Senior living operators and residents alike are concerned about a proposed federal regulation that could result in steep tax bills for continuing care retirement communities (CCRCs) — and they may now have reason to be more worried about that rule taking effect as written.
On Wednesday, the Centers for Medicare & Medicaid Services (CMS) published a blog post from Administrator Seema Verma, in which she staunchly defended the controversial Medicaid Fiscal Accountability Regulation (MFAR).
Originally issued in Nov. 2019, MFAR contains a provision related to so-called provider assessments or bed taxes. These state taxes are levied on health care providers as a mechanism for generating federal matching dollars to fund the Medicaid program. In 18 states, certain types of providers that do not rely heavily on Medicaid — including CCRCs — are exempted from these taxes or pay them at reduced rates. These exemptions could be eliminated under MFAR.
“States may impose health care related taxes to broadly raise revenue from health care providers that can then be used to finance additional Medicaid payments,” Verma noted in her blog post. “However, there are important restrictions to prevent states from imposing a tax as a way to skirt restrictions around provider donations. In essence, states can’t raise tax revenue only from the providers who will benefit from additional Medicaid payments, and a tax generally must be evenly applied to all similarly situated providers.”
To explain the concept of “provider donations,” Verma offered the example of a hospital that contributes $1,000 to the state, which allocates that money to Medicaid and then draws down $2,000 in federal matching funds, meaning $3,000 flows back to the provider. Such a situation creates “an endless cycle of increased federal money with no skin in the game for states and no link to value,” she wrote.
However, CCRC providers argue that the elimination of provider tax exemptions could saddle them with six- or seven-figure tax bills, and these costs would have to be passed on to residents.
Currently, statistical tests are written into regulation governing which providers qualify for tax waivers.
“These statistical tests provide both transparency and certainty as to which types of tax programs are or are not permissible,” provider association LeadingAge wrote in a response to Verma’s blog post. “The proposed MFAR, however, provides none of the certainty or transparency states and CMS currently have access to.”
The proposed rule generated more than 4,000 comments from the public, and more than 700 of them mention CCRCs, according to LeadingAge. Hundreds of those comments came from CCRC residents or consumers, many of whom are concerned about the financial burden that MFAR might place on them in the form of increased costs.
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“It is critical that CMS continues to acknowledge interest in this proposed rule as well as the key causes for concern, including implications for CCRC residents,” LeadingAge urged.