The Attack on Seniors

SEPT. 21, 2010


This op ed originally appeared in The Sacramento Business Journal Sept. 17, 2010.

On the weary backs of California seniors, the governor’s May budget revision offers a plan to help alleviate the state’s $19.1 billion deficit.

Gov. Arnold Schwarzenegger proposed to suspend an exemption for residential retirement communities from paying a fee on the skilled-nursing services they offer. Quite simply put, this is a tax.

After assuring Californians that he would not approve a budget that raised taxes, Schwarzenegger and some state Democrats want to tax nursing home beds in residential retirement communities. Of course, only the private-pay residents will be penalized and pay the tax, because Medi-Cal and Medicare residents would not be required to do so.

The results will be ugly for about 18 percent of residents — those who pay privately, out-of-pocket for their skilled-nursing care — who will be solely responsible for paying the exorbitant tax.

Many are asking why impose such a punitive tax on those who have shown personal accountability and have been responsible with their savings. The results will be predictable: This tax will force thousands of elderly people onto Medi-Cal, at an even greater expense to the state, even though they scrimped and saved to avoid being on government insurance.

If the governor’s proposal passes, the tax is projected to be $13 per-bed every day — an additional $390 per bed per month, $4,680 per bed per year. This tax sham does not take into account the resident senior’s ability to pay, or that it most likely will result in people running out of money, often referred to as “outliving your savings,” and eventually being forced onto Medi-Cal, an unthinkable predicament for the thousands of seniors who saved their money to avoid such a situation.

An attack on residential retirement communities will result because more seniors will avoid moving into such communities since they will be taxed on their savings. And being taxed on savings is a double-whammy — a tax on after-tax saving accounts, only for those living in retirement communities.

Of all the people to pick on, the people who have been paying their own way all of these years and subsidizing Medi-Cal through higher private pay rates, the governor seeks to tax these folks even more.

And this is not a tax on the wealthy, either. According to Aging Services of California, seniors living in multi-level residential retirement communities are middle-class earners who saved and paid-off their mortgages to fund a decent retirement.

The tax on skilled-nursing facilities was created five years ago in California in order to obtain more federal funds. Called a “bed tax,” the larger the nursing home’s Medi-Cal patient population, the more federal money it receives through increased Medi-Cal reimbursements. Larger nursing homes with a bigger Medi-Cal population would be able to recoup their losses; smaller nursing homes, which generally would have relatively few Medi-Cal residents, would not.

The governor’s budget proposal will hit private-pay residents hard and the communities they call home. The proposal will chase private-pay residents away from the multi-level retirement community model and thereby destroy a popular retirement choice for Californians. All generations will eventually be affected by this poor public policy. The young and old alike must demand that their elected state representatives kill this ill-conceived tax.

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