LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 77th Regular Session April 11, 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 state Medicaid program.), Committee Report 1st House, Substituted ************************************************************************** * Estimated Two-year Net Impact to General Revenue Related Funds for * * SB1156, Committee Report 1st House, Substituted: positive impact * * of $8,046,096 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 $4,134,311 * * 2003 3,911,785 * * 2004 1,217,864 * * 2005 (1,689,923) * * 2006 (4,818,953) * **************************************************** All Funds, Five-Year Impact: *********************************************************************** *Fiscal Probable Probable Probable Probable Change in * * Year Revenue Savings/ Savings/ Savings/ Number of * * Gain/(Loss) (Cost) from (Cost) from (Cost) from State * * from GR Match General Federal Employees * * General for Revenue Funds - from FY 2001 * * Revenue Medicaid Fund Federal * * Fund 0758 0001 0555 * * 0001 * * 2002 $1,778,649 $19,609,900 $2,690,319 6.0 * * $(17,254, * * 238) * * 2003 1,809,111 39,219,799 2,722,731 6.0 * * (37,117,125) * * 2004 1,835,022 39,219,799 2,760,576 6.0 * * (39,836,957) * * 2005 1,860,847 39,219,799 2,799,425 6.0 * * (42,770,569) * * 2006 1,887,023 39,219,799 2,838,805 6.0 * * (45,925,775) * *********************************************************************** ***************************************************** * Fiscal Year Probable Savings/(Cost) from * * Federal Funds - Federal * * 0555 * * 2002 $(27,098,118) * * 2003 (55,861,645) * * 2004 (59,930,027) * * 2005 (64,343,303) * * 2006 (69,089,941) * ***************************************************** Technology Impact Section 2: 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 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 percent 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 3 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. Sections 6 would direct HHSC to develop a consolidated Medicaid appropriations request, with input from the Legislative Budget Board and the Governor s Office of Budget and Planning. Updates to the request would also be prepared. Section 7 would direct HHSC to prepare a comprehensive Medicaid operating budget and quarterly Medicaid expenditure reports, again with input from the Legislative Budget Board and the Governor s Office of Budget and Planning. Section 9 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 12: The bill would take effect September 1, 2001. Sections 2, 8 and 12 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 below. Methodology Section 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 3 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. The client contribution would be divided between the federal government and the State. The federal share would total 60.2 percent in FY 2002, 60.08 percent in FY 2003, and 60.07 percent 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 2 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 60.2 percent in FY 2002, 60.08 percent in FY 2003, and 60.07 percent in each subsequent year. 2. General Revenue savings in the table above 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 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. 5. The potential increase in revenue related to copayments made by waiver participants has not been estimated at this time due to the absence of detailed assumptions regarding prescription usage. 6. 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. Local Government Impact No fiscal implication to units of local government is anticipated. Source Agencies: 529 Health and Human Services Commission, 324 Texas Department of Human Services, 501 Texas Department of Health, 655 TX Dept. of Mental Health & Mental Retardation LBB Staff: JK, SD, PP