Grandma in her wheelchair is back on the ledge. Do we want a new tax pushing her over?
Texas’ elder population cannot get the care they need. Resources are insufficient such as: lack of support to avoid institutionalization; inadequate numbers of nurses; lower skill levels than patients need; shortages of beds in certain areas; facilities caring for Alzheimer’s patients without proper certification; a perverse dollar matching program that punishes states that save money; a burgeoning population of younger Medicaid enrollees constantly against which elders must compete for dollars; and worst of all, the lack of an effective, coordinated, and sustainable plan for Texas elder care.
As Medicare does not cover long-term care, Medicaid is often the main support. Medicaid funding is structured as a matching program, where Washington contributes an equal or greater number of dollars than what a state Medicaid program expends. Washington’s contribution varies from state to state according to the FMAP (Federal Medical Assistance Program) formula. When Wyoming Medicaid spends one dollar, Washington adds another dollar to Wyoming Medicaid. Mississippi Medicaid gets the highest match: when it spends one dollar, Washington gives the Magnolia state $2.50. Texas gets $1.32 for every $1.00 we spend.
Legislation pending before the Texas House seeks to leverage the federal match to increase funding for long-term care facilities. It will levy a $11 per day tax on all 60,000 Medicaid beds and 15,000 private beds in Texas. (CMS rules prohibit taxing Medicare beds.) This “Granny tax” would generate $301 million classified as spending by Texas Medicaid. The Granny tax could funnel as much as $577million additional federal funds into Texas Medicaid, with a net gain of more than $858 million for long-term care.
The actual amount received will be less than $858 million since only “occupied” beds will be taxed, and occupancy rates have been declining over time, currently in the range of 68 percent for Medicaid beds. Even so, new Medicaid beds are being built in Texas. Why? Because 69 percent of long-term care facilities are for-profit facilities, and they have learned how to make a profit while caring for Medicaid patients.
Ostensibly, the purpose of the Granny tax is to improve care for Texas seniors. Nearly one billion additional dollars would certainly be welcome. However, the important question is whether that money would go to patient care or to corporate profits? The bill simply trusts facility owners to expend their additional payments on patient care rather than paying more to their shareholders.
The tax will be imposed on all non-Medicare long-term beds, including 15,000 that are not Medicaid. Yet the return of dollars will be limited to Medicaid beds. A private facility with 100 non-Medicaid beds would pay an annual tax of $401,500. As only Medicaid beds would get additional funds, private beds would pay the tax and get nothing back. How fair is that?
Beyond being unfair, it is also illegal. The Granny tax violates federal law 42 CFR 433.68 titled, “permitted health-care related taxes.” A rule within that law has a “hold harmless” provision that requires that any “tax holds taxpayers harmless for the cost of the tax.” As the bill stands, facilities with few or no Medicaid patients will pay the tax but receive nothing in return. They are thus harmed. Further, the private facility would have to pass that cost on to patients (taxpayers) becoming noncompliant with the hold harmless clause.
Supporters of the legislation are quick on defense saying that Sec. 242.702 (d) of the bill states that “a facility may not list the reinvestment allowance [tax] as a separate charge on a resident’s billing statement or otherwise directly or indirectly attempt to charge the reinvestment allowance to a resident.” Do they really believe that private facilities can absorb a $401,500 annual mandated loss without passing that cost onto patients, reducing care, or closing their doors?
When Missouri tried to pass a Granny tax, the federal Centers for Medicare and Medicaid Services deemed it noncompliant and prohibited its implementation.
Long-term care for Texas elders is in desperate need of a complete overhaul. Creating a large slush fund with minimal oversight using an illegal and unfair tax is a far cry from offering a real solution. Our senior citizens deserve Texas’ best, not our worst.
Dr. Deane Waldman, MD MBA, is Emeritus Professor of Pediatrics, Pathology and Decision Science, and Director of the Center for Health Care Policy at the Texas Public Policy Foundation as well as the author of The Cancer in the American Healthcare System. He can be reached at firstname.lastname@example.org.
Mr. Morrissette works in the Center for Health Care Policy at the Texas Public Policy Foundation. He can be reached at email@example.com.