Lawmakers who supported the “Granny Tax” during the 2017 legislative session have taken to social media to defend the bill and in one case paint criticism as “outright lies.” But their protests don’t hold up to scrutiny.

Those supporters of the tax, which was sponsored by State Rep. J.D. Sheffield (R–Gatesville), present it as a solution to boost Medicaid reimbursements to Texas nursing homes. In reality, House Bill 2766 accomplished that goal by taxing one group of elderly residents in order to pay for another.

In short, the measure would have instituted a Nursing Facility Reinvestment Allowance (NFRA)—widely called a “granny tax” by opponents—on all nursing home beds in Texas. Based on a Missouri model, an entity known as a Nursing Facility Agent Corporation would collect the fees and matching federal funds and disburse them back to nursing home operators.

Calling the tax an “allowance” facilitates an effort to skirt federal regulations requiring the tax to be applied uniformly, since the bill exempts some facilities known as Continuing Care Retirement Communities. Those regulations also prevent the scheme from defining the Agent Corporation, its oversight, and duties in statute.

Opponents of the tax, including those testifying before the House Committee hearing on the bill, shared concerns that private-pay homes and residents would suffer an unnecessary burden.

“The legislation balances the state budget on the backs of elderly veterans, retired teachers, and other Texans paying for their own nursing home expenses,” said George Linial, President of LeadingAge Texas, an association representing non-profit nursing homes testifying at the Health Services Committee hearing on the bill.

Supporters contend that the Agent Corporation would “make whole” the private care homes that are paying in, but detractors point out that such a provision does not exist in the law.

Estimates put the potential losses at primarily private-care homes close to $500,000 annually. And while some point to bill language preventing the tax from being passed through to residents, there’s no guarantee. An analysis by Dr. Dean Waldman, former Chief of Pediatric Cardiology at University of Chicago notes:

There are loopholes in the wording of HB 2766 that could allow facilities to pass the cost of the tax on to residents. Many would be forced to do so to keep their doors open.

Adding to the concerns over the Granny Tax are how the funds would be spent. The private Agent Corp. with that responsibility would be spun up by The Texas Health Care Association and other industry groups. Without legislative oversight, accountability simply cannot be ensured, and the expected $800 million collected under the scheme has the potential to invite rampant fraud.

All of this reeks of New Deal-style social engineering that conservatives have rightly opposed for decades. In fact, the Texas GOP Platform plank on Medicaid Reform reminds us that entanglements with federal programs do not comport with limited government principles, plainly stating that “We oppose any further expansion of Medicaid.”

In addition, the platform plank on Health Care Choice reads, “We urge the passage of health care reform which results in more affordable healthcare through a market-based, competitive, and transparent health care system.”

Conservatives are rightfully suspect of how federal dollars are used to coerce the states and threaten local control and oversight. Whether it’s Medicaid, education spending, or community development dollars, Washington provides no shortage of taxpayer-funded programs designed to entice and influence the states into certain behaviors against their better interests.

In addition to harming private-care residents, the Granny Tax ultimately distorts markets and the mechanisms that lead to lower prices and more quality by adding layers of bureaucracy to a system that is already struggling and, in many cases, operating on razor-thin margins. Milton Friedman, the Nobel-prize winning economist and architect of modern conservative economic theory, once observed “Nothing is so permanent as a temporary government program.”

While Texas nursing homes need a solution to rising costs of care and limited resources to provide it, presenting the Granny Tax as a conservative solution is the real “outright lie.” It has the potential to make a bad situation worse on the backs of the most vulnerable among us.
Additional Resources:

  1. Nursing homes joust over fee proposal: ‘Granny tax’ or funding lifeline?
  2. ‘Granny Tax’ Legislation Targets Local Seniors
  3. Bryan nursing home CEO speaks out against ‘Granny Tax’ bill
  4. Proposed “Granny Tax” seeks to fund Medicaid by taxing private pay nursing home residents, Ron Jennette, President of Crestview Retirement Community and President & CEO of Methodist Retirement Communities
  5. OpEd- ‘Granny Tax’ No Solution for Texas Medicaid, George Linial, President and CEO of LeadingAge Texas, a trade association representing over 250 not-for-profit Medicaid and Private Pay communities in Texas
  6. Granny Tax Legislation Targets Dallas-area Seniors
Salvador Ayala

Sal is the Budget & Policy Analyst for Empower Texans. He has been a committed proponent of American founding principles since 2007, shortly after receiving his J.D. from Chicago-Kent College of Law. Before joining Empower Texans, he served as legislative director for Rep. Matt Rinaldi in the Texas house and was a delegate to the 2012 RNC. In his leisure, Sal enjoys live music, digital photography, guitar, bicycling, trivia, and documentary films.


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