Nursing home residents caught in middle of bed tax battle

A battle between state and federal governments over a bed tax is putting nursing home residents in the middle.

At stake is a nearly $9 a day tax on all occupied nursing home beds in the state. The tax was instituted in 2004 in hopes of drawing extra Medicaid funding. But the feds said the income tax credit that allowed nursing home patients to deduct the tax from their state income was illegal.

Rep. Jose Campos, D-Santa Rosa, said the surcharge would unfairly tax private-pay individuals who are often on fixed incomes. Campos supported the measure to implement the surcharge in the 2004 session, but now says it should be repealed altogether.

“The people on Medicaid, there is no burden on them,” Campos said. “It is the people on the private pay, their portion is not being covered and it has to come out of their pockets.”

A bill that calls for the repeal of the daily bed surcharge and the repeal of the tax credit has been introduced in the state House of Representatives and the Senate. The fiscal impact report produced in the Senate shows about an $18.5 million negative impact on state revenue if passed.

But according to Sen. Stuart Ingle, R-Portales, who said he supports the full repeal of the surcharge, the repeal bill may never get out of committee.

“I think the bill is basically tabled now,” Ingle said.

Ingle said the bed tax just took the tax rate too high for those in nursing homes, who are already paying a sales tax for the services.

Federal officials have said to receive federal funding, nursing-home residents cannot receive tax breaks from the surcharge, said Betina Gonzales McCracken, a spokeswoman for the New Mexico Human Services Department.

“The feds don’t have a problem with the bed surcharge, they have a problem with the tax credit” that benefits between 1,500 and 1,800 individuals statewide, she said. “The federal government has made it clear that if the tax credit is repealed they will continue to fund our Medicaid.”

She said the federal government has reimbursed the fund so far, but if the tax credit is not repealed this session they could quit reimbursements and recoup funds already allocated.

At Retirement Ranch, approximately 35 out of 104 residents are considered private pay since they pay for their stay from their own pockets. The rate for private residents recently jumped from $120 to $132 a day, in part to make up for the surcharge, said Retirement Ranch Administrator Marv Schultz.

“Unfortunately private pay people took the brunt of that increase. All they end up doing is using up their resources much quicker and then they have to apply for Medicaid,” he said.

Andrew Chitwood, 95, has been in the Retirement Ranch for about the last 20 months.

“It’s an unfair tax anyway you look at it. It’s on sick people who aren’t making any money,” Chitwood said. “It’s just like throwing a rope on a group of people, and saying all the blue eyes are going to pay a tax to keep the brown eyes eating.”