An Act To Improve the Fairness of the Health Care Provider Tax and To Ensure Fair Implementation of Health Care Reimbursement Reforms
Maine Legislature, Session 121, LD 1293
Committee: Health and Human Services
Sponsors: MARTIN, WESTON, LAVERRIERE-BOUCHER
Amends: 22 MRSA §7853, 36 MRSA §2871, 36 MRSA §2872, 36 MRSA §2873

Legislative Document 
No. 1293 
S.P.424 
In Senate, March 11, 2003 
An Act To Improve the Fairness of the Health Care Provider Tax 
and To Ensure Fair Implementation of Health Care Reimbursement 
Reforms 
Reference to the Committee on Health and Human Services suggested and ordered printed. 
Presented by Senator MARTIN of Aroostook. 
JOY J. O'BRIEN 
Secretary of the Senate 
Cosponsored by Senator: WESTON of Waldo, Representative: LAVERRIERE-BOUCHER of 
Biddeford. 
Be it enacted by the People of the State of Maine as follows: 
Sec. 1. 22 MRS A §1708, sub-§3-A is enacted to read: 
3-A. 
Increases in nursing home compensation. 
In addition 
to rules established under subsection 3, 
the department shall 
establish rules concerning reimbursement that: 
A. 
Ensure that the following increases in nursing home 
reimbursement are provided for all services rendered on or 
after July 1, 2002: 
(1) 
The 
amount necessary to reimburse nursing home 
facilities, in the fixed cost component of the Medicaid 
rate, for the portion of the cos ts of the health care 
provider tax imposed by Title 36, chapter 373 allocable 
to Medicaid-covered services; and 
{ 2) 
A statewide increase in per diem 
reimbursement 
rates 
for 
patient 
care 
costs, 
in 
an 
amount 
that 
represents 
an increase relative to 
reimbursement 
ln 
effect on June 30, 
2002 of not less than ;1;16,300,000 
annually in the aggregate, consisting of: 
Ca} 
An increase in the direct care component 01 
the 
rate 
to 
address 
a 
portion of 
the 
current 
shortfall 
in 
direct 
care 
Medicaid 
revenues 
relative 
to 
the djrect care 
staffi~ costs of 
providing care to Medicaid recipients; and 
(b) 
A 
nursing 
patient 
costs. 
supplemental rate component that assists 
facilities 
in 
recruiting 
and 
retaini~ 
care staff and meeting other patient care 
"Patient care 
co&~ as 
used in this subparagraph, 
means all direct care costs and all routine costs. 
In 
setting 
rates 
to 
implement 
this 
subparagraph, 
the 
department shall provide relief for facility losses as 
eguitably as possible and seek to minimize the need for 
substantial price increases to consumers not covered by 
Medicaid; and 
B. 
Ensure 
that the 
supplemental 
rate 
component 
of 
the 
reimbursement rate provided in paragraph 
A, 
subparagraph 
(2), division {b) is determined and paid on a prospective 
basis and is not subject to retrospective adjustment. 
Rules adopted pursuant to this subsection are routine technical 
rules as defined in Title 5, chapter 375, subchapter 2-A. 
Page l-LR1304(1) 
Sec. 2. 22 MRSA §7853, sub-§7 is enacted to read: 
7. 
Reimbursement increases. 
The rules of reimbursement for 
residential care facilities must: 
A. 
Recognize and reimburse as fixed costs all necessary and 
proper costs of liability, malpractice and other insurance: 
B. 
Reflect a statewide increase in reimbursement for direct 
care costs in an amount that represents an increase relative 
to reimbursement in effect on June 30, 2002 of not less than 
the 
difference 
between 
$1,000,000 
and 
the 
aggregate 
statewide increase provided in section 1708, subsection 3-A, 
paragraph Ai and 
C. 
Upon request of a facility and a showing that there have 
been unusual increases in particular elements in the fixed 
cost component, 
require an adjustment in that facility's 
interim payments. 
This paragraph applies 
to 
fixed cost 
component elements, including without limitation liability 
insurance. 
Notwithstanding 
any 
other provisions 
of 
this 
section, 
rules 
adopted pursuant to this subsection are routine technical rules 
as defined in Title 5, chapter 375, subchapter 2-A. 
