Nursing Home/ ICF-MRs' "Bed Taxes" and Money Follows the Person

By Steve Gold

Rumpelstiltsken turned straw into gold. So do nearly two-thirds of the States' Medicaid programs at the expense of the ADA's right to avoid  "unnecessary institutionalization." 

Here's how the straw to gold cycle works: A State reimburses nursing facilities and ICF-MRs for Medicaid services they provide per bed. From these reimbursements, the State then requires "bed taxes" to be paid to the State from these same Medicaid funds that providers have just been paid by the State. 

The revenue from the "bed taxes" reduce the actual expenditures the State must pay as part of the State Medicaid match, while at the same time the State then collects the entire federal Medicaid share or match. The State can use the federal funds to prospectively increase the fees it pays to nursing facilities and ICF-MRs. And the cycle continues and the fees increase and the "bed taxes" continue and so on and so on. 

Silly us, we thought the State's Medicaid costs were entirely financed from public funds. We thought a State's Medicaid allocations were made based on unbiased policy health decisions. 

But the more nursing home or ICF-MR beds a state has, the more "bed taxes" the nursing home or ICF-MR providers pay to the State. If the number of nursing home or ICF-MR beds were reduced, there will be less "straw money" that your State can use, and, egads, the State will have to use real public funds for MA services. 

Could the loss of "bed taxes" be an incentive for a State NOT to apply for Money Follows the Person? Could the loss of "bed taxes" be enough for a State or Governor to perpetuate "unnecessary institutionalization" and the violation of the ADA? 

Let's look a little deeper at how "bed taxes" work. Assume a State's Medicaid program pays a nursing home or ICF facility, for example, $125 a day per bed, nearly $45,600 a year per bed, for the services the facilities provide. The Federal Medicaid match for this bed, let's assume is 57% (the national average) will be $29,992 per year and the State's share (43%) will be $19,608. 

Many States impose a "bed tax" on their nursing home or ICF-MR's beds. States currently set a 6% "bed tax." In our example, 6% of $125 per day (the Medicaid reimbursement rate) is $7.50 per day per bed. Not a lot daily, but, annually, this is $2,737.50 per bed, and for 1,000 beds it is $2.7 million. These "bed taxes" are presumably part of the daily $125 and of the annual $45,600 reimbursement for the bed that the State pays the providers. 

We don't want to be too cynical, but by not spending its own funds and collecting all the federal match, the State could then increase the nursing facility or ICF-MR reimbursement rates for the next year from $125, for example, to $135 a day per bed. With the increased reimbursement rates for the next year, the nursing facility or ICF-MR will then make back its entire $7.50 per day "bed tax" and its entire $2,737.50 per bed per year. 

Think Ponzi! In a few years, as this scam continues and builds on itself, and as the State Medicaid funds get put back into increased nursing facility and ICF bed reimbursements, these beds trigger a larger chunk of "savings" for the State. Also, the nursing facilities and ICF-MRs continue to get increases in their fees that generate more federal funds and so on and so on and so on. 

Could this be why it's been so hard to convince States to close down even unoccupied beds? Could this be why some States have fought against implementing "Money Follows the Person?" 

We have heard rumors that there are State Medicaid officials who will not apply for the "Money Follows the Person" because they do not want to jeopardize their "bed taxes," if they were to really "rebalance" their Medicaid programs by reducing beds. Why? 

Let's continue with the example. What would happen if ten people were to decide they wanted to leave the nursing facility or ICF and your State "rebalanced" its Medicaid Long Term Care by reducing the number of beds by ten beds? 

Your State would lose those ten beds and would lose the "bed taxes" the beds generate. Your State would also have to use real public funds and not "bed taxes" funds to pay the State share of the Medicaid expenditures for nursing facilities and ICF-MRs. 

Could the reason that the numbers of people in nursing facilities/ICF-MRs has leveled off, but the overall nursing facility and ICF-MR Medicaid expenditures keep increasing, have anything to do with increased Medicaid reimbursements for these beds? 

Disability Advocates should:

1. Find out if your State is applying for MFP?

2. If yes, will it close beds when the person moves out of the nursing facility or ICF-MR? How will your State "rebalance" its Long Term Care programs without reducing the number of beds?

3. If your State is not applying for MFP, does your State presently impose a "bed tax?"

4. What political influences do ICF-MRs or nursing home providers have in your State? Do they have a Political Action Committee and do they make political donations to your Governor? Your State representatives?

-- Steve Gold, The Disability Odyssey continues

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