FINAL BILL REPORT

                           SSB 5957

                          C 276 L 93

                      SYNOPSIS AS ENACTED

Brief Description:  Changing the tax rate for intermediate care facilities for the mentally retarded.

SPONSORS: Senate Committee on Ways & Means (originally sponsored by Senator Rinehart; by request of Department of Social and Health Services)

SENATE COMMITTEE ON WAYS & MEANS

BACKGROUND:

Over the past several years, many states began to use health care provider-specific taxes to help finance their Medicaid programs.  Such taxes can be acceptable to providers who do a large amount of Medicaid business, because their tax cost can often be reimbursed in full as part of their Medicaid rate.  These taxes are attractive to states because the state receives all of the tax receipts, but only pays the state Medicaid share of the reimbursement to providers.  The federal share of the Medicaid reimbursement becomes a net gain to the state.

The 1992 Legislature enacted a 15 percent provider-specific tax on Medicaid intermediate care facilities for the mentally retarded, or IMRs.  IMRs include five of the six state-operated developmental disabilities institutions, five nursing home-licensed facilities, and 19 group homes.  The tax was expected to result in a $19.5 million net gain to the state general fund this biennium.

New federal regulations have been issued on provider-specific taxes.  These regulations establish new requirements for federal reimbursement on any tax in excess of 6 percent. Washington's IMR tax does not meet those new requirements.  Unless the tax rate is lowered to 6 percent by April 1, 1993, the federal government will no longer reimburse the cost of the tax.  This would result in a net loss to the state general fund of approximately $1.4 million this biennium, and approximately $11 million during the 1993-95 biennium. 

The new regulations require states to tax community residences for the mentally retarded covered under a Medicaid waiver, provided that, as of December 24, 1992, at least 85 percent of such facilities were IMRs prior to the grant of the waiver.  Washington's developmental disabilities group homes do not meet this requirement, and therefore may not be taxed.

SUMMARY:

The tax rate on IMR facilities is lowered from 15 percent to 6 percent when the Secretary of Social and Health Services certifies that the 15 percent rate is no longer eligible for federal financial participation.  The secretary is not delegated the authority to determine what activities are to be taxed, or the tax rate.

VOTES ON FINAL PASSAGE:

Senate    48   0

House     94   0

EFFECTIVE:July 1, 1993