LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 77th Regular Session May 1, 2001 TO: Honorable Patricia Gray, Chair, House Committee On Public Health FROM: John Keel, Director, Legislative Budget Board IN RE: SB1156 by Zaffirini (Relating to the state Medicaid program.), As Engrossed ************************************************************************** * Estimated Two-year Net Impact to General Revenue Related Funds for * * SB1156, As Engrossed: positive impact of $43,715,151 through the * * biennium ending August 31, 2003. * * * * The bill would make no appropriation but could provide the legal * * basis for an appropriation of funds to implement the provisions of * * the bill. * ************************************************************************** General Revenue-Related Funds, Five-Year Impact: **************************************************** * Fiscal Year Probable Net Positive/(Negative) * * Impact to General Revenue Related * * Funds * * 2002 $20,596,959 * * 2003 23,118,192 * * 2004 24,018,954 * * 2005 21,111,166 * * 2006 17,982,137 * **************************************************** All Funds, Five-Year Impact: *********************************************************************** *Fiscal Probable Probable Probable Probable Change in * * Year Savings/ Savings/ Savings/ Savings/ Number of * * (Cost) from (Cost) from (Cost) from (Cost) from State * * GR Match Federal GR Match Federal Employees * * for Funds - for Funds - from FY 2001 * * Medicaid Federal Medicaid Federal * * 0758 (Medicaid) 0758 (Medicaid) * * 0555 0555 * * 2002 $16,412,500 $27,591,108 6.0 * * $(17,254, $(27,098, * * 238) 118) * * 2003 19,105,808 31,628,565 6.0 * * (37,117,125)(55,861,645) * * 2004 22,700,466 37,062,139 6.0 * * (39,836,957)(59,930,027) * * 2005 22,700,466 37,100,989 6.0 * * (42,770,569)(64,343,303) * * 2006 22,700,466 37,140,368 6.0 * * (45,925,775)(69,089,941) * *********************************************************************** *************************************************************************** *Fiscal Probable Savings/(Cost) from Probable Revenue Gain/(Loss) * * Year General Revenue Fund from General Revenue Fund * * 0001 0001 * * 2002 $19,609,900 $1,828,797 * * 2003 39,219,799 1,909,710 * * 2004 39,219,799 1,935,646 * * 2005 39,219,799 1,961,470 * * 2006 39,219,799 1,987,647 * *************************************************************************** Technology Impact Section 3: The Department of Health (TDH) would require $71,500 per year for claims processing fees performed by the National Heritage Insurance Company. Fiscal Analysis The bill would revise Medicaid statutes. Bill sections are discussed below. Section 1 would direct TDH to provide for cost-sharing by recipients of prescription drug benefits in a manner that ensures that recipients with higher income levels are required to pay progressively higher percentages of the costs of prescription drugs. The fiscal impact is discussed under Methodology. Section 2 would require that the allocation of any funds appropriated for rate increases for physician services and outpatient hospital services recognize and reward high volume providers, with an emphasis on providers located in areas of the state where medical assistance payments are particularly vital to the health care delivery system. It is estimated this provision would not have a net impact fiscal impact to the state. However, it would result in a different allocation of any funds appropriated for rate increases. Section 3 would require a Medicaid demonstration project (waiver) for a period of seven years. The waiver would provide psychotropic medications and related laboratory and medical services necessary to conform to a prescribed medical regime for those medications. Eligible persons would be those between the ages of 19 and 64, with incomes below 200% of the federal poverty level, and have been diagnosed with a mental impairment, including schizophrenia or bipolar disorder, that is expected to cause the person to become a disabled individual as defined by federal law. The bill would provide for 12 month continuous eligibility and appropriate enrollment limits. The bill would allow for cost-sharing payments by participants. The fiscal impact is discussed under Methodology. Section 4 would empower the Health and Human Services Commission (HHSC) to transfer any portion of the Medicaid program from a health and human services agency to the commission, subject to the approval of the Medicaid Legislative Oversight Committee. The bill would establish the committee to review and approve or reject any Medicaid transfer proposed by HHSC. The committee would be composed of three members of the Senate appointed by the Lieutenant Governor and three members of the House of Representatives appointed by the Speaker. Section 4 would also direct HHSC to develop and implement strategies to improve management of the cost, quality, and use of services provided under the program. The strategies could include the imposition of copayments for services and the use of procurement initiatives such as selective contracting. TDH and HHSC estimate that various procurement initiatives would result in savings. See Methodology for details. The agencies did not estimate savings that could result from copayments (other than copayments for prescription medications). Sections 7, 8, and 9 would direct HHSC to develop and provide