Austin, Texas
                    FISCAL NOTE, 77th Regular Session
                              March 29, 2001
          TO:  Honorable David Sibley, Chair, Senate Committee on
               Business & Commerce
        FROM:  John Keel, Director, Legislative Budget Board
       IN RE:  SB1476  by Duncan (Relating to medical and income
               benefits, return to work coordination, and regulation of
               doctors and insurance carriers under the workers'
               compensation system.), As Introduced
*  Estimated Two-year Net Impact to General Revenue Related Funds for    *
*  SB1476, As Introduced:  positive impact of $2,724,964 through the     *
*  biennium ending August 31, 2003.                                      *
General Revenue-Related Funds, Five-Year Impact:
          *  Fiscal Year  Probable Net Positive/(Negative)   *
          *               Impact to General Revenue Related  *
          *                             Funds                *
          *       2002                           $1,309,701  *
          *       2003                            1,415,263  *
          *       2004                            2,098,606  *
          *       2005                            2,798,009  *
          *       2006                            3,576,688  *
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      *
*          General     General     Federal   Other Funds  Employees    *
*          Revenue     Revenue     Funds -       0997    from FY 2001  *
*            Fund        Fund      Federal                             *
*            0001        0001        0555                              *
*  2002    $(903,823)  $2,213,524    $738,550    $288,468       (3.6)  *
*  2003     (944,970)   2,360,233     778,785     304,184       (6.6)  *
*  2004     (944,970)   3,043,576   1,112,997     434,722       (6.6)  *
*  2005     (944,970)   3,742,979   1,455,061     568,328       (6.6)  *
*  2006     (944,970)   4,521,658   1,835,897     717,078       (6.6)  *
Technology Impact
The Texas Workers' Compensation Commission (TWCC) would need to modify
databases to track information on approved doctors and for the
certification of doctors to be added to the approved doctors' list.
Also, TWCC would need modifications to the current systems to include
the collection and reporting of return-to-work data and to comply with
mandatory reporting to the Research and Oversight Council on Workers'
Fiscal Analysis
The bill would replace the current licensure-based Approved Doctor List
(ADL) with a qualification-based voluntary ADL and requires all doctors
performing any duty in the workers' compensation system to be on the ADL.
The Texas Workers' Compensation Commission (TWCC) would set standards
for being a treating doctor, designated doctor, peer review doctor, or
for performing a utilization review.

The bill would formalize the position of Medical Advisor and require the
advisor to set standards and guidelines for practice, review compliance,
as well as deletions, suspensions and practice restrictions for doctors
on the ADL. The bill would authorize the creation of a Medical Quality
Review Panel to assist the Medical Advisor and to recommend sanctions, as
well as additions, deletions or suspensions of doctors on the ADL.

The bill would establish a medical network advisory committee to provide
input into the creation and standards for workers' compensation regional
health networks. Employee participation in networks of providers would be
voluntary, with employees opting into the network receiving additional
income benefits.

The bill would require employers to notify employees, treating doctors,
and insurance carriers of any return-to-work or modified duty programs
available. The bill would require carriers to provide and notify
employers of return to work coordination services available.

The bill would require TWCC to adopt rules for preauthorization and
concurrent review of specific services, and bring spinal surgery under
the current preauthorization process.  The bill also directs that a
designated doctor be consulted prior to an insurance carrier requesting a
required medical examination (RME) by a doctor other than the treating
doctor. The designated doctor's opinion would hold presumptive weight.
Medical necessity disputes would be resolved by independent review

The bill would direct TWCC to develop a drug formulary requiring generic
prescription drugs be dispensed with doctor approval.

The bill would take effect September 1, 2001.  The Medical Network
Advisory Committee would convene by October 1, 2001, TWCC would adopt
rules by December 1, 2001, and regional workers compensation networks
would be established by May 1, 2002.
The bill would produce total savings of approximately $20 million over
five years. The overall savings were assumed to occur in General Revenue,
Federal Funds and Other Funds in the same proportion as the current
state expenditures.

It has been assumed that regional workers' compensation networks would be
operational to 5 percent of state employees in the first year and an
additional 10 percent each year thereafter. Seventy-five percent of those
covered by the networks are assumed to opt into the network. In fiscal
year 2000, approximately $46 million in workers' compensation medical
claims were paid to injured state employees. Assuming a general 20
percent savings in medical treatment cost to those employees choosing to
participate, and an expanding network system, a savings of $10.4 million
is estimated over five years.

The significant reduction in required medical examinations would result
in an estimated one-time cost savings of $718,284 in 2002. Additionally,
the creation of a drug formulary and mandatory generic substitution would
produce an estimated savings of $1.4 million in 2002, and a five year
savings of $9.2 million.

The State Office of Risk Management estimates the need for three FTEs to
implement and maintain the return-to-work services required by the bill
at a cost of $200,383 in 2002 and $177,094 in 2003 and forward.

Texas Workers' Compensation Commission (TWCC) estimates a reduction in
staff of 6.6 FTEs in 2002 and an additional 3 FTEs in 2003. TWCC
estimates a cost of $800,000 per year for litigation due to doctor
removal from the approved doctors' list. It is assumed that any costs
incurred at TWCC would be offset by additional revenue from the workers'
compensation maintenance tax.
Local Government Impact
No fiscal implication to units of local government is anticipated.
Source Agencies:   453   Texas Workers' Compensation Commission, 720
                   The University of Texas System, 454   Texas
                   Department of Insurance, 503   Texas State Board of
                   Medical Examiners, 508   Texas Board of Chiropractic
                   Examiners, 592   State Soil & Water Conservation
                   Board, 601   Texas Department of Transportation, 479
                   State Office of Risk Management
LBB Staff:         JK, JO, RT, KM