LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE
74th Regular Session
April 11, 1995
TO: Honorable Judith Zaffirini, Chair IN RE: Senate Bill No. 406
Committee on Health & Human Services By: Zaffirini
Senate
Austin, Texas
FROM: John Keel, Director
In response to your request for a Fiscal Note on Senate Bill No.
406 (Relating to the creation, powers, and duties of the health
care purchasing office.) this office has determined the
following:
The bill would make no appropriation but could provide the legal
basis for an appropriation of funds to implement the provisions
of the bill.
The bill would establish a Health Care Purchasing Office under
the jurisdiction of the Health and Human Services Commission.
The Commissioner of Health and Human Services would be authorized
to hire staff with expertise related to health care rates,
purchase of goods and services, specific needs of state health
care programs, and statistical modeling capabilities.
Except for the managed care plan of the Texas Department of
Criminal Justice and a program provided under the Texas Employees
Uniform Group Insurance Benefits Act, the bill would require the
Health Care Purchasing Office to:
* prescribe a uniform rate structure for reimbursement to
providers of health care services under a state health care
program; the bill does exempt certain institutions of higher
education.
* negotiate contracts for the purchase of drugs, medical
equipment, and supplies that consolidates purchases for all state
health care programs.
* prescribe uniform reimbursement rates for drugs, medical
equipment, and supplies purchased under a state health care
program. The bill would restrict provider reimbursement to that
of the Medicaid schedule for the period of September 1, 1995
through December 31, 1995 .
* prescribe a uniform rate structure for drug dispensing fees
under a state health care program for services provided on or
after January 1, 1996. The bill also requires certain state
agencies not to pay more than $4 as the dispensing fee for each
prescription but does exempt certain institutions of higher
education.
* adopt a list of medical supplies for which separate billing is
permissible in order to encourage private providers to obtain
competitive rates for medical supplies.
The bill would also require the Health Care Purchasing Office to:
* develop and implement a plan to incorporate the processing of
claims to mitigate high processing costs by combining the costs
with programs with lower processing costs.
* study potential cost-containment strategies for the Texas
Medicaid Management Information System.
* develop and implement an incentive plan in which state
agencies and state health care programs share in any savings to
the General Revenue Fund for any cost-containment strategies
provided by this bill which exceed $34 million in a fiscal year.
The bill would require an interim study committee and a study of
the managed health care plan of the Texas Department of Criminal
Justice. The Office would be required to report to the Seventy-
fifth Legislature regarding its findings on TDCJ's managed care
plan, any savings to state health care programs that occurred due
to provisions of this bill, and any other cost-containment
strategies it may identify.
The bill would require the Health Care Purchasing Office to:
* initiate collaboration between agencies for cost-containment
purposes;
* an analysis of reimbursement methods among agencies;
* evaluate Medicaid programs with emphasis on cost-containment
and managed care initiatives;
* a long-term strategic plan for the administration, purchase
and delivery of health care services;
* development of a central database of health care purchases;
* reduce the administrative burden on providers; and
* develop strategies to allow local governments to participate
in state health care cost-control initiatives.
This bill substantially implements HHS 1 in the Comptroller of
Public Accounts' publication, Gaining Ground. The Comptroller
estimates assume that six full-time equivalents (FTEs) at an
estimated annual cost of $500,000 in general revenue would be
necessary to implement the provisions of the bill. The estimates
of savings projected by the Comptroller have been reduced by the
amount which Gaining Ground attributed to the Medicaid component
at the Department of Health because both of the House and Senate
appropriations bills assume implementation of Legislative Budget
Board staff recommendations regarding dispensing fees for
prescriptions. General revenue savings of $12,900,400 in 1996
and $12,899,000 each year thereafter were projected by
Comptroller estimates. The Comptroller also reports that savings
would be generated to the Crime Victim's Compensation Fund but
does not specify estimates of such savings.
The estimates displayed below correspond to those prepared by
agencies which would be required to implement the provisions of
the bill. The Department of Health projects Medicaid savings
corresponding to incremental savings achieved by reducing the
dispensing fee from $4.55 assumed by the LBB to $4.00 as required
by the bill.
The Health and Human Services Commission estimates that a total
of 41.5 FTEs would be required at an annual cost of $2.1 million.
HHSC assumed that a combination of exempt (5) and classified
(36.6) positions would be required to fulfill the requirements of
the bill and include positions such as attorneys, economists,
budget analyst, planners, administrative technicians and
directors. In addition, HHSC assumed it would cost $20 million
for the development and implementation of a central database.
Savings associated with the requirement that all providers be
reimbursed at Medicaid rates until January 1, 1996 cannot be
determined at this time.
The probable fiscal implication of implementing the provisions of
the bill during each of the first five years following passage
is estimated as follows:
Fiscal Probable Cost Out Probable Cost to Probable Savings
Year of General Federal Funds: to General
Revenue and Medicaid Revenue Match For
General Revenue Medicaid
Consolidated Funds
1996 $19,062,119 $3,600,000 $5,575,103
1997 2,389,796 420,056 6,428,273
1998 2,481,596 318,256 6,428,273
1999 2,481,596 318,256 6,428,273
2000 2,481,596 318,256 6,428,273
Fiscal Probable Savings Change in
Year to Federal Number of State
Funds: Medicaid Employees from
FY 1995
1996 $9,244,417 41.5
1997 10,434,983 41.5
1998 10,434,983 41.5
1999 10,434,983 41.5
2000 10,434,983 41.5
Similar annual fiscal implications would continue as long as the
provisions of the bill are in effect.
The fiscal implication to units of local government cannot be
determined.
Source: Comptroller of Public Accounts, Department of Health,
Health and Human Services Commission
LBB Staff: JK, AZ, DF