LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
May 7, 2001
TO: Honorable Rodney Ellis, Chair, Senate Committee on Finance
FROM: John Keel, Director, Legislative Budget Board
IN RE: SB1838 by Duncan (Relating to certain long-term care
facilities.), As Introduced
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* SB1838, As Introduced: impact of $0 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. *
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General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2002 $0 *
* 2003 0 *
* 2004 0 *
* 2005 0 *
* 2006 0 *
****************************************************
All Funds, Five-Year Impact:
***********************************************************************
*Fiscal Probable Probable Probable Probable Change in *
* Year Revenue Savings/ Revenue Savings/ Number of *
* Gain/(Loss) (Cost) from Gain/(Loss) (Cost) from State *
* from New New from Federal Employees *
* Quality Quality Federal Funds - from FY 2001 *
* Assurance Assurance Funds - Federal *
* Fund Fund Federal 0555 *
* 0555 *
* 2002 $186,000,000 $279,000,000 21.0 *
* $(186,672, $(280,135, *
* 819) 629) *
* 2003 202,740,000 304,110,000 21.0 *
* (203,257, (304,925, *
* 623) 433) *
* 2004 204,246,600 306,369,900 21.0 *
* (204,764, (307,185, *
* 223) 333) *
* 2005 204,382,194 306,573,291 21.0 *
* (204,899, (307,388, *
* 817) 724) *
* 2006 204,394,397 306,591,596 21.0 *
* (204,912, (307,407, *
* 020) 029) *
***********************************************************************
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*Fiscal Probable Revenue Gain/(Loss) Probable Savings/(Cost) from *
* Year from New Policyholder New Policyholder Stabilization *
* Stabilization Reserve Fund Reserve Fund *
* 2002 $86,001,250 $(11,001,250) *
* 2003 12,005,350 (12,005,350) *
* 2004 12,001,375 (12,001,375) *
* 2005 12,004,900 (12,004,900) *
* 2006 12,005,700 (12,005,700) *
***************************************************************************
Fiscal Analysis
The bill would amend various sections of the Insurance Code, Government
Code and Health and Safety Code. Sections 5.07, 5.08 and 5.09 amend
Article 21.49-3 of the Insurance Code by addressing rates and rating
plans for nursing homes and describing the issuance of bonds for the
Texas Public Finance Authority to fund professional liability insurance.
Section 7.02 amends Subchapter B, Chapter 531, Government Code by adding
Sections 531.056 and 531.057 relating to a survey process review and
quality assurance early warning system for long-term-care facilities and
rapid response teams.
Section 7.06 requires all property, records and appropriated funds
related to informal dispute resolution currently residing at the
Department of Human Services (DHS) be transferred to the Health and Human
Services Commission (HHSC) by January 1, 2002.
Section 9.01 amends Chapter 242, Health and Safety Code, by adding
Subchapter Q, Quality Assurance Fee. The bill would require that each
institution, for which a license fee must be paid under Section 242.034,
be assessed a quality assurance fee. The Health and Human Services
Commission or the Texas Department of Human Services at the direction of
the Commission would collect the fee. The fee may be appropriated only
for the purposes of paying the cost of administering provisions of the
bill and increasing the rate of reimbursement paid to institutions under
the state Medicaid Program.
The Quality Assurance Fee would be assessed on each licensed institution
at a rate equal to six percent of the institution's gross receipts from
its operations in Texas. The fee would be payable monthly, in addition
to other fees imposed under Chapter 242 of the Health and Safety Code,
and would be an allowable cost for reimbursement under the state
Medicaid program.
Methodology
Sections 5.07, 5.08 and 5.09 amend Article 21.49-3, Insurance Code, and
would establish the joint underwriting association for health-care
providers. Bonds could be issued by the TPFA in the name of the
association, in a maximum amount of $75 million, for a maximum term of 10
years.
The bonds would be paid solely from a maintenance tax surcharge on all
insurance companies writing professional liability insurance for nursing
homes and the association, based on their reported gross premiums. The
rate of the surcharge would be set by the Insurance Commissioner and
collected by the Comptroller at the times and in the manner as other
maintenance taxes, in an amount determined to be sufficient to pay the
bond obligations. The surcharge could be passed through to the
policyholders. TPFA estimated the debt service on $75 million in bonds to
range from $11,001,250 in FY 2002 to $12,005,700 in FY 2006 and assumed
9.5 % (taxable bonds) interest rate with level debt service payments over
10 years. The bonds would be exempt from state and local taxes,
however, under federal tax law, the bonds would not be tax-exempt.
The HHSC estimate included 21 FTEs for the sections relating to quality
of care monitors (15 Nurse IV and 1 Attorney IV), review of the survey
process (1 Attorney IV, 3 Program Specialist IV and 1 Admin Tech IV) and
the quality assurance early warning system (1 Program Specialist IV).
FTEs and the associated operating costs were estimated to be $1.3 million
in FY 2002 and approximately $1.1 million thereafter by HHSC. A one-time
automation cost of $330,000 for the implementation of the early warning
system, matched at 25/75 state/federal, was included in the HHSC
estimate. HHSC assumed that there would be no new costs associated with
the transfer of informal dispute resolution to HHSC from DHS.
It is assumed that the costs associated with survey and related processes
could be paid for using new Quality Assurance Funds and federal funds.
The HHSC estimate stated either HHSC or DHS would collect and distribute
the fee and HHSC or DHS would likely have to add staff and associated
administrative support. The fee would be collected from all licensed
nursing and convalescent homes and deposited into the Quality Assurance
Fund, which is a fund outside of the State Treasury held by the Texas
Treasury Safekeeping Trust Company. The HHSC estimated administrative
costs to be $1.0 million annually with a one-time technology cost of
$100,000 in FY 2002.
The HHSC estimated revenue generated from the new fund would be between
$186.0 million in FY 2002 to $204.0 million in FY 2006. The HHSC assumed
that because provisions of the bill require the funds generated be used
for rate reimbursements to nursing facilities, the State would use the
new funds to draw down additional Medicaid funds. The Commission
estimated these additional federal funds to be between $279 to $306
million for FY 2002 through 2006, respectively. The Health and Human
Services Commission assumes the additional new funds and federal funds
would be allocated to the facilities, if appropriated, through a modeled
rate during the first two years and incorporated into the cost reports
using the cost report methodology subsequently. The Health and Human
Services Commission assumes that, under this scenario, there would be no
compounding effect of increased expenditures adopted through the cost
report.
However, the HHSC stated in the estimate if the assumption regarding the
use of the increased fee revenues is not correct, and if these fees are
to be used only for rate increases for the current year and the previous
years' rate increases become part of the base appropriation for nursing
facilities, then there could be a very significant impact on the General
Revenue Fund beginning in the second year of this program (FY 2003). In
other words, the amount of revenue gains become new General Revenue
costs in the second year of the program.
Local Government Impact
No fiscal implication to units of local government is anticipated.
Source Agencies: 324 Texas Department of Human Services, 454 Texas
Department of Insurance, 529 Health and Human
Services Commission, 501 Texas Department of
Health
LBB Staff: JK, SD, KF, ML