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F I S C A L I M P A C T R E P O R T

SPONSOR Fox-Young

DATE TYPED 1/25/05

HB 214

SHORT TITLE Daily Bed Surcharge Repeal

SB

ANALYST Taylor

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY06

FY06

(4,750.0)

(19,500.0)

(20,000.0)

Recurring

General Fund

(Parenthesis ( ) Indicate Revenue Decreases)

Relates to HB 77, HB 213, SB44

SOURCES OF INFORMATION

Responses Received From

Human Services Department (HSD)

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

HB 214 repeals the daily bed surcharge imposed on nursing homes, intermediate care facilities

for the mentally retarded and residential treatment centers. Also, the bill repeals the sections of

law pertaining to the distribution of the associated revenues to the general fund for purposes of

funding the Medicaid program.

The bill carries an emergency clause, making it effective upon approval by the governor.

FISCAL IMPLICATIONS

The general fund revenue losses shown for FY05 and FY06 simply reflect consensus revenue

estimate developed in December. These revenue estimates are based upon the initial full-year

fiscal impact estimate of $22.5 million developed during the 2004 session adjusted for collec-

tions to date.

The FY05 fiscal impact estimate assumes the repeal takes effect on April 1. Based on the FY05

House Bill 214 -- Page 2

revenue estimate of $19 million for the bed tax in FY05 and the assumption that the emergency

clause ends the tax in April, the revenue impact is $4.75 million, or one fourth of total estimated

revenue. The FY06 impact of $19.5 million reflects the entire amount estimated for this revenue.

ADMINISTRATIVE IMPLICATIONS

HSD reports that bed rates for nursing homes and intermediate care facilities, which were

changed effective July 1, 2005, would need to be reduced.

TRD indicates that repealing the bed tax would result in administrative savings to the depart-

ment.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

HB 213 is nearly identical to HB 214. The only difference is that HB 214 carries an emergency

clause.

HB 213 also relates to HB 77 and SB 44 (duplicate bills). These repeal the bed tax and the in-

come tax credit provided to private pay beds.

SUBSTANTIVE ISSUES

Bed tax revenues are earmarked to the Medicaid program. HSD’s analysis notes that the federal

government’s Centers for Medicare and Medicaid Services (CMS) does not have a concern with

bed surcharge revenues per se; their concern relates to the income tax credit. Unless the tax

credit is repealed, CMS will not allow bed surcharge revenue to be used as a state match to

Medicaid program. The federal government pays for approximately 73 percent of the Medicaid

program. Thus, a net loss of $19.5 million in general fund revenues in FY06 implies a loss of

approximately $53 million in federal funds for Medicaid unless other revenues from the general

fund are used to replace bed surcharge revenues. The impact in FY05 would be approximately

one fourth the full year impact.

HSD says that revenues lost from the repeal of the bed surcharge “would result in the enforce-

ment of additional cost containment measures”.

BT/lg:yr