Congress approves payroll tax cut, but concerns in N.J. over Medicare decision

February 17. 2012 2:36PM

Congress approves payroll tax cut, but concerns in N.J. over Medicare decision

An extension of the federal payroll tax cut and unemployment benefits passed today by U.S. Congress won applause in the House of Representatives, but representatives of New Jersey's health care community said they were discouraged that no long-term solution was included to handle Medicare reimbursements.

Dave Knowlton, president and CEO of the New Jersey Health Care Quality Institute, said Congress should have recalculated the sustainable growth rate a long time ago to move away from a Medicare reimbursement model and avoid overburdening hospitals.

"The government is just rearranging the deck chairs," Knowlton said. "Everyone is in the same pot — doctors and hospitals. We've got to fix the broken system by addressing how physicians are receiving payments. But Congress is thinking this is an issue too complicated to address in the time they had, and it's not something you want to get into in an election year."

"I am greatly disappointed over how these extensions are offset," U.S. Rep. Frank Pallone Jr. (D-Long Branch) said on the floor of the House of Representatives. Pallone said the bill "cut from one provider — hospitals and nursing homes — to help pay for another—physicians."

"We cannot rob Peter to pay Paul, and our health care system cannot sustain further provider cuts," he said.

Earlier this month, Moody's Investors Service released a report that showed the fundamental credit conditions in New Jersey's hospital industry over the next year were extremely negative, according to Sean Hopkins, senior vice president of health economics at the New Jersey Hospital Association.

"Right now, 30 percent of hospitals in New Jersey are operating in the red, and eight have declared bankruptcy," Hopkins said. "We are saddened that Congress has looked at payments to hospitals and payments to providers as resources to fix other problematic components."

The payroll tax cut, meanwhile, fulfills its purpose of getting employees to spend money in local communities, according to John Sarno, president of the Employers Association of New Jersey.

"If people are paying less payroll taxes, they have money in their pockets to spend," Sarno said. "Maybe they'll only get $40 more a year, and since it's only a small amount, the chances are that they'll spend it locally, and that will help the local economy."

But Sarno said the extension falls short on cutting taxes for employers, which could give them an incentive to hire more workers and support economic growth more than the payroll tax cut.