You asked us to present both sides of the discussion on a nursing home provider tax, as conveyed by the for-profit and nonprofit nursing home industries during the last legislative session.

SUMMARY

Connecticut would receive additional federal Medicaid funds if it enacted a provider tax, which could be used to increase the reimbursement the state pays homes for serving Medicaid-eligible residents. In general, these taxes produce winners and losers, if they are broad based and do not hold any particular home harmless. The reason is that every home must pay the tax, but the homes that have the highest number of Medicaid-paying residents get the most back in enhanced Medicaid rates.

A review of the 2004 Public Health Committee favorable report on sSB 565 shows that the for- and noprofit nursing home trade groups were on opposite sides of the issue. The for-profit Connecticut Association of Health Care Facilities (CAHCF) supported the tax, while the Connecticut Association of Not-for-Profit Providers for the Aged (CANFPA) was against it. Additionally, the Department of Social Services (DSS) raised concerns about how any additional spending, albeit fully reimbursable by the collection of the tax and more federal funds, would affect compliance with the state’s spending cap law. And it raised the question of fairness to the homes that do not participate in the Medicaid program.

ARGUMENTS

In supporting the tax, CAHCF’s Executive Vice President Toni Fatone testified that the state’s nursing home industry was in a state of fiscal crisis and that many other states had already adopted such taxes. She was joined by Jane McNichol of the Connecticut Citizens Coaltion for Nursing Home Reform, who spoke of the need to increase staffing levels to improve care for the elderly and said such a tax could make this possible. Others spoke of the inadequacies of the current Medicaid rate structure.

Bonnie Gauthier of CANPFA expressed concern about the losers under the tax and asserted that the federal government would not grant exemptions to states to soften the negative impact on the homes with few or no Medicaid residents. Both sides spoke about the availability of federal waivers that would allow states to exempt certain classes of homes from the tax. The nonprofits asserted several times that the federal government would probably not grant Connecticut such a waiver, while the for-profit homes said they would. (Our research indicates that North Carolina and Oregon have in fact recently received federal waivers to reduce the negative impact such taxes have on homes with few or no Medicaid–eligible residents. )

CANPFA was also concerned whether the proceeds of such a tax and additional federal funds would actually be distributed to the homes or revert to the General Fund. (The bill required the monies to be used solely to promote nursing facility residents’ well being, improve staff working conditions, and protect the nursing facilities’ financial stability through increased reimbursement; a called, though not debated, Senate amendment would have distributed the funds into a special nursing facility security account and earmarked them specifically for rate enhancements. ) The administrator of the Bradley Home, which does not participate in Medicaid, also expressed opposition to a $ 153,000 increase in taxes without any return from Medicaid.

Please see OLR reports 2003-R-0864 and 2004-R-0386 for descriptions of the 31 state provider taxes, including information on the states that have applied for and received the above-mentioned exemption waivers.

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