to roughly 15 million low-income people. But that number will be lower if states opt out of the expansion.

Two states at the forefront of the opposition are Texas and Florida, whose governors have already announced their non-participation plans. So have the leaders of Louisiana, Mississippi, South Carolina and Wisconsin.

Both Rick Perry (Texas) and Rick Scott (Florida) are adamant that although Uncle Sam initially will pick up the full Medicaid expansion tab, as the program costs transition to the states it will take billions from each state’s bottom line.

However, many hospitals and medical associations disagree with the governors. Texas and Florida are two states that rely heavily on property taxes and county leaders are worried because they don’t have an individual income tax.

In Texas, several local leaders, health policy analysts and officials at urban hospitals across the state say that Perry’s rejection of federal billions in Medicaid expansion would hurt county taxpayers and the hospitals they support, forcing them to continue to pick up much of the tab for treatment of the uninsured.

Compounding the local tax collectors’ fears is a recent report from the Rockefeller Institute of Government that found local governments and school districts nationwide already are facing “a serious fiscal crunch accelerated by weakness in property tax collections.

The public policy research arm of the University at Albany, N.Y., says that local property taxes declined by 0.9 percent in nominal terms in the first quarter of 2012, after two consecutive quarters of growth.

But when adjusted for inflation, local property taxes actually declined by 2.8 percent in the first quarter of 2012, marking the sixth consecutive quarterly decline in real collections, according to the report.  It is particularly acute in states that have experienced the largest declines in housing prices. Florida is one of those states with a hard hit housing sector.

Will the anti-Obamacare governors hold firm? Will the economy pick up enough at all levels to help counties replenish their accounts?

Since the Medicaid provisions, as well as the associated health exchanges, don’t kick in until 2014, states could change their minds. And some governors are waiting until after Nov. 6 to decide since a change in the White House will mean a change in the health care law.

If Obama is reelected and his signature piece of legislation goes forward, when the feds start doling out billions to bring more Americans into the Medicaid program, Perry, Scott and the other opposing state leaders will likely be on board.

Governors, regardless of their political affiliation, are like the rest of us. We all find it awfully hard to turn down money.

JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.

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