a consolidated Medicaid appropriations request, a comprehensive Medicaid operating budget and quarterly Medicaid expenditure reports, and a Medicaid reimbursement rates report. Section 11 would transfer all funding, functions, employees, etc. of the Department of Health (TDH) that are determined by the HHSC Commissioner to be essential to the administration of the Medicaid program to HHSC. The transfer would occur no later than January 1, 2002. Section 16: The bill would take effect September 1, 2001. Some bill sections would take effect immediately if the Act received a vote of two-thirds of all members elected to each house. This fiscal analysis assumes that all sections of the bill would be effective September 1, 2001. An earlier effective date could increase the savings and costs reflected in the estimate. Methodology Section 1 1. TDH assumes the following: Copayments would be required of the Aged, Disabled and Blind population residing in the community; the affected number of clients would total 248,276 in FY 2002, 251,769 in FY 2003, 255,311 in FY 2004, 258,904 in FY 2005, and 262,546 in FY 2006; clients would pay on average fifty cents per prescription per month; each client would receive three prescriptions per month per year; client contributions would total $4,468,968 in FY 2002, $4,531,842 in FY 2003, $4,595,598 in FY 2004, $4,660,272 in FY 2005, and $4,725,828 in FY 2006. 2. The client contribution would be divided between the federal government and the State. The federal share would total 60.20% in FY 2002, 60.08% in FY 2003, and 60.07% in each subsequent year. The federal share is reflected as a savings. The State share is reflected as a revenue gain to General Revenue, as it is assumed these funds would be deposited to the General Revenue Fund. Section 3 1. It is assumed that no more than 21,000 total clients would be served in the medications waiver. It is also assumed that benefits are limited but the participants are not subject to the monthly three prescription limit under the Medicaid program. The average cost for services is assumed to be $3,821 per month, as found in the waiver application to HCFA dated October 2000. Estimates assume the inclusion of clients with schizophrenia and bipolar disorders. Inclusion of clients with other disorders could increase or decrease expenditures, provided the number of clients to be served did not change. The federal share would total 60.20% in FY 2002, 60.08% in FY 2003, and 60.07% in each subsequent year. 2. General Revenue (001) savings would result from no longer serving 12,697 clients in General Revenue funded programs at the Department of Mental Health and Mental Retardation (MHMR). It is assumed that these clients would be served in the new waiver program. 3. MHMR would need an additional six FTEs at an average cost of $64,832. Average costs include salaries, benefits, and operating expenses. 4. There is an assumption of a six month phase-in period for FY 2002. 5. An increase in General Revenue (001) is assumed as follows: clients would pay on average fifty cents per prescription per month; each client would receive two prescriptions per month per year. The client contribution would be divided between the federal government and the State (as indicated under Section 1). 6. It is assumed that 6.5% of clients with schizophrenia and bipolar disorders served by MHMR become eligible for Supplemental Security Income (SSI) and full Medicaid coverage one year after initially receiving treatment. It is further assumed that this percentage of the waiver clients will avoid SSI/full Medicaid coverage, resulting in a savings to the Medicaid program. Specifically, it is assumed that 681 waiver clients in FY 2003 and 1,363 waiver clients in each subsequent year will avoid full Medicaid coverage. The average monthly cost (savings) per disabled client is estimated to be $825.05. Savings would be divided between the federal government and the State. The federal share would total 60.20% in FY 2002, 60.08% in FY 2003, and 60.07% in each subsequent year. 7. The Department of Human Services (DHS) assumes eligibility determination would be conducted through the use of existing resources at MHMR and local entities, therefore, no costs have been assumed related to DHS. Section 4 1. TDH and HHSC estimate that selected contracting with hospitals would result in a 2.5% savings per year, totaling in All Funds $30,904,523 in FY 2002, $30,811,623 in FY 2003, $32,556,975 in each subsequent year. TDH and HHSC estimate that a statewide competitive procurement for Durable Medical Equipment would result in a 10% savings per year totaling $9,170,854 in FY 2002, $9,143,287 in FY 2003, and $9,641,873 in each subsequent year. TDH and HHSC estimate that a statewide competitive procurement for vision care would result in a 10% savings per year totaling $1,162,060 in FY 2002, $1,158,567 in FY 2003, and $1,158,277 in each subsequent year. 2. Savings would be divided between the federal government and the State. The federal share would total 60.20% in FY 2002, 60.08% in FY 2003, and 60.07% in each subsequent year. Local Government Impact No significant fiscal implication to units of local government is anticipated. Source Agencies: 324 Texas Department of Human Services, 501 Texas Department of Health, 529 Health and Human Services Commission, 655 TX Dept. of Mental Health & Mental Retardation LBB Staff: JK, HD, PP