Sec. 3. 36 MRSA §2871, sub-§2, as enacted by PL 2001, c. 714, 
Pt. CC, §3 and affected by §8, is amended to read: 
2. 
Annual net 
revenue" means gross 
as bad debts, charity 
operating revenue. 
"Annual net operating 
charges less any amounts allewaale recorded 
care or payer discounts. 
Sec. 4. 36 MRSA §2871, sub-§3, as enacted by PL 2001, c. 714, 
Pt. CC, §3 and affected by §8, is repealed. 
Sec. 5. 36 MRSA §2871, sub-§3-A is enacted to read: 
3-A. 
Facility fiscal year. 
"Facility fiscal year" means 
the fiscal year actually used by a person subject to this chapter 
in keeping that person's books and records. 
Sec. 6. 36 MRSA §2871, sub-§6-A is enacted to read: 
6-A. 
State fiscal year. 
"State fiscal year" 
means 
the 
uniform fiscal year established pursuant to Title 5, section 1501 
for all financing and reporting of state government expenditures. 
Sec. 7. 36 MRSA §2872, as enacted by PL 2001, c. 714, Pt. CC, 
§3 and affected by §8, is repealed and the following enacted in 
its place: 
§2872. 
Tax imposed; fiscal years beginning 2002 
Beginning July L 
2002, in addition to all other fees and 
taxes assessed or imposed by the Maine Revised Statutes, a tax is 
imposed annually against each residential treatment facility and 
nursing home located in the State and calculated as follows. 
1. 
Residential treatment facilities. 
residential treatment facility under this 
as follows: 
The tax imposed on a 
section is calculated 
A. 
For the state fiscal 
tax imposed against each 
equal to 6% of its annual 
the state fiscal year; 
year beginning July L 
2002, the 
residential treatment facility is 
gross patient services revenue for 
B. 
For facility fiscal years beginning on or after July 1, 
2002 and before July 1, 2003, the tax imposed against each 
residential 
treatment 
facility 
in 
addition 
to 
the 
tax 
imposed pursuant to paragraph A is equal to 6% of its gross 
patient services revenue for that portion of the faci li ty 
fiscal year occurring after June 30, 2003; and 
C. 
For facility fiscal years beginning on or after July ~ 
2003, 
the tax imposed against each residential treatment 
facility is equal to 6% of its annual gross patient services 
revenue for each full facility fiscal year. 
2. 
Nursing homes. 
The tax imposed on a nursing home under 
this section is calculated as follows: 
A. 
For the state fiscal year beginning July 1, 2002, the 
tax imposed against each nursing home is equal to 6% of its 
annual net operating revenue for the state fiscal year; 
B. 
For facility fiscal years beginning on or after July 1, 
2002 and before July 1, 2003, the tax imposed against each 
nursing home in addition to the tax imposed pursuant to 
paragraph A is equal to 6% of its net operating revenue for 
that portion of the facility fiscal year occurring after 
June 30, 2003; and 
C. 
For facility fiscal years beginning on or after July lL 
2003, the tax imposed against each nursing home is equal to 
6% 
of 
its 
annual 
net 
operating 
revenue 
for 
each 
full 
facility fiscal year. 
The tax imposed by this 
p-rovider pursuant to section 
patient as a separately stated 
section is an obligation of the 
2873 and may not be billed to a 
charge. 
Sec. 8. 36 MRSA §2873, sub-§l, as enacted by PL 2001, c. 714, 
Pt. ee, §3 and affected by §8, is amended to read: 
1. 
Monthly 
returns 
required; 
payment 
of estimated 
tax 
liability. 
On or before the 15th day of each month, each person 
subject to the tax imposed by this chapter shall submit to the 
assessor 
a 
return on 
a 
form prescribed and furnished by the 
assessor. 
Each return must be accompanied by a payment of an 
amount equal to 1/12 of the person's estimated tax liability for 
the entire current state fiscal year or facility fiscal year ~ 
in the case of 
a 
facility taxed on the basis of 
a partial 
facility fiscal year after June 30,2003, an amount equal to a 
fraction of the estimated liability in which the denominator is 
the number of months remaining in the facility fiscal year and 
the numerator is one. 
