Medicaid Bed Taxes and Institutional Bias.

Medicaid Bed Taxes and Institutional Bias. Information Bulletin #333 (5/20111)

In FY 2010, nearly $13.5 billion dollars were generated in 37 States as Medicaid “Provider Taxes,” a/k/a, Bed Taxes, Fees, and/or Assessments. At a minimum, these bed taxes generated another $13.5 billion federal match and more that States received.

What are Medicaid Bed Taxes and why should advocates for older and disabled Americans care?

37 States levy Medicaid provider/bed taxes against nursing homes (they can also be levied on hospitals or ICF beds). The $13.5 billion broken at the end of this Bulletin does not distinguish among NH, ICF or hospitals.

Often, bed taxes are based on, for example, the total number of nursing home beds in a nursing home. That is, a State requires each nursing home to pay the State a specific amount of money for each nursing home bed per day. We heard recently that one State taxed nursing homes $10 per nursing home bed per day whether or not the bed was even occupied.

The State then uses revenues generated from these “bed taxes” to bring down federal Medicaid funds, i.e., the federal match.

Here’s what happens over time. After a few years of these bed taxes, the federal reimbursement generated from nursing home bed taxes are then used to draw down more federal funds. (A type of Ponzi scheme?)

Obviously, State legislatures like bed taxes because the income generated means that less general State revenue funds need to be allocated to draw down free federal Medicaid funds. States that have provider/bed taxes therefore save State general revenue expenditures because States use the provider tax – not State general revenue funds - to generate the federal reimbursements. (No idea what’s in it for the federal government.)

It is quite important for advocates for older and disabled Americans to understand that bed taxes directly impact on your State’s Medicaid long-term, home and community-based versus institutional policy.

As the National Conference of State Legislatures recently wrote, “the rate of taxation and the allocation or earmarking of the revenue can have far-reaching impacts on state health programs and on overall state budgets.” “Earmarking” means where the federal funds that the bed taxes draw down are then used. “Far-reaching impacts” mean that institutional versus community-based services is dictated not by the ADA but where the bed-taxes come from and where they are used.

No one should be naïve. Nursing homes and other institutions do not voluntarily agree to pay these bed taxes without getting something in return.

Did you ever wonder why nursing homes receive, often annually, increased nursing home Medicaid per diem rates, while home and community-based service programs do not receive similar increases (and/or are actually reduced)? Look at how your State uses its Provider Taxes. Of course, these taxes could be used for any and all Medicaid programs, including HCBS, but as NCSL notes above they are “earmarked” for specific programs.

The National Conference of State Legislature report stated that “in a majority of cases, the cost of the tax is promised back to providers through an increase in the Medicaid reimbursement rate.” Yup, Medicaid nursing home reimbursement rates are increased as part of the sweet deal with nursing homes paying bed taxes: from the nursing homes as bed taxes back to the nursing homes as increased per diem reimbursements. Anyone want to wager whether the nursing homes make a profit on this scheme?

Advocates should find out which institutions in the 37 States pay these taxes and where the generated federal match is “earmarked.” If these funds are earmarked to keep institutions operating, they are not distributed “even handed” so home and community-based services receive a reasonable amount. Hmm, the Olmstead decision assumed “even handed” expenditures.

Here are the 2010 Bed Taxes for the 37 States that use them. This information was obtained via a FOIA request. If your State is not listed, it did not have a bed tax.

Arkansas..................... $65 .1m
California................... $412.9m
Connecticut................. $3.2m
Florida........................ $489.4m
Georgia....................... $194.9
Illinois......................... $1.501 b
Indiana........................ $86.7m
Iowa............................ $38.3m
Kansas........................ $32.7 m
Kentucky.................... $311.3m
Louisiana.................... $110.5m
Maine.......................... $138.3m
Maryland.................... $0.7m
Massachus.................. $601.9m
Michigan..................... $757.2m
Minnesota................... $711.6m
Mississippi.................. $272m
Missouri...................... $1.134b
Montana...................... $31m
Nebraska..................... $1m
Nevada........................ $29.6m
New Hampshire.......... $36.4m
New York .................. $3.549 b
North Carolina............ $133.5
North Dakota.............. $4.5 m
Ohio............................ $1.067b
Oklahoma................... $51.6m
Oregon....................... $35.5m
Pennsylvania............... $596.6m
Rhode Island............... $40.4m
South Carolina............ $66.5m
Tennessee................... $414.3m
Texas......................... $48.6m
Washington ................ $38.1m
West Virginia.............. $157,9m
Wisconsin .................. $74.4m
Wyoming ................... $4.7m

National ..................... $13.425 billion

Steve Gold, The Disability Odyssey continues

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