Georgia Governor Sonny Perdue is proposing a tax on hospitals and managed care insurers to help cover a projected $608 million shortfall in the state’s Medicaid program in the coming fiscal year.

A 7.7% increase in Medicaid enrollment and a decline in revenues relied on to fund the program are at the root of the shortfall. Enrollment is expected to grow another two percent in the coming fiscal year.

Perdue’s budget proposes a 1.6 percent tax on net patient revenue from hospitals and premium revenues on managed care insurance companies.The tax is projected to bring in $345 million annually. The budget also proposes a 10 percent increase in the healthcare premiums paid by state employees and retirees.

During recent legislative hearings, officials said that new revenue is needed to cover the program shortfall. If the taxes are not approved, reimbursement payments to healthcare providers would have to be cut 16.5 percent. .

A similar tax proposed last year by the governor was met with criticism.

Funding for behavioral and mental health services may increase, however, due to a settlement of a lawsuit concerning the state’s operation of its mental hospitals.