July 3, 2001

Mr. C. Warren Neel, Ph.D.
Commissioner
Tennessee Department of Finance and Administration
1st Floor, State Capital
Nashville, TN 37243

RE: Federal Medicaid funding for Long Term Care

Dear Commissioner Neel:

We are writing with regard to the recent disallowance of federal Medicaid matching funds, as communicated to you in the June 11 letter from the Regional Office of Health Care Financing Administration. 

As you are aware, we and our fellow community organizations representing children, the elderly and people with disabilities have followed with interest and concern for several years the state's nursing home bed tax and related private pay resident grant program. Our interest stems from the fact that the tax is levied upon our constituents, who are among the most vulnerable of Tennesseans. Our concern arises from the manner in which the state uses the revenues from the bed tax, and because of the way in which the nursing home lobby characterizes the tax. The revenues are used to fund nursing home care, to the exclusion of home and community-based services that are preferred by most long term care consumers and their families. Ironically, the nursing home industry has used the bed tax to retard the development of community alternatives, by claiming that nursing homes pay the tax, and the revenues therefore belong to them. In fact, as you know, it is consumers who pay the tax, and the nursing facilities merely collect it on the state's behalf. Despite the inaccuracy of the industry's characterizations, the existence of the bed tax has been used successfully by the nursing home lobby in opposing any use of current Medicaid revenues to fund home and community-based care. The bed tax scheme therefore materially contributes to the state's ongoing violation of the Americans with Disabilities Act and the federal mandate to comply with the Supreme Court's decision in the Olmstead case.

Because of the inequities in the bed tax and its perverse impact on the development of a cost-effective, fair and humane long term care system in our state, we support a major revision of the bed tax and private pay resident grant program. Please refer to the Nursing Home CARE Bill, H.B. 628/S.B. 988, currently pending before the General Assembly.

The recent disallowance of federal matching funds for the bed tax directly implicates our concerns. It is our understanding that the state is pursuing an appeal of the disallowance to the Departmental Appeals Board of the U.S. Department of Health and Human Services. We intend to seek amicus curiae status before the Board in those proceedings, representing the constituencies that pay the bed tax and are affected by it. We intend to play a decisive role which consumer groups played in similar proceedings in re: Tennessee Department of Health and Environment, Departmental Appeals Board Dec. No. 1047 (1989) 

We are currently trying to assess what position we should take in order to best represent the interests of that constituency. Unless the revenues from the bed tax are used to advance compliance with Olmstead by developing an effective comprehensive system of home and community-based services, there is no reason to oppose the disallowance, and every reason to advocate against the state's position. 

On the other hand, if the revenues from the bed tax were used to fund home and community-based services, the tax would no long be part of an illegal "hold harmless" scheme benefiting the nursing homes. In such circumstances, the tax would also be defensible as a necessary revenue source for funding compliance with Olmstead. We could then support the state's appeal as consistent with sound long term care policy, the federal law, and the interests of our constituents. 

Thus far, state policy has reflected the nursing home industry's insistence that the more than $800 million that Tennessee currently spends on long term care continue to be allocated solely to nursing facilities. During last week's legislative action on the new budget, token funding to fulfill commitments to the development of home and community-based services was deleted. The state is actually going backward in terms of Olmstead compliance and reform of the state's long term care system, which is among the most deficient in the country. 

We would like to meet with you and other interested officials at your earliest convenience to explore whether the state is willing to commit itself to reforms that would enable us to support the state's appeal of the federal Medicaid funding disallowance. 

Thank you in advance for your consideration. We look forward to hearing from you.

Sincerely yours,