Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance

committees of the NM Legislature. The LFC does not assume responsibility for the accuracy of these reports

if they are used for other purposes.

Current FIRs (in HTML & Adobe PDF formats) are a vailable on the NM Legislative Website (legis.state.nm.us).

Adobe PDF versions include all attachments, whereas HTML versions may not. Previously issued FIRs and

attachments may be obtained from the LFC in Suite 101 of the State Capitol Building North.

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

SPONSOR Carraro

DATE TYPED 1/25/2005 HB

SHORT TITLE Eliminate Nursing Home Daily Bed Surcharge

SB 44

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

Tax Credit Repeal

1,000.0

2,000.0 Recurring

General Fund

Total Impact

(18,500.0)

(18,000.0) Recurring

General Fund

(Parenthesis ( ) Indicate Revenue Decreases)

Duplicates HB 77

Relates to HB 213, HB 214,

SOURCES OF INFORMATION

Responses Received From

Human Services Department (HSD)

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

SB 44 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 as well as the income tax credit provided for payment of the tax

not made by insurers.

The bill does not specify an effective date, so provisions are assumed to become effective 90

days after the end of the session.

Senate Bill 44 -- Page 2

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 ad-

justed for collections to date.

Based on information provided by TRD and HSD repeal of the income tax credit is estimated to

increase general fund revenues by about $1 million in FY 06 and $2 million in FY07. The fiscal

impact estimate reports that there are approximately 8,400 beds in the kind of facilities eligible

for the tax credit. It also assumes 10 percent of beds are private pay and a 90 percent occupancy

rate, implying 756 occupied beds. Some private pay beds are financed by insurance and some by

individuals. TRD assumes that about three-quarters are paid for by individuals. Multiplying 756

by three quarters by $10 dollars by 365 yields a $2.0 million full year fiscal impact. The FY 06

impact is one-half the estimated full year impact. In making this estimate TRD assumed that the

credit would not apply to expenditures paid after the effective date of the repeal. However, they

note that the effective date of the repeal is ambiguous.

TRD also indicates that the fiscal impact of repealing the tax credit may be understated because

the private pay group does not include nursing home patients who pay for their care from social

security benefits. TRD notes that they don’t know how large this group is, but claim it could be

significant.

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.

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 $18.5 million in general fund revenues implies a loss of approxi-

mately $50 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/yr