LEGISLATIVE BUDGET BOARD
                              Austin, Texas
                                     
                    FISCAL NOTE, 76th Regular Session
  
                              April 6, 1999
  
  
          TO:  Honorable Judith Zaffirini, Chair, Senate Committee on
               Human Services
  
        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 Introduced
  
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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 than having
employees of the department continue to process claims.

The Department of Health estimates a cost associated with this bill based
on the assumption that a consulting contract would be needed in order to
gather information, assist in writing and evaluation of Requests for
Proposal, and assist in the evaluation of components of the vendor drug
program that could be competitively bid.  However, it is assumed that
these functions could be absorbed by the department within existing
resources.

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:   
LBB Staff:         JK, TP, KF