On February 10, 2011, House Appropriations took up discussion on the prison system, the foundation school program and Medicaid; Chairman Jim Pitts noted these issues take up 65% of the budget.
The committee first heard on the prison system and foundation school program. Prison systems expect increases in prison growth above what the Legislative Budget Board (LBB) has estimated. It was also pointed out that approximately 25% of the prison population has a mental health history or problem.
There was discussion on the basics of school finance in regards to the foundation school program. The introduced budget bill does assume there will be statutory changes to parts of the Texas Education Code but those changes are not specified in the introduced bill. The committee also discussed school funding before and after the compression rate. Rep. Mike Villarreal argued it appeared that Texas has invested less in schools since the compression rate.
In regards to Article II, Health and Human Services Commission (HHSC) Executive Commissioner Tom Suehs presented including HHSC staff including Chris Traylor, Commissioner, Department of Aging and Disability Services and Billy Millwee, State Medicaid Director.
A copy of the presentation can be viewed at: http://www.hhsc.state.tx.us/news/presentations/2011/Medicaid-Overview-0211.pdf
Suehs pointed out during his presentation that the introduced budget did not assume any costs of implementing the Affordable Care Act (ACA).
In regards to Medicaid costs, the HB 497 report, also known as the Medicaid Opt-Out report, argues that Medicaid, as it is designed currently, is not sustainable, stated Suehs.
Medicaid cost containment initiatives were also reviewed by Billy Millwee. The following initiatives were noted as saving $70 million in General Revenue (GR) this biennium:
• High cost imaging management
- Requires prior authorization (PA) for high cost imaging services.
• New drug classes added to Preferred Drug List (PDL)
- Effective July 2009, Medicaid implemented a PDL for cough and cold products.
- HHSC was able to increase savings by adding this class of medications.
• Billing coordination system expansion
- Expanded BCS to pharmacy claims.
- Identifies other insurance and defers Medicaid payment.
• Managed Care Organization (MCO) Rates
- Tighten up experience rebate methodology.
- Increase third-party recovery requirements.
- Reduce administrative cost component in rates.
Additionally, various assumptions for the Medicaid program assumed in HB1:
• Rates for all Medicaid providers reduced by 10% – ($1.6 billion GR)
- Rate increases in current biennium considered one-time and also reduced, except minimum wage increases.
- 10% reduction is in addition to 1% reduction to certain providers implemented in September 2010.
• Additional future cost containment efforts (HHSC Rider 61) – $450 million GR.
• Managed care expansion net savings (HHSC Rider 52)- $367 million GR. – six items that are included.
• Medicaid optional services reduced – $45 million GR. There were discussions on provider rate cuts.
The committee also heard that provider rates which are to be reduced by 10% in HB 1 could have a larger impact when combined with previous reductions, taking into account the absence of ARRA funds and if bonds are downgraded. Suehs said he read over the last weekend that Standard & Poor’s is already “marking Texas hospitals for a downgrade in their bonds because of a 10 percent scenario.”
Rep. Sylvester Turner, in response to various reductions in HB 1 asked about the known impact of these decisions to local community. Rep. Dawnna Dukes reiterated that she would like information provided on local level impact, a possible “ripple level effect” that could occur since the Legislative Budget Board (LBB) testified in front of the committee they had reviewed what impacts HB 1 would make at a state level without any review of how it will ripple down to local level.
Summary of LBB Budget and Policy Recommendations for the 2012-13 Biennium
Correctional Population Projections and Update on Recent Trends – February 10, 2011