LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
April 9, 2001
TO: Honorable Rodney Ellis, Chair, Senate Committee on Finance
FROM: John Keel, Director, Legislative Budget Board
IN RE: SB1156 by Zaffirini (Relating to the financing of, and
eligibility for, the state Medicaid program; making an
appropriation.), As Introduced
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* SB1156, As Introduced: negative impact of $(522,761,738) through *
* the biennium ending August 31, 2003. *
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NOTE: The bill appropriates an unspecified amount for the
implementation of the provisions of this Act. Certain sections of the
bill are effective immediately upon passage.
Appropriations:
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*Fiscal Appropriation out of GR Match Appropriation out of Federal *
* Year for Medicaid Funds - Federal *
* 0758 0555 *
* 2002 $0 $0 *
* 2003 0 0 *
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General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2002 $(208,084,828) *
* 2003 (314,676,910) *
* 2004 (318,289,232) *
* 2005 (311,784,288) *
* 2006 (316,452,881) *
****************************************************
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 GR Match General GR for HIV Employees *
* for for Revenue Services from FY 2001 *
* Medicaid Medicaid Fund 8005 *
* 0758 0758 0001 *
* 2002 $11,183,860 $19,609,900 $361,548 (324.0) *
* $(250,624, *
* 748) *
* 2003 21,311,673 39,219,799 361,548 261.6 *
* (387,516, *
* 721) *
* 2004 48,145,830 39,219,799 361,548 218.6 *
* (417,761, *
* 848) *
* 2005 71,845,158 39,219,799 361,548 174.6 *
* (435,121, *
* 526) *
* 2006 82,984,758 39,219,799 361,548 127.6 *
* (451,097, *
* 267) *
***********************************************************************
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*Fiscal Probable Probable Probable Probable *
* Year Savings/(Cost) Savings/(Cost) Savings/(Cost) Savings/(Cost) *
* from Counties from Federal from Federal from Federal *
* Funds - Federal Funds - Federal Funds - Federal *
* (Medicaid) (Medicaid) (HIV) *
* 0555 0555 0555 *
* 2002 $(8,348,602) $(347,315,789) $11,183,860 $724,183 *
* 2003 (7,711,784) (548,842,533) 24,160,481 724,183 *
* 2004 (7,711,784) (613,025,901) 64,158,090 724,183 *
* 2005 (7,711,784) (649,598,240) 99,423,090 724,183 *
* 2006 (7,711,784) (685,334,621) 115,773,498 724,183 *
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*Fiscal Probable Revenue Gain/(Loss) Probable Revenue Gain/(Loss) *
* Year from Vendor Drug Rebates (State from General Revenue Fund *
* Share) 0001 *
* 0706 *
* 2002 $11,384,612 $0 *
* 2003 11,579,591 367,200 *
* 2004 11,745,439 0 *
* 2005 11,910,733 0 *
* 2006 12,078,281 0 *
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Technology Impact
Section 1: One-time automation costs are assumed for the Department of
Human Services (DHS): 500 hours at $110 per hour. Transaction processing
costs totaling $35,000 per year are assumed for the Department of Health
(TDH). The federal share of administrative expenses would total 50%.
Section 6:
Psychotropic Medications Waiver: DHS would require 12,000 hours of
programming to adapt the eligibility system for a one-time cost of
$1,320,000. National Heritage Insurance Company (via TDH) would require
$71,500 per year for processing of claims.
HIV Waiver: DHS estimates 12,000 hours of programming at a cost of $110
per hour, for a total of $1,320,000 for FY 2002.
Women's Health Waiver: Automation for DHS to create a new type program
is assumed at 16,800 hours at $110, resulting in a cost of $1,848,000.
Section 7: For the demonstration project, DHS estimates an automation
cost of $715,000 for FY 2002 and $71,500 for FY 2003.
Fiscal Analysis
The bill would make numerous changes to the Medicaid program. Relevant
bill sections are analyzed below:
Section 1 would prohibit TDH from limiting the number of medications
prescribed to a recipient of prescription drug benefits under the medical
assistance program.
