House Overwhelmingly Passes Six-Year Extension to Nursing Home Tax

The Oregon Health Care Association lobbied to for an early vote to extend the tax to 2026, providing stability to their businesses and the state. The tax raises about $70 million a year for vulnerable seniors.

The Oregon House of Representatives voted 53 to 3 to renew the tax on nursing home facilities by six years, extending the tax through 2026.

House Bill 4162 will now go to the Senate for approval, and would take effect on July 1, 2020.

The tax, which totals six percent of the total revenues of the state’s 136 nursing facilities, helps provide the state’s share of the Medicaid program for seniors and people with disabilities and has been in place since 2003, with the last extension in 2013.

The assessment was not set to expire until the middle of the next biennium, but Jim Carlson, the president of the Oregon Health Care Association, which represents most of these facilities, wanted to extend the tax early to provide stability to the industry.

The industry supports these taxes because most facilities will recoup more than they pay into the system when they are compensated by Medicaid. Without the tax, they would lose a big chunk of their funding stream, and poor senior citizens might go without care.

“The Medicaid program is a safety-net program for frail elderly or people with disabilities,” Carlson said. “This is for individuals who are impoverished and have very high care needs.”

The long-term care portion of Medicaid is managed by the Department of Human Services, separately from the Oregon Health Plan, which is housed in the Oregon Health Authority, which contracts with 15 coordinated care organizations to insure poor Oregonians. The long-term care program has much stricter limits -- people cannot have more than $5,000 in assets or income.

The tax will also remove one more headache as the Legislature seeks to fill a $1.5 billion hole in the healthcare budget for the 2019-2021 biennium. House Bill 4162 will raise about $72 million for the long-term care program in the second half of the next biennium, followed by $156 million in 2021-2023.

“It will allow the governor to assume the money will continue through the next biennium,” Carlson said. The tax is administered based on the number of nursing home beds a facility has available for use, at a rate of $23.68 a day, which DHS resets annually.

“It’s a long-term solution that provides stable funding,” said Rep. Greg Smith, R-Heppner.

Rep. Julie Parrish, R-West Linn, continues to oppose the assessment because it taxes continuing care retirement facilities, which are geared toward more affluent seniors, do not accept Medicaid, and therefore cannot be reimbursed to care for poor seniors.

“People in my community lost access to healthcare because we are taxing seniors who do not receive any benefit from that,” said Parrish, who said that Mary’s Woods at Marylhurst in Lake Oswego reduced their nursing bed capacity from 31 beds to just five beds to get out of the tax.

The original long-term care assessment exempted these facilities but Oregon was penalized by the federal government and lost about $10.6 million a year in Medicaid funds. The tax was extended to include continuing care retirement facilities like Mary’s Woods in 2013. Only seven nursing homes in Oregon do not accept Medicaid, accounting for about 2 percent of the beds.

The 2013 bill had a carrot-and-stick formula to reduce excess capacity in the nursing home system, as Oregon gravitates toward home- and community-based care for seniors and makes use of nursing homes only for rehabilitation and the frailest patients -- in stark contrast to many other states, where entrenched nursing home lobbies drive up the cost of care while keeping seniors in a more institutionalized care than they actually need.

In Oregon, Carlson and the long-term care lobby worked hand-in-hand with DHS to move toward a more progressive model of care, and about 1,300 beds out of a goal of 1,500 beds were removed from the system in the past five years. This left the system with about 11,000 nursing-home beds.

This provision was removed from the 2018 bill and Medicaid payment rates will be fixed at the level achieved according to that formula -- the 62nd percentile of allowable costs. It would have been higher if they had eliminated more beds, or less if they had removed fewer.

Reach Chris Gray at