Reaction from a medical student after Schwarzenegger’s proposal of a doctor tax:
Even doctors in training are figuring out how the plan might affect them. Some physicians believe Schwarzenegger’s plan might drive doctors out of state, but University of Southern California medical student Julia Cormano says she would stay in California””but reconsider her choice of specialties. Cormano, co-president of the med school’s students’ association, says the talk on campus is whether students, who can carry as much as $200,000 in loans, would be forced out of general medicine with the additional drain on future income. “(The plan) would make it that much more difficult to go into fields that aren’t well-compensated,” says Cormano.
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Well, I sure wouldn’t be contributing anything to the Committee to Reelect Governor Schwarzenegger.
If Californians want universal health insurance, they can tax all of their citizens for that purpose, not just the small business providers of physicians services.
Selective taxation of medical practice corporation businesses will only result in complicated accounting schemes to avoid showing taxable income. It will cause practices to drop poorly-paying plans, which will reduce access to doctors.
Taxing of individual persons would be immediately open to challenge in the courts unless the tax were applied to all similar incomes. I can’t believe anyone expects this to fly.
I like the “loss of services” as part of the award. What exactly does that mean? If the plaintiff remarries, does the award get reduced due to “restoration of services”?
Suppose she weren’t married and legally not a widow, would the claim be as valid?
The Governators next step will be to require UC med students to practice in state for 5-10 years after graduation. Additionally, if there is a PCP shortage then he will borrow a page from HillaryScare and force them all into primary care except for a select few. Of course, let’s not forget the racial quotas for residency slots Hillary authored in 1993…
It’s California. The doctors will whine and cry and when it comes to pass they will pay it. They want to be in California so badly that they will just pay up, so they should shut up.
Call me when the doctors put their money where their mouths are and pack up and leave California.
That’s 2% of Gross revenue.
No business pays tax on gross revenue, only on net after business expenses.
Depending on the practice model that 2% gross could easily be 10% or more of the doc’s real after (all other) tax take-home pay.
The governor has found a way to stick it to the ‘rich’ doctors using class warfare and make the impact sound trivial by making the value on gross rather than net practice revenue.
Is that 2% for cosmetic derm and plastic surg as well?
Does this include other health care providers as well? For example, nurse anesthetists, nurse practitioners, etc.? What if you are not a “corporation”? Would it apply to individual taxes? And if so, will the spouse of a physician be penalized also?
“Is that 2% for cosmetic derm and plastic surg as well?”
Yes. And these are about the only specialities that will be able to raise their prices 2% to compensate. The clear incentive of the tax is to dump Medicare and MediCal participation and do only cash pay procedures where at least you can raise your price to compensate.
There is one part of the bill that I have yet to see discussed. That is that there is no state mandate for the coverage of illegal alien adults. That will be left to the individual counties. The 4% revenue tax on the hospitals that see illegals flooding the ER being recouped by part of the $4 billion in increased medical payouts? Not likely. The current situation harkens to the unintended consequences of various provider lobbies that had lobbied for this or that tax (e.g. tax on home improvement projects in LA County to support the ER system)to “support” the health care system while allowing illegals to have unfettered access to the system. Did these various groups think that it was always going to be someone else that was footing the bill? The tax and spend monster is insatiable and one should always be careful in feeding it lest the “road to social justice” pass through one’s own home.
Will salaried physicians be taxed?? How will this affect physicians employed by hospitals and psychiatrists employed by community mental health centers and state psychiatric hospitals?
“Call me when the doctors put their money where their mouths are and pack up and leave California.”
What is your number? I work in the so called Inland Empire between LA and Palm Springs which encompasses about 2-3 million people. It has one of the lowest rates of primary care docs per capita than anywhere in the US
Example -
Gross revenues = 600,000
physician pay = 150,000
2% tax = 12,000
Which will come out of the physician’s pay (where else).
So, new take home pay = 138,000
Therefore, the tax represents 8% of his/her income. CA already has an income tax (if I’m not mistaken, 9.3%). So the physician will be paying over 17% of his income to the state just for the privilege of living in Nirvanafornia.
