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Advocacy in Action

Posted By Jennifer Gill, Friday, December 13, 2019
Updated: Thursday, December 12, 2019
December 13, 2019

Tell Congress to Support the Medical Expense Tax Deduction

The medical expense tax deduction is vitally important to older adults with high out-of-pocket medical costs and has enjoyed broad bipartisan support for over 75 years. Unfortunately, the lower 7.5% threshold of adjusted gross income (AGI) expired at the end of 2018 and it now stands at 10%. Thus, older adults are only entitled to deduct medical expenses in excess of 10% of their AGI. Congress is currently considering whether to return the threshold to 7.5% of AGI.

We urge you to contact Sen. Richard Burr, Sen. Thom Tillis, and your United States Representative and urge them to support extending that provision permanently, or at least through 2019. Email your lawmakers today by clicking on this link that will take you directly to a LeadingAge national website that will make the process simple and quick.

People aged 65 and over often have high out-of-pocket medical expenses relative to their incomes. Thousands of them will end up paying far higher taxes unless the lower threshold is extended. Residents of life plan communities can utilize this deduction for a portion of their entry and/or monthly fees that qualify as medical expenses, making this form of medical care in their retirement housing far more affordable for many older adults.

CMS Proposed Rule Could Impact Nursing Home Provider Taxes and Supplemental Payments
CMS has published the Medicaid Fiscal Accountability Regulation (MFAR) Proposal on the Federal Register. This proposed rule would make significant changes to key parts of state Medicaid financing structures for nursing homes and hospitals and would, among other items, preclude CCRCs from being exempted from North Carolina’s provider tax.

For nursing homes, including CCRCs with nursing homes/health centers, the most significant proposed changes are to provider taxes and supplemental payments. Listed below is a summary of key provisions of the MFAR proposal as they relate to nursing homes. A full crosswalk comparing current policy to the proposal is available from LeadingAge national here.

Provider taxes would not be banned outright under the proposed rule. CMS is, however, proposing to set new criteria for which revenue generated by provider taxes would or would not receive federal matching funds, and state provider taxes would face new scrutiny under the proposed regulation. Current policy requires that provider taxes be broad-based and uniform (or, in other words, be applied to providers equally), and that if states want more targeted tax structures, like a bed tax, it must receive a CMS waiver to do so. This process would not change under the proposed rule, and states would still be able to receive these waivers from CMS, but the considerations of what would be allowed under those waivers would change. Specifically, states would be disallowed from receiving federal funds for taxes that “impose undue burden” on the Medicaid program. Such “undue burdens”, per the proposal, include:

  1. Taxing providers that provide less Medicaid services at lower rates than those that provide relatively more Medicaid services.
  2. Medicaid services, in general, being taxed more than non-Medicaid services (except when excluding Medicare/Medicaid revenue).
  3. Not taxing, or taxing at a lower rate, groups of providers with no Medicaid services compared to other groups (e.g., those that take Medicaid).

In addition to these cases, the proposal also says that a tax would impose an undue burden if it,

“excludes or imposes a lower tax rate on a taxpayer group defined based on any commonality that, considering the totality of the circumstances, CMS reasonably determines to be used as a proxy for the taxpayer group having no Medicaid activity or relatively lower Medicaid activity than any other taxpayer group.”

In other words, CMS would have significant latitude determining whether a provider tax and any provider tax exclusions or “discounts” would comply with the proposal if finalized. This could very well mean that exclusions or lower taxes for CCRCs, for example, could be determined disallowable. Further, current policy does not allow providers to be guaranteed to be held harmless under provider taxes. This means taxes can’t be levied with the understanding that any funds a provider pays will eventually circle back to them. CMS proposes new language in MFAR that would allow CMS to more closely look at arrangements between providers, states and other relevant entities – including arrangements not in writing or legally enforceable – to determine if providers have “reasonable expectation that the taxpayer will receive a return of all or any portion of the tax amount.” If CMS reaches that conclusion, provider taxes could be further jeopardized.

LeadingAge North Carolina, in concert with LeadingAge national and other organizations, will work aggressively to provide CMS with information about the detrimental impact to residents of the proposed changes.

Aging Services Issues: Capitol Hill Status
The 116th Congress is moving toward the end of its first session. Because of partisan wrangling over issues unrelated to long-term services and supports, it has been difficult for Congress to reach the consensus necessary to pass even routine legislation. Click here for a comprehensive look at where aging services issues stand as we reach the end of the calendar year.

Keep Safety AND Compliance in Mind When Decorating for the Holidays
Celebrating the holidays can be an uplifting experience for both residents and staff. However, decorating can sometimes lead to some unintended consequences. Here are some quick tips to help ensure your organization maintains a safe environment that is compliant with the Life Safety Code.

LeadingAge North Carolina
222 N. Person Street Suite 205 | Raleigh, NC  27601
Ph. 919.571.8333 | Fax 919.869.1811 |

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