A person may estimate its tax liability 
for the current state fiscal year or facility fiscal year by 
applying the tax rates provided by section 2872 
to the most 
recent state fiscal year 
or facility fiscal 
year 
for 
which 
Fe±evaBt 
reliable, 
complete 
information 
on 
total, 
taxable 
revenues have-~-~~~~y-aeteFmiBea-~~r~-Be-~~-~-te 
aHait-a4j~£~m€R~-~-~~~~r-~Fe",ieee-that-~~~-~~-yeaF-iB 
~HestieB-B€~aR-~~-~~--~ha~-~-yea£6-~~~-~~~~-b~iaai~-eE 
the--eHFFeBt--Eisea±--yeaF 
is 
available. 
The 
assessor 
shall 
prescribe by rule the criteria for determining reliability and 
suitability of revenue information used for estimates. 
The rule 
must provide for adjustments to reflect changes in the number of 
licensed or certified beds or extraordinary changes in payment 
rates. 
Once a taxpayer has made its first monthly payment for a 
state fiscal year or facility fiscal 
year 
pursuant 
to 
this 
subsection, the monthly amount must remain fixed throughout the 
fiscal year unless the assessor authorizes 
a 
change. 
If the 
person's estimated annual 
tax liability as 
reported and paid 
pursuant to thi s subsection does not equal the tax imposed on 
that 
person 
by 
section 
2872, 
any 
adjustments 
necessary 
to 
reconcile the estimated tax with the correct tax amount must be 
made pursuant to subsection 2. 
Rules adopted pursuant to this subsection are routine technical 
rules as defined in Title 5, chapter 375, subchapter 2-A. 
Pt. 
Sec. 9. 36 MRSA §2873, sub-§2, as 
ee, §3 and affected by §8, is 
enacted by PL 2001, c. 714, 
repealed and the following 
enacted in its place: 
2. 
Reconciliation return required. 
On or before October 
15, 2003 and on or before the 15th day of the 4th month following 
the end of each facility fiscal year ending after October 15, 
2003, each person subject in that state fiscal year or facility 
fiscal year to the tax imposed by this chapter shall submit a 
reconciliation return on a form prescribed and furnished by the 
assessor. 
The 
reconciliation 
return 
must 
account 
for 
any 
adjustments necessary to reconcile the annual tax for a prior 
state fiscal year or facility fiscal year estimated pursuant to 
subsection 1 with the person's correct tax liability, and the 
person shall submit with the reconciliation return payment of any 
amount due for the prior state fiscal year or facility fiscal 
year or portion of any prior state fiscal year or facility fiscal 
year. 
The taxpayer may also claim on the reconciliation return a 
refund or credit for any overpayment of tax. 
The determination 
of amounts due or overpaid is calculated by comparing the tax 
originally estimated and paid in the prior state fiscal year or 
facility fiscal year or years with the tax imposed by section 
2872 on taxable revenues accrued for that period, together with 
any audit adjustments or corrections of which the person has 
knowledge on or before the 15th day of the month immediately 
preceding the due date of the return. 
The obligation to file a 
reconciliation return with respect to a particular state fiscal 
year or facility fiscal year continues until the relevant taxable 
revenues for that period have been finally determined and are no 
longer open to audit adjustment or correction and the person has 
reported those revenues on a reconciliation return. 
Sec. 10. 36 MRSA §2873, sub-§3, as enac ted by PL 2001, c. 714, 
Pt. ee, §3 and affected by §8, is amended to read: 
3. 
Audit period to remain open; accrual of penalties and 
interest. 
Notwithstanding any other provision of law, the tax 
imposed against a person by section 2872 for any fiscal year 
remains open to audit and further assessment by the assessor 
until the person's taxable revenues for that fiscal year have 
been finally determined. 
