Taxing medical procedures doesn’t work

Connecticut is facing the worst budget crisis of our lifetimes, and most people agree that the solutions will require both spending cuts and new taxes. With so many unpleasant options in the governor’s budget proposal, it can be difficult to make the case that any particular constituency should be spared.

But the governor’s proposal to tax a medical procedure – in this case cosmetic surgery – has already failed in New Jersey, where the tax has cost more to administer than it brings in, and its application has opened personal medical files to state tax auditors. A leading proponent of the tax is not only seeking its repeal in New Jersey, but also is actively urging Congress and other states to  abandon the concept.

As they did in New Jersey, proponents of the cosmetic tax here argue that the procedures are a luxury, performed largely on wealthy patients who can afford to pay the additional tax, despite recent studies that show the majority of patients have household incomes of less than $60,000.

Connecticut’s new budget secretary even said in his testimony before the legislature’s Appropriations Committee that he was not troubled or deterred by the fact that patients may choose to go out of state for procedures to avoid the tax.  The argument for the tax, it seems, is that what the state gains in revenue would offset the loss in business.

But taxing medical procedures raises issues that can be difficult if not impossible to address.

While the proposed tax legislation would exempt reconstructive surgery, there is often a fine line between what is deemed medically necessary and cosmetic. Some procedures are a mix of both. Who will decide which procedures should be taxed?

The state’s Department of Revenue Services regularly audits taxpayers to ensure compliance. How will they audit this tax without examining the personal medical files of patients that include items such as the test results, history of major illnesses and surgeries, mental health and HIV status, lists of medications, history of illnesses in a family and sensitive photographic documentation?

Federal HIPPA laws prohibit such disclosure, and that law is rooted in the need to protect the special relationship between doctors and patients. In order to provide the best care possible for a patient, individuals seeking medical help or advice should not worry that their medical concerns or conditions may be disclosed.  Deliberate withholding of information because of the fear of public scutiny will create safety issues for patients undergoing procedures.

Furthermore, the loss of patients to surrounding states will have a significant and negative effect on medical care here in Connecticut. Reconstructive and medically necessary surgery that is covered by insurance is often not reimbursed at the full cost of providing the service. If patients begin to go elsewhere for cosmetic surgery, surgeons will lose business, and practices are likely to close, as they have in New Jersey.  The issue of access to a plastic surgeon in the state of Connecticut will become problematic.

In a letter to Connecticut legislators, the majority leader of the New Jersey General Assembly, who in 2004 was an avid supporter of the tax, called it a “real world failure” that has actually cost the state $3.39 for every dollar collected.

Connecticut needs to balance its budget, and every one of us is probably going to have to accept a budget with spending cuts or tax changes that we don’t like.  But the General Assembly must reject this ill conceived idea to tax cosmetic surgery.

At the very least, Connecticut residents have the right to expect that the policies enacted by the state budget will not invade their medical privacy, and that those taxes will actually generate the tax revenue as intended.