Physician Vaccine Cost and State Margin Tax
Under the state margin tax, the tax base begins on gross revenue. From that, the taxpayer may choose to deduct either compensation or cost of goods sold. Many physicians choose to exempt compensation, leaving them to pay 1-percent tax on cost of goods sold. This includes vaccines.
- When adjusted for inflation, in 1980 it cost $59 for children to receive all of the vaccines recommended from birth to 18 years. Today, there are nine more recommended vaccines than there were in 1980, with the cost for all necessary immunizations totaling $1,661.
- Vaccine costs have tripled since 2001, and with the addition of several new immunizations in 2005, it’s estimated that vaccine costs represent 20 percent of a pediatric practice budget.
- About 80 percent of the nation's children get some or all of their immunizations from private physicians' offices, which operate as businesses.
Physicians have to place vaccine orders 9 to 12 months before the vaccines will be used and pay that expense out of pocket, not knowing whether or not they will sell that product, and if they do sell, not knowing the level of payment the insurance companies will provide for the product. Physicians are not reimbursed for the purchase and maintenance of the costly equipment necessary to store and monitor vaccines (including refrigeration and alarm monitoring), and vaccines that are not used go uncompensated.
Physicians cannot pass the tax along to insurers. Anti-trust laws require that practices negotiate contracts with insurers separately and they are not allowed to share their cost and payment data with colleagues. Many practices don’t have the resources to negotiate fair contracts, and because there is little benchmarking data available, they are held to the insurer’s terms.
Because of the growing number of necessary vaccines, increasing costs, and variable payments, some physicians are reducing the number of vaccinations that they administer because they are not able to recoup their costs and are putting the financial viability of their business in danger. For example, a typical flu vaccine costs about $15. The physician would add on an administering fee, maybe $5. The fee is deductible but the vaccine cost is not. A 1-percent tax means that the physician actually pays 15 cents to administer the vaccine.