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

SPONSOR Foley

DATE TYPED 2/04/05

HB 646

SHORT TITLE Eliminating Daily Bed Surcharge

SB

ANALYST Taylor

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

Provision

FY06

Bed Surcharge

Repeal

($19,500.0)

($20,000.0)

Recurring

General Fund

(Parenthesis ( ) Indicate Revenue Decreases)

Duplicates HB 213

Relates to HB 77, HB 214, SB44

SOURCES OF INFORMATION

Responses Received From

Human Services Department (HSD)

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

House Bill 646 eliminates 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 does not specify an effective date, so provisions are assumed to become effective 90

days after the end of the session.

FISCAL IMPLICATIONS

The general fund revenue loss simply reflects the $19.5 million included in the FY 2006 revenue

estimate. The revenue estimate reflects the initial fiscal impact estimate of $22.5 million devel-

oped during the 2004 session adjusted for collections to date.

House Bill 646 -- Page 2

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 646 duplicates HB 213.

HB 646 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credit is repealed, CMS will not allow bed surcharge revenue to be used as a state match to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 implies a loss of approxi-

mately $53 million in federal funds for Medicaid unless other revenues from the general fund are

used to replace bed surcharge revenues.

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