Those of you who are not physicians should be honest with yourselves in asking whether you would pay this amount of state tax just to live in CA. Is it fair? Really??
Also, there is a gross receipts tax that nails phycicians in New Mexico. It used to be 3%. It is often cited as the reason NM has so few physicians across the board.
A gross receipts tax will not be offset unless practices can replace non-paying and low-paying patients with those that offer better compensation for services consumed. So cutting back on MediCal and Medicare patients is one way to do that. (And I doubt that any miniscule increases in MediCal will offset the costs of the tax. Higher gross revenue tax is not an incentive to take more Medicaid patients, the reverse, in fact.) Another is doing less charity care. Still another is to dump private plans that discount heavily on payments, have long delays to payment, or impose other disproportionate administrative costs. Busy practices with high overhead cannot add more patients per hour just because the state wants a piece of practice revenues.
Working more hours just to pay taxes is not a good option; the costs of office staff labor become prohibitive when you do that, unless you start replacing smaller numbers of full-time staff with larger numbers of part-time staff who don’t require overtime wages. Even then, doctors have to work longer to make the same money, a loss of quality of life and an increase in work-related stress. So that is a losing plan.
In any other business, you could pass on the costs with higher fees. Were the tax applied as an excise tax instead of a gross income tax, the same revenue would be obtained, but it would become the burden of consumers generally rather than an effective special income tax on medical doctors.
California has some of the highest living and business-cost communities in the nation, and squeezing private medical practices to pay for the privileges of the rest of the state’s population is likely to have the unintended consequence of driving doctors out of state. The youngest doctors will go first as they have the least investment in their communities and typically the highest debts; they are also faced with all the other high costs that most Californians have to suffer, housing in particular.
If all Californians are to benefit from better access to medical care by this insurance proposal, then the costs should be shared as other state budgetary costs are shared, by raising everyone’s income taxes
or by raising property taxes. Do they tax university professors’ salaries specially when the state wants to increase financial aid to college students?
I thought California was Mecca for physicians because of the draconian damage caps.
Where will you all flee to now?
“I thought California was Mecca for physicians because of the draconian damage caps.
Where will you all flee to now?”
We’ll see. But your attitude is obnoxious. Its a market. It is complicated, but market forces will have an effect.
I have a skill. Its worth something. It took me a long time to learn and perfect it. Starting with the raw material of a college graduate, it would take fifteen years to produce a new board-certified specialist to replace me.
I’m sorry, but if you’re going to tell me I can take it or leave it, let me point out that I can certainly leave it if you make it bad enough.
Selective taxation like this is fundamentally unfair. Do we tax teachers to improve the schools? How about taxing attorneys to cover the cost of the criminal justice system?
Last year the fair and progressive citizens of the State of Washington got themselves in a frenzy when a small tax on coffee was proposed. It was denounced as being selective and unfair, and it was soundly defeated.
We’ll see if Californians feel the same way. Or as this poster suggests, are taxes fair as long as they apply only to someone else.
This is a particularly pernicious kind of tax, as it punishes the provider of medical services but not others and as practice costs increase but gross revenue does not, the constant percentage on constant gross becomes an increasing percentage against the physician’s net personal income. Gross practice incomes will not necessarily rise as more people get enrolled on lowball insurance plans, but the overhead expense pressures on practices relentlessly increase–new wage minimums in California generally placing upward pressures on all wages, including medical office personnel–along with rents and other substantial practice costs. It is really an unjust type of tax and will make it even more difficult for practices to compete for new doctors when living in less expensive and less tax-burdened states is an option.
Could the Governor really be that stupid? Or is he just cynical, figuring the goodwill of the medical practice community is expendable?
If the benefit is really to everyone in the guarantee of access by way of guarantees insurance, then an income tax or a general sales tax would be a fairer and more equitable sourcing of revenues.
To extend the example given above:
$600,000 gross annual practice income
$450,000 non-physician overhead
150,000 physician pay
apply 2% gross revenue tax=$12,000
deducted from physician’s income
Net annual physician income=$138,000
Effective additional income tax rate against physician= 8.0% (not deductible!)
