Gov. Greg Abbott, in his State of the State address to the Legislature, said “the only good tax is a dead tax.” This anti-tax message was delivered to make it clear that he was not interested in increasing or expanding taxes on any Texan or Texas business. Unfortunately, a bill taxing nursing home residents has been introduced in the Senate and House. Senate Bill 1130 and House Bill 2766 both institute a Nursing Facility Reinvestment Allowance (NFRA) — a “granny tax” — on all nursing home beds in Texas.
This legislative funding scheme falls in with a long line of failed bills that attempt to expand state reliance on federal Medicaid dollars for nursing homes. It also joins past legislative attempts to tax elderly Texans paying for their own nursing home care. We have seen the tax proposal for over twenty years — shot down each time by legislative leaders who realized it went against their anti-tax convictions and their preference for legislation that supports free-market values.
Supporters of the tax see nursing homes that receive Medicaid are dramatically underfunded in Texas, and legislators are unwilling to commit general revenue funds to meet this shortfall. The proposal would generate revenue by placing a tax on each nursing home resident in Texas. Those revenues would then be used to expand the amount of federal resources Texas can access. The state would direct those increased federal funds to Texas Medicaid providers. The state would avoid paying for the care and Medicaid providers would benefit from higher payment rates.
It comes with a cost. Not every nursing home would benefit from this legislation. Carrying the weight of the bill are 30,000 Texans paying for their own nursing home care. Under the legislation, those who are paying for their own care would be forced to pay a $4,000 annual tax. The total tax bill would amount to over $120 million dollars, and would push many of these seniors to the brink of financial destruction. Just imagine being taxed an extra $4,000 next year. Could you afford that?
Supporters of the legislation suggest that it would not tax the elderly already paying for their own care, but would instead be the burden of the organization taking care of them — that those patients would not see that $4,000 per year tax increase. But let’s be realistic. An average size nursing home would see a tax of $500,000 a year. No business can absorb an average tax increase of $500,000 without passing that cost on to the consumer.
Call it a consumer or a business tax, either way, this legislation would create a tax. Whether that tax is placed directly on the elderly or on the nursing homes caring for them, it does not hide the reality that the legislation would place a heavy financial burden on those paying for their own care.
There is no doubt that Medicaid reimbursement rates for Texas nursing homes are among the lowest in the country. Faced with such low rates, a responsible nursing home provider still must meet a daily challenge to maintain adequate staff levels, pay staff competitive wages, provide residents with nutritious meals, adhere to a complex set of regulations and provide high-quality compassionate care at rates too low for providers to pay minimum wage to their employees. But taxing one group of elderly to pay for another group is just the wrong way to improve Medicaid rates.
Taxing nursing homes or residents does nothing to improve quality, and in fact may take necessary resources away from our most vulnerable population. We think free-market principles should guide our payment system for Medicaid providers. Higher quality nursing homes should receive higher payments than others. Nursing homes that staff at higher levels should be paid more. Distinguishing better care through our payment system is one way that we can eliminate nursing homes that constantly perform at poor levels.
It’s unfortunate that some elected officials would seek to threaten quality care by imposing another tax, this time on some of the most vulnerable in our society. Instead of more taxes, let us redirect the focus to truly improving quality of care. Our hope is that the Legislature will follow the advice of Gov. Abbott and send this tax bill to the legislative graveyard for placing a terrible burden on our elderly population.