Health Care

Jul 14, 2011

The FY 2012-13 appropriations for the Texas Health and Human Services Commission (HHSC) totals $13.9 billion General Revenue (GR) and $33.9 billion All Funds (AF), before article IX (General Provisions) reductions and the impact of any funding changes enacted during the First Called Session. Article II, the health and human services article of the budget, absorbs a 17.2 percent reduction in all funds. 

To avoid even deeper cuts, budget riders combined provider rate reductions, Medicaid funding reductions and cost containment initiatives across broad areas.  Further, the Medicaid funding levels do not address the full funding of caseload growth, acuity and costs, underfunding the Medicaid program by a projected $4.8 billion.  This shortfall amount, or more depending on actual caseload costs and growth, will be part of a supplemental appropriation request by the HHSC to the 83rd Legislature when they convene in January 2013. 

Key Cross Agency Issues

• Medicaid is not fully funded for caseload or cost growth. Based on LBB estimates, HHSC and DADS are under funded by $4.8 billion in general revenue.
• Several Medicaid provider rate reductions included in the introduced bill are restored, including nursing facilities, community care, physicians, dentists and home health providers. FY 2010 cuts remain in effect.
• Contingent on the Comptroller certifying additional GR and premium tax revenue above the biennial revenue estimate, HHSC and DADS are appropriated $500 million (GR) for the Medicaid services in fiscal year 2013, with HHSC receiving $387million and DADS receiving $113million.
• In general, the budget maintains the 10% reductions to agency programs and operations that were included in the bill as introduced.

Cost containment Initiatives and Other Reductions

• HB 1 includes three major cost containment riders for Article II focusing on producing savings in Medicaid through service utilization efficiencies, reimbursement policy adjustments, and other targeted efforts to reduce costs. HHSC Rider 59, HHSC Rider 61 and Article II, Special Provisions, Sec. 17 reduces general revenue funding by $700 million, $450 million and $705 million respectively, for a total of almost $1.9 billion.
• In addition, savings of $367 million in general revenue is included related to expanding the scope and geographic reach of Medicaid managed care.
• HHSC appropriation also is reduced by $200 million (GR) in fiscal year 2013 in B.1.4. Children and Medically Needy. Funds are restored contingent on the Comptroller certifying additional GR above the Biennial Revenue Estimate.
• HB 1 also includes a reduction of $250 (GR/GRD) to state agencies and institutions of higher education excluding FSP and the state Medicaid program in fiscal year 2013.

Article IX Reductions & Potential for Additional Revenue

• Article IX could impose an additional $200 million GR reduction to Medicaid.
• Should the Comptroller certify an additional $950 million in new revenue, HB 1 would prioritize the first $700 million in new revenue to the Medicaid program so that some reductions could be avoided and reduce the Medicaid shortfall.

Across the Board Reductions

• All state agencies will be assessed a 1% surcharge on payroll during the 2012-13 biennium in an effort to maintain employee health and insurance benefits.
• All state agencies are subject to a reduction of $250 million GR in FY 2013. This reduction can be mitigated by the certification of new revenue.

The appropriations made in the 2012-13 biennium include reductions to several provider rates for the 2012-13 biennium. At least 33 states have reduced provider fees for the fiscal year that starts July 1, according to a report  by the National Association of Budget Officers. Hearings regarding several provider rate reductions have already taken place. HHSC has published an expedited process for development and approval of rules which will culminate in an effective date of September 1, 2011 for adopted rules (more details).

Key legislation from 82^nd Regular Session:

HB 1983 – Kolkhorst/Nelson – relating to certain labor inductions performed on recipients under the Medicaid program. HB 1983 requires a hospital that provides obstetrical services to collaborate with physicians providing services at the hospital to develop quality initiatives to reduce the number of elective or non-medically indicated induced deliveries or cesarean sections performed at the hospital on a woman before the 39th week of gestation. HHSC is to conduct a study to assess the effects of the quality initiatives as added by this Act on infant health and frequency of infant admissions to neonatal intensive care units and hospital readmissions for mothers and infants. Further, the bill directs HHSC to achieve cost savings by adopting quality initiatives that are evidenced based and designed to reduce the number of elective inductions and cesareans. This is similar to a cost containment rider in HB 1, the state budget.  (Effective September 1, 2011.)

