LEGISLATIVE BUDGET BOARD
                              Austin, Texas
                                     
                    FISCAL NOTE, 76th Regular Session
  
                              April 28, 1999
  
  
          TO:  Honorable Patricia Gray, Chair, House Committee on Public
               Health
  
        FROM:  John Keel, Director, Legislative Budget Board
  
       IN RE:  SB1585  by Zaffirini (Relating to the use of competitive
               bidding for certain functions and components of the
               Medicaid vendor drug program.), As Engrossed
  
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*  No significant fiscal implication to the State is anticipated.        *
*                                                                        *
*  The bill would make no appropriation but could provide the legal      *
*  basis for an appropriation of funds to implement the provisions of    *
*  the bill.                                                             *
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The bill would require the Department of Health, in consultation with the
State Council on Competitive Government, to seek competitive bids for
the claims processing function of the vendor drug program.  The
department would only be allowed to award a contract if the department
and Council on Competitive Government determine that the provision of
services under the contract would be more cost effective and the time to
process claims would be the same as or faster than having employees of
the department continue to process claims.

The Department of Human Services assesses a $1.7 million annual All Funds
cost in association with this bill on the basis that, if the vendor drug
program were outsourced, other programs using the Department of Human
Services mainframe would be assessed the vendor drug program's current
share of mainframe costs.  However, it is assumed that a review of the
cost effectiveness of any potential outsourced contract would take the
Department of Human Services' mainframe costs into consideration and the
state would not award a contract that would result in an increased cost
of $1.7 million per year overall for the state.
  
Source Agencies:   501   Department of Health, 324   Department of Human
                   Services
LBB Staff:         JK, TP, KF