Now assume 3% annual operating inflation rate:
Same gross income, $600,000
Overhead now $463,500
Tax on Gross: $12,000
Net physian income: $124,500
Effective additional tax rate on physician’s income: 8.8%
The following year, given the same rate of inflation, the effective tax rate becomes 9.8% against an after overhead income of $122,595.
This is a tax that is designed to drive doctors out of business, plain and simple.
Thank you Okulus for your excellent illustrations.
I would also like to emphasize the fact that such a tax is NOT DEDUCTIBLE on your state or federal income tax return, unlike other taxes such as property or income tax.
This tax will likely make provider reimbursement costs very low for the state of California.To use Okulus’ example, say that MediCal accounts for 8% of your practice gross revenue of $600K. This equates to $48K of gross revenue. You net $12K after overhead($48k – $36k), THEN pay $12k in tax (2% of gross receipts) to California, leaving you with ZERO income from MediCal.
Do the math! You are working FOR FREE in the above illustration, and I guarantee that if MediCal is 8% of your practice, it consumes more than 8% of your slots and resources as it reimburses so poorly.
It is time to send a message and TERMINATE this proposal before the political machines take over, enslaving the health care provider race.
This is the inevitable consequence of decades of empowerment of the divide and conquer statists – the mechanism and machinery, once in place, can just as easily turn to be used on any group. I see this proposal as having more of a chance than not of passing. The tax is being advanced as a fee. Should this withstand the inevitable legal challenge(s), it will not require a single Republican (traditionally anti-tax) vote in the California legislature to be voted into law. Secondly, any “universal” tax is not going to pass given the current climate in the state and this view will become even more entrenched should the Governor’s rosy budget predictions fail to materialize. Thirdly, while physicians will be able to get some of their patients on board to fight as proxies when it comes to opposing the fees there will be enough that upon seeing even the worst case scenarios for providers will see that providers will continue to make at least three to four times what the “average” patient is making (while going broke paying for their health insurance). The power of class warfare is one that should never be underestimated.
The real worst case scenario? The providers in California are split into camps. First, out go those who calculate the results of this scheme and figure they don’t want to be around to watch their personal income shrink by a third or more in five years. This means the lower-paying specialties, peds, general IM, psych, heading for greener pastures where the state residents have not yet drunk their Kool-Aid.
Those that remain? Some who will think they will gut it out only to realize that a future of relentless downward income mobility won’t afford them retirement or a decent home after paying their school loans. They will leave. Some others will stay and carve out a practice after abandoning all the low-paying insurance plans they used to put up with. No more Medicare, no more MediCal, just Visa, MasterCard or cash payment only and patients can deal with their own insurance companies and their own claims. Obviously there won’t be too many of those kinds of practitioners, only people who can afford to pay well will have access there. Forget getting in with the new cut-rate insurance-for-everyone plans; they won’t cut it. Those doctors will earn enough to pay their 2%, because they will be able to raise their prices to cover their costs.
Can’t afford to pay cash at the time of your visit? Have one of the crummy McInsurance plans that don’t cover much? Then schedule an appointment at one of the new style primary care practices: PAs and NPs and medical “technicians” everywhere you look, but scarcely any MDs. Those few doctors contracted to work at these kinds of facilities will spend most of their time riding herd over all the extenders, there won’t be much time for you to spend with him, dear patient. So don’t worry about the doctor turnover there; you won’t be getting to know them anyway.
It’ll even seem familiar, just like Sam’s Club; “Asile 26, low back pain! “
Forget all the arguments about what will happen with the revenues of such a tax, will the docs go or stay, etc. This issue is very simple. It is absolutely unfair to target a specific portion of the population to pay a certain tax. Using the fact that their chosen profession is in the same category as a political problem to justify taxing them as the solution to that problem is, well, daft. This may result in the creation of a whole new world of discrimination AND don’t forget the slippery slope this sets up for the future: teachers getting taxed to pay for school improvements, police officers paying for jails, pharmacists taxed to help pay for Medicare prescriptions… How far can this ball go? I have a fabulous solution: tax the insurance companies. Duh.
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