Since the recession, state taxes on nursing homes have doubled — but it’s hard to tell who really pays
by Tim Lockette
Jun 29, 2013 | 4300 views |  0 comments | 136 136 recommendations | email to a friend | print
Nurses Aide Patricia Coleman takes blood pressure of a resident at NHC Health Care. Photo by Stephen Gross.
Nurses Aide Patricia Coleman takes blood pressure of a resident at NHC Health Care. Photo by Stephen Gross.
Alabama’s taxes on nursing homes have doubled since the 2008 recession, a largely unnoticed $56 million tax boost supported by lawmakers in both parties.

The nursing home industry has also supported the tax increases — largely because nursing homes can recoup the cost of taxes on Medicaid patients. But it’s likely non-Medicaid patients are picking some of the tab for the tax on their nursing home beds, one health official says.

“That portion probably would get passed on to the consumer,” state health officer Don Williamson said.

In 2009, Alabama collected $1,900 in “bed tax” on each of the roughly 24,500 patients in the state’s 200-plus nursing homes. By 2012, industry officials say, tax increases and additional fees raised that to $4,028 per patient per year.

State records show that the tax increase has more than doubled the state’s revenues from nursing homes. In 2010, the state collected $50 million in nursing home taxes and fees. In 2012, revenues rose to $106 million. The nursing home population remained more or less stable over that time, an official of the Alabama Nursing Home Association said.

About half of the increases — roughly $1,000 per patient — were passed in 2010, when Democrats controlled the Legislature. But even when Republicans came to power, largely on a campaign theme of low taxes, the tax increases for nursing homes kept coming. In 2012, lawmakers passed a monthly "surcharge" that currently adds $525 per patient per year. In 2011, legislators in both parties overwhelmingly voted to add $540 to the state's annual per-patient tax.

The same year, lawmakers also scratched the word "tax" out of the bed tax law, replacing it with the words "privilege assessment."

Saving Medicaid

If nursing homes haven't raised a ruckus about the increases, it may be because of the strange math of Medicaid, in which states have to spend money to get money.

“It’s money we have to spend in order to draw down federal funds,” said John Matson, spokesman for the Alabama Nursing Home Association.

About two-thirds of all the state’s nursing home residents have their bills paid by Medicaid. Most of the Medicaid program is paid for by the federal government. But to participate in the program, states have to put up their own money to get a federal match.

That became hard to do in the 2008 recession and the years immediately afterward, when Medicaid enrollment grew and growth in state revenues stalled.

That led normally tax-averse states such as Kansas, Georgia and Alabama to a new option: increase taxes on hospitals and nursing homes, the biggest recipients of Medicaid funds, for the up-front money.

Nursing homes weren’t the only ones feeling the crunch. Hospitals began paying a tax of about 5 percent on their net patient revenue in 2011, a tax that generated $211 million in the first year, according to state budget records.

Paying up front for Medicaid wasn’t a new thing for hospitals, though. For years, public hospitals had fronted the money to the state Medicaid program through “intergovernmental transfers.” The switch to a state tax spread some of that burden to private hospitals, said Rosemary Blackmon, spokeswoman for the Alabama Hospital Association.

“Is it the ideal situation? No,” Blackmon said. “But at the time, we knew we had to do something to save Medicaid.”

For David McCormack, CEO of Anniston’s Regional Medical Center, it’s a wash. The hospital gets just as much back from Medicaid, he said, and would face financial difficulty if the program ended altogether.

“It’s very screwy, it’s bizarre, but that’s health care,” McCormack said.


For nursing homes, however, the post-recession tax increase carried more of a bite. They didn’t pay intergovernmental transfers before the recession, so the doubling of their taxes was just that — a doubling of the amount they pay to the state.

Even so, the industry supported the change, because it keeps the Medicaid dollars coming.

“It’s a double-sided situation,” said Becky Helton, the director of NHC Nursing Home in Anniston. Helton said the tax was a good thing for nursing homes in that it kept Medicaid in operation. Still, she said, the nursing home has to carefully manage its resources in order to pay the tax.

"We have to look at everything we purchase — food, supplies — and make sure we're getting the best deal on everything," Helton said.

Helton said about one third of her patients are covered by private payers. She said the company tries hard not to pass the cost of the tax on to the client.

Matson, of the Nursing Home Association, said only about 6 percent of clients pay out-of-pocket, most being on Medicaid or private insurance.

Complaints from nursing home clients seem to have been few. Robyn Grant, spokeswoman for the patient advocacy group National Consumer Voice for Quality Long-Term Care, said most complaints about the increases nationwide have come from nonprofit nursing homes, which tend to have higher percentages of private-payer patients.

“The more state dollars you put in, the more federal dollars you get,” she said. “That’s the enticement. Not-for-profit homes tend to be more opposed because they don’t get as much in return.”

Virginia Moore-Bell, who monitors patient complaints as the state’s ombudsman for long-term care, said she’d fielded no complaints from patients or family members about fee increases through the rise in bed tax.

‘Taxing themselves’

Alabama is no stranger to debates about how to fund Medicaid. This year, legislators approved a broad plan to restructure part of the Medicaid program, dividing responsibility for the medical-care side of the program among regional divisions in hopes of saving some money.

In 2012, the state’s voters approved an amendment that took $437 million from a state trust fund to shore up Medicaid, a move that opponents criticized as fiscally irresponsible. An effort that year to raise a similar amount of money through a tobacco tax went nowhere.

The rise in provider taxes, meanwhile, has drawn far less attention. It’s not a typical tax situation, said Sen. Del Marsh, R-Anniston, who sponsored a 2011 Senate bill to raise the nursing home bed tax by $540 per year. (Marsh’s bill didn’t pass, but an identical House version did.)

“These entities are almost taxing themselves,” Marsh said. “These industries are basically asking us to tax them.”

He said the the hospital and nursing home associations had asked for the increases, in order to bring in Medicaid money. He described the tax increases as “a strange situation.”

“What if I said, give me a dollar and I’ll give you five dollars back?” he said. “You’d give me the dollar.”

Marsh said he doesn’t see a public appetite for other taxes — such as a tobacco tax — to relieve future Medicaid needs.

Williamson, the state health officer, said the bed tax shows that tax increases are politically viable in Alabama — in the rare event that an industry actually asks to be taxed. Still, he said, a similar tax, supported by federally qualified health centers, failed in the Legislature this year.

“It takes a lot of explaining to tell people why this new tax is a good thing,” he said.

Capitol & statewide correspondent Tim Lockette: 256-294-4193. On Twitter @TLockette_Star.

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