Any underestimates of tax liability 
reported and paid pursuant to subsection 1 are subject to an 
assessment of interest at the rate provided in section 186 from 
the date or dates of underpayment until payment is made, unless 
the estimated tax liability was calculated 
ai'--app-J.y-i£~--t=he--t;aH 
~at;e6-F£ev4aea-by-~~~-i~~~~~~~~~~-~&~-~i6eal-i'eaF-EeF 
wa~ea-~~~--&a~able-~€¥€£~~-~-Beea-~~~~~-ae&eFm~Rea jn 
compliance with the standards adopted by the assessor pursuant to 
subsection 1, in which case no interest may accrue prior to the 
date on which the reconciliation return for the year is due. 
Any 
amount 
of 
tax 
that is 
reported 
on 
a 
reconciliation 
return 
required 
by 
subsection 
but 
not 
paid 
at 
the 
time 
the 
reconciliation return is filed is subject to the accrual of 
interest as provided by section 186, as well as to any applicable 
provisions of section 187 -B, 
penal ty provided by section 
pay a tax. 
including, without 
187-B, subsection 2 
limi tation, the 
for failure to 
Sec. 11. Nursing facilities assessment Other Special Revenue Funds 
program. 
There is created in the Department of Human Services 
an 
Other 
Special 
Revenue 
Funds 
program 
to 
be 
known 
as 
the 
"Nursing 
Facilities 
Assessment," 
which 
is 
composed 
of 
the 
revenues received from the tax imposed on nursing homes by the 
Maine Revised Statutes, Title 36, section 2872. 
Funds in the 
Nursing Facilities Assessment must be expended only for nursing 
facility services and may be expended only upon allocation by the 
Legislature. 
Any unexpended funds remaining at the end of each 
fiscal year may not lapse but must be carried forward to be used 
for the same purposes. 
Notwithstanding the requirements of this section, $9,500,000 
must be allocated annually to the General Fund, 
adjusted for 
inflation 
using 
the 
same 
economic 
trend 
factor 
methodology 
employed by the Department of Human Services for purposes of the 
Maine Revised Statutes, Title 22, section 1708, subsection 3-A. 
Sec. 12. Retroactivity. 
This Act applies retroactively to July 
1, 2002. 
Rules adopted pursuant to the Maine Revised Statutes, Title 
22, 
section 1708, 
subsection 3-A take effect retroactively to 
ensure that the increases required by Title 22, 
section 1708, 
subsection 
3-A, 
paragraph 
C 
are 
applicable 
to all 
services 
rendered by all nursing facilities on or after July 1,2002. 
To 
the extent necessary or expedient to accomplish this objective, 
the department shall provide in its rules for one-time, lump-sum 
payments to provide increased reimbursement for the period of 
time 
between 
July 
1, 
2002 
and 
the 
effective 
date 
of 
any 
prospective rate 
changes established under Title 
22, 
section 
1708, subsection 3-A. 
Rules amended pursuant to the Maine Revised Statutes, Title 
22, section 7853, subsection 7 are retroactive to July 1, 2002. 
Sec. 13. 
Effective date. 
This 
Act 
takes 
effect 
provisions in Public Law 2001, chapter 714, Part CC, 
are met. 
when 
the 
section 8 
SUMMARY 
This 
bill 
ensures 
that 
enhanced 
reimbursement 
that 
is 
essential to the long-term care industry will be made possible by 
revenue generated through the recently enacted provider tax and 
be timely implemented by the Department of Human Services. 
This bill also alleviates the unusual administrative burden 
imposed on Maine's nursing homes 
by certain features of the 
recently enacted provider tax, specifically the requirement that 
tax returns be based on the state fiscal year rather than the 
fiscal year used by the facility in keeping its books and records 
and certain rigid requirements with respect to the manner in 
which estimated taxes are to be computed. 
The bill prescribes reimbursement reforms for nursing homes 
and residential care facilities, respectively. 
The bill makes a technical correction in the definition of 
"annual net operating revenue." 
The bill provides for a transition to taxation on the basis 
of facility fiscal year information and returns, instead of state 
fiscal years, after the close of the current state fiscal year. 
The bill introduces 
reasonable flexibility into 
the 
tax 
estimation and reconciliation processes for the provider tax. 
The bill creates a special revenue account for the proceeds 
of the new provider tax. 
The Act applies retroactively to July I, 2002.