June 22, 2005

Rural Nursing Homes Worried Over Death of "Granny Tax"

Many rural nursing homes are afraid of potential bankruptcies or closures due to the death of the so-called "granny tax" in the state Senate this session. The tax, which is technically called the quality assurance fee, was a proposed $7 a day fee placed on a nursing home bed that was privately funded that was estimated to generate around $1 billion in Medicaid reimbursements.

Many nursing home providers feel that they lose money on Medicaid patients. On average, about 30% of the beds at a given facility are private pay. In rural areas however, only about half that pay their own way, with the remaining 85% Medicaid recipients. As the cost of health care, including drugs, services and overhead costs, has increased, the amount paid out by Medicaid has not.

Many in the industry were hoping that this tax on private beds would alleviate some of the cost. The state estimated that the tax would generate $440 million in payments from nursing homes, leading to an additional $525 million in federal funding, all filtered back into Medicaid recipients. Governor Perry thought this tax was unfair to patients who pay their own way, who would bear the burden of the tax without seeing any increase in their services.

It appears that any increases in the pay rate for Medicaid beds will have to wait a couple years. While no cut has been proposed, the state did cut $92 million from its budget for Medicaid in anticipation of the passage of this tax. State officials promise no cut will be made, and the state will have to find the money somewhere to make up the deficit.

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