HB 2245 – Zerwas/Nelson – relating to physician incentive programs to reduce hospital emergency room use for non-emergent conditions by Medicaid recipients. HB 2245 seeks to reduce the use of emergency rooms for non-emergent care by requiring a study to evaluate the benefits of a cost-effective physician incentive program throughout the Texas Medicaid program and, according to the results of the study, establish such a program. Study results are due to the governor and Legislative Budget Board by August, 2012. Currently, many Medicaid clients use the emergency room for conditions that could be treated in a primary care setting, such as a doctor’s office or clinic, where the treatment costs much less.  Redirecting clients with non-emergent conditions to the primary care setting could save the state approximately $180 million per year according to the LBB. (Effective September 1, 2011.)

HB 2636 – Kolkhorst/Nelson – relating to a commission to study neonatal intensive care units. The bill requires the executive commissioner of the Health and Human Services Commission to create and appoint the members of the Neonatal Intensive Care Unit Council to study and make recommendations regarding neonatal intensive care unit operating standards and reimbursement, including an accreditation process, through the Medicaid program for services provided to an infant admitted to a neonatal intensive care unit. (Effective September 1, 2011.)

SB 796 – Nelson/S. King – relating to reporting on the prevention and treatment of diabetes in the state. SB 796 amends the Health and Safety Code to require the Health and Human Services Commission, in coordination with the Texas Diabetes Council, to prepare a biennial report that identifies HHSC’s priorities for addressing diabetes within the Medicaid population and to submit the report to the legislature and the governor not later than December 1 of each even-numbered year. The bill requires HHSC, not later than December 1, 2012, to submit the initial report. The bill also requires the council, in conjunction with developing each state plan for diabetes treatment, education, and training, to conduct a statewide assessment of existing programs for the prevention of diabetes and treatment of individuals with diabetes that are administered by HHSC or a Texas health and human services agency.

The council, in their assessment, must:

• Collect data regarding the number of individuals served by the programs; the areas where services to prevent diabetes and treat individuals with diabetes are unavailable; and the number of health care providers treating individuals with diabetes under the programs.
• The bill requires the council, not later than November 1 of each odd-numbered year, to submit to the governor, the lieutenant governor, and the legislature a written report containing the findings of the assessment and requires the council, not later than November 1, 2013, to conduct and submit a report on the initial assessment. (Effective September 1, 2011.)

HB 300 – Kolkhorst/Nelson – relating to the privacy of protected health information. Currently in statute, two prohibited acts to the state privacy law exist – marketing and re-identification of protected health care information. HB 300 adds two new prohibited acts to the state privacy law – the sale of protected health care information and disclosure without authorization. (Effective September 1, 2011.)

SB 293 – Watson/J. Davis – relating to telemedicine medical services, telehealth services, and home telemonitoring services provided to certain Medicaid recipients. SB 293 requires the Health and Human Services Commission to create a system for reimbursing Medicaid providers for telehealth and home telemonitoring services, if cost-effective, and report on Medicaid telehealth and home telemonitoring services biannually. (Effective September 1, 2011.)

SB 652 – Hegar/Bonnen – relating to governmental entities subject to the sunset review process. Each legislative session there is a “sunset safety net” bill.  This is the vehicle passed each session to extend the sunset dates of agencies that have undergone the sunset review process but whose enactin
g legislation implementing sunset recommendations failed to finally pass.  The safety net bill is used to ensure the agency continues until the next legislative session.  The bill is also used to extend the sunset date of agencies for various reasons.  SB 652 extends the Sunset review date for the Health and Human Services Commission and the Medicaid program under its purview until September 1, 2015.  The rationale is with limited resources HHSC would not be able to undergo the rigorous sunset process and implement the demanding timelines associated with Medicaid cost containment, quality-based reforms and provider methodology changes which are needed to achieve budget savings assumed in HB 1, the state budget. (Effective immediately.)

HB 1951 – L. Taylor/Hagar – relating to the continuation and operation of the Texas Department of Insurance and the operation of certain insurance programs. This bill has changed significantly through the process, with the House adding 27 floor amendments and the Senate adding an additional 10. The final bill has been significantly whittled down in conference and as finally passed now pertains to mainly sunset recommendations and/or language in the original bill as filed. (Effective September 1, 2011.)