Sections 2-5 and 9 would modify the Medicaid application and
recertification processes for children under the age of 19 to make them
comparable to those of the Children's Health Insurance Program (CHIP).
Specific changes include: eliminating the face-to-face interview at
application and recertification; simplifying documentation and
verification; providing continuous eligibility for 12 months, with
recertification performed either annually or before the child's 19th
birthday; and excluding a child's/family's assets and resources. The
bill would take effect September 1, 2001, requiring that rules for
continuous eligibility be adopted by the appropriate state Medicaid
agency by October 1, 2001. Section 9 would take effect immediately if
the Act receives a vote of two-thirds of all members elected to each
house.
Section 6 (Psychotropic Waiver) would amend Chapter 32, Medical
Assistance Programs (Medicaid), Human Resources Code by establishing a
demonstration project for a period of five years. The demonstration
project, through Medicaid, would provide eligible persons with a limited
benefit package of psychotropic medications and related laboratory and
physician 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 percent of the federal poverty
level, and have been diagnosed with schizophrenia or bipolar disorder.
Section 6 (HIV Waiver) would provide for a demonstration project to
provide certain medical services and medications through the Medicaid
program for certain persons with HIV infection or AIDS. The medical
services would include services provided by a physician, physician
assistant, advanced practice nurse, or other health care provider, other
medications necessary for the treatment of HIV or AIDS, certain
vaccinations, certain gynecological services, hospitalizations, and other
laboratory services. The demonstration project would be established in
at least a two counties with a high prevalence of HIV and AIDS. A person
would be eligible if the person is diagnosed with HIV or AIDS by a
physician, is under 65 years of age, has a net family income that is at
or below 200 percent of federal poverty level, is a resident in the
county where the project is being conducted, is not adequately covered by
a health benefits plan, and is not otherwise eligible for medical
assistance. The participants would not be subject to a three prescription
limit per month. The bill states the demonstration project would not
create an entitlement. The bill would require the department to submit a
biennial report to the legislature and evaluate the cost-effectiveness of
the program. The project would be financed with local funds serving as
match for federal funds. The project would expire September 1, 2007. The
effective date would be September 1, 2001.
Section 6 (Women's Health Waiver) would increase the income eligibility
cap for medical assistance (Medicaid) to 185 percent of the federal
poverty level for preventative health and family planning services for
women. It is assumed implementation would require waiver approval by the
federal government. Automation changes would occur in FY 2002, with
waiver clients being served beginning in FY 2003.
Section 7 would provide for a demonstration project for a medical
assistance buy-in for certain recipients with disabilities in accordance
with the federal Ticket to Work and Work Incentives Improvement Act of
1999. Eligibles would include persons who are (1) at least 16 but not
more than 64 and have earned income which exceeds the limit for SSI but
are otherwise eligible, and (2) employed with a medically improved
disability.
The bill would authorize the department to set income, assets, and
resource limitations for purposes of the demonstration project. The bill
would provide for cost-sharing. The Health and Human Services Commission
would be required to apply for an infrastructure grant related to the
Ticket to Work program and to apply for necessary waivers for
implementation not later than September 1, 2002. The bill would require
the department to evaluate the effectiveness of the project by December
1, 2002. This section would expire on September 1, 2003.
Section 10 would appropriate an unspecified amount of funding to the
Health and Human Services Commission for implementation of this Act.
Section 15 specifies Sections 6,9, and 12 would take effect immediately
if the Act receives a vote of two-thirds of all members elected to each
house. This analysis assumes the bill would go into effect September 1,
2001. An earlier effective date would result in higher costs.
Methodology
Section 1: The average monthly number of recipients to receive
additional prescriptions under the Medicaid Vendor Drug program is
assumed to 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 receive
an additional 1.01 prescriptions per month at a cost of $47.53 per
prescription per month. It is assumed cost and utilization levels would
remain constant. The federal share of client services would be 60.20% in
FY 2002, 60.08% in FY 2004, and 60.07% in each subsequent year.
Approximately 20% of the General Revenue for the Vendor Drug program is
provided through manufacturer rebates. An increase in program costs
would in turn increase revenue (Vendor Drug Rebates). This increase
would partially offset the costs identified above.
Sections 2-5 and 9: General Assumptions
All policy changes would impact the Department of Health (TDH), the
Department of Human Services (DHS), and the Employees Retirement System
(ERS). Excluding a Child's/Family's Assets and Resources would also
impact the Health and Human Services Commission (HHSC), which operates
CHIP. It is assumed that funding would be realigned among state agencies
as needed, with implementation occurring January 2002. No costs related
to automation are assumed. Medicaid services provided by TDH would
include premiums (weighted for fee for service and managed care),
prescriptions, dental, physician, hospital, laboratory and other
services. Client costs would remain at the estimated FY 2001 level, with
no adjustment for inflation or change in service utilization. (Average
costs do vary according to the mixture of client risk groups.) The
federal match for client services would be 60.20% in FY 2002, 60.08% in
FY 2003, and 60.07% in subsequent years. To account for potential
overlap in clients, estimates for Eliminating the Face-to-Face Interview
and Simplifying Documentation and Verification have been reduced by 10%.
Annual savings/costs per eligibility-related FTE at DHS would total
approximately $30,850. Of this amount, 19% is for employee benefits
funded at ERS. The federal share of FTE expenses would be 50% of the
total.
Eliminating the Face-to-Face Interview
Recipient months per month would increase by 9,176 in FY 2002, 27,734 in
FY 2003, 34,695 in FY 2004, 37,254 in FY 2005, and 38,193 in FY 2006.
Monthly client services costs would total $138.67 each fiscal year. A
reduction in application processing time would result in a net FTE
reduction totaling 263.7 in FY 2002, 369.9 in FY 2003, 387.0 in FY 2004,
405.0 in FY 2005, and 424.8 in FY 2006.
Simplifying Documentation and Verification
Recipient months per month would increase by 20,617 in FY 2002, 63,202 in
FY 2003, 80,357 in FY 2004, 87,339 in FY 2005, and 91,216 in FY 2006.
Monthly client services costs would range from $142.99 in FY 2002 to
$141.64 in FY 2006. An increase in the number of eligible cases would
offset a reduction in application processing time, resulting in a net FTE
increase totaling 80.1 in FY 2002, 112.5 in FY 2003, 117.0 in FY 2004,
123.3 in FY 2005, and 128.7 in FY 2006.
Providing Continuous Eligibility for 12 Months, with 12 Month
Recertification
It is assumed that clients would receive an additional 3.82 months of
coverage, increasing recipient months per month by 170,179 in FY 2002,
238,451 in FY 2003, 249,544 in FY 2004, 261,245 in FY 2005, and 273,550
in FY 2006. Monthly client services costs would range from $137.39 in FY
2002 to $134.14 in FY 2006. Replacing the current six month review with
an annual review would result in an FTE reduction totaling 461.0 in FY
2002, 646.0 in FY 2003, 676.0 in FY 2004, 708.0 in FY 2005, and 741.0 in
FY 2006.
Excluding a Child's/Family's Assets and Resources
Thirty-two percent of CHIP enrollees are within Medicaid income limits.
It is assumed that 32% of CHIP clients funded in Senate Bill 1/ House
Bill 1, As Introduced, would be shifted to Medicaid, increasing Medicaid
recipient months per month by 104,114 in FY 2002, and 138,819 in
subsequent years. A net cost increase would result from a fuller benefit
package and a less favorable federal match in Medicaid. Monthly client
services costs would total $136.55 in FY 2002 and $131.53 in subsequent
years for Medicaid, compared to $108.58 each year for CHIP. The federal
match for Medicaid is noted above, compared to 72.14% in FY 2002, and
72.05% in subsequent years for CHIP. Additionally, it is assumed that
32% of potential CHIP enrollees above levels funded in Senate Bill
1/House Bill 1, As Introduced, would enroll in Medicaid, resulting in a
new cost to the state. Medicaid recipient months per month would increase
by 10,063 in FY 2002, and 21,500 in subsequent years. The increase in
Medicaid cases would be partially offset by a reduction in application
processing time, resulting in a net FTE increase totaling 249.0 in FY
2002 and 335.7 in subsequent years.
Section 6:
Psychotropic Medications Waiver
1. The bill would provide a limited benefits package of physician,
laboratory, and medication services to persons with schizophrenia or
bipolar disorder. It is assumed that no more than 21,000 total clients
would be served in the 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. The federal matching rate is
assumed to be 60.20% in FY 2002, 60.08% in FY 2003 and 60.07% in the
remaining years.
2. General Revenue savings in the table above results 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. DHS would need and additional 66 FTEs in FY 2002 and an additional
131.6 in FYs 2003-06 for additional eligibility workers. Average cost per
FTE would be $39,178. MHMR would need an additional 6 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.
HIV Waiver
Based upon the Texas Department of Health's (TDH) estimates, it is
assumed 2700 clients will participate in the project and the annual cost
of outpatient services is $4,306 per client. TDH also estimates the cost
of a hospitalization stay for a person with AIDS or HIV is $10,555, based
upon cost data from the University of Texas Medical Branch at Galveston.
TDH estimates 15 percent of the participants will require 1.8
hospitalization stays per year. According to the Department of Health,
the AIDS Drug Assistance Program (ADAP) already funds anti-retroviral
drug treatments for the majority of these clients, thus there will be no
significant impact to this program. There will be a savings to the
Department of Health's HIV program that provides grants composed of state
and federal funds to local entities and other providers. TDH estimates
80% of these clients would be eligible for the demonstration project for
a cost savings of $1,085,731, composed of state and federal funds. It is
assumed services provided through the demonstration project would satisfy
the maintenance of effort requirement for the HIV Care Formula Grant.
Women's Health Waiver
1. It is assumed the average monthly number of recipients served by the
Department of Health's (TDH) Medicaid program would increase by 170,328
in FY 2003, 401,888 in FY 2004, 414,108 in FY 2005, and 509,908 in FY
2006 for new waiver clients. The average annual cost per client is
assumed to be $163.60. The federal share is assumed to be 90% in all
years.
2. TDH assumes that births would be averted due to clients receiving
waiver services. The number of births averted would total 1,378 in FY
2003, 7,753 in FY 2004, 13,353 in FY 2005, and 15,876 in FY 2006. The
annual savings assumed per averted birth totals $10,254.71, resulting in
an annual savings totaling $14,130,990 in FY 2003, $79,504,767 in FY
2004, $136,931,142 in FY 2005, and $162,803,776 in FY 2006. The federal
share is assumed to be 60.08% in FY 2003, and 60.07% in subsequent years.
3. It is assumed that additional eligibility workers at DHS will be
required, totaling 692 in FY 2003, and 691 in each subsequent year. The
annual cost per worker (salary, operating expenses and benefits) is
assumed to total $34,980.
Section 7
1. It is assumed that funding related to the evaluation and to the
required systems changes at the Department of Human Services would be
funded with federal funds made available specifically for infrastructure
relating to "Ticket to Work." It is further assumed the State and the
Health Care Financing Administration (HCFA) would agree to annual
benchmarks related to personal assistance services, which are necessary
for receipt of the federal funds.
2. Client medical benefits were estimated using a category relating to
disabled persons and include the full package of medical assistance
benefits.
3. It is assumed that 270 clients are currently receiving Medicaid but
would return to work and participate in this program and 30 clients are
clients new to the Medicaid program. It is assumed all clients would
contribute in cost sharing as follows: 150 clients would pay $68 per
month, and 150 clients would pay $136.
4. The project would begin providing services on September 1, 2002.
Local Government Impact
It is estimated that Section 6--HIV Waiver would increase county
expenditures. Amounts are reflected in the table above.
Source Agencies: 304 Comptroller of Public Accounts, 324 Texas
Department of Human Services, 529 Health and Human
Services Commission, 501 Texas Department of
Health
LBB Staff: JK, SD, PP