LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
May 26, 2001
TO: Honorable Bill Ratliff, Lieutenant Governor
Honorable James E. "Pete" Laney, Speaker of the House
FROM: John Keel, Director, Legislative Budget Board
IN RE: SB1839 by Moncrief (Relating to certain long-term care
facilities.), Conference Committee Report
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* SB1839, Conference Committee Report: negative impact of *
* $(2,989,966) 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 $(1,648,276) *
* 2003 (1,341,690) *
* 2004 (1,341,690) *
* 2005 (1,341,690) *
* 2006 (1,341,690) *
****************************************************
All Funds, Five-Year Impact:
***********************************************************************
*Fiscal Probable Probable Probable Probable Change in *
* Year Savings/ Revenue Savings/ Revenue Number of *
* (Cost) from Gain/(Loss) (Cost) from Gain/(Loss) State *
* General from New New from Employees *
* Revenue New Quality New Quality Federal from FY 2001 *
* Fund Assurance Assurance Funds - *
* 0001 Fund Fund Federal *
* 0555 *
* 2002 $(765,846) $17,854,395 $28,353,286 45.2 *
* $(17,906, *
* 525) *
* 2003 (578,807) 19,173,011 29,995,678 45.2 *
* (19,224,716) *
* 2004 (578,807) 19,263,969 30,132,513 45.2 *
* (19,315,674) *
* 2005 (578,807) 19,270,656 30,142,573 45.2 *
* (19,322,361) *
* 2006 (578,807) 19,271,147 30,143,313 45.2 *
* (19,322,852) *
***********************************************************************
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*Fiscal Probable Probable Probable Probable *
* Year Savings/(Cost) Revenue Savings/(Cost) Savings/(Cost) *
* from Federal Gain/(Loss) from New from GR Match *
* Funds - Federal from New PolicyholderSt- for Medicaid *
* 0555 PolicyholderSt- abilization 0758 *
* abilization Reserve Fund *
* Reserve Fund for Profit and *
* for Profit and Not-For-Profit *
* Not-For-Profit Nursing Homes *
* Nursing Homes *
* 2002 $(28,353,286) $86,001,250 $(11,001,250) $(882,430) *
* 2003 (29,995,678) 12,005,350 (12,005,350) (762,883) *
* 2004 (30,132,513) 12,001,375 (12,001,375) (762,883) *
* 2005 (30,142,573) 12,004,900 (12,004,900) (762,883) *
* 2006 (30,143,313) 12,005,700 (12,005,700) (762,883) *
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Fiscal Analysis
The bill would amend Chapters 242, 252, Health & Safety Code, Chapter 22
& 32, Human Resource Code, Chapter 21 & 38, Insurance Code, Chapter 531,
Government Code, and Chapter 41, Civil Practices & Remedies Code.
Article 21.49, 3d to the Insurance Code to create a revenue bond program
to raise funds to provide nursing home professional liability insurance
through the Medical Liability Insurance Underwriting Association (JUA).
The bill would allow the Texas Public Finance Authority (TPFA) to issue,
on behalf of the JUA, up to $75 million in 10-year tax-exempt revenue
bonds to fund the Policyholder Stabilization Reserve Fund for Profit and
Not-For-Profit Nursing Homes, to pay the costs related to the issuance of
the bonds, and to pay other bond-associated costs, as determined by
TPFA. The bonds issued under this bill would not be an obligation of the
State, but would be solely an obligation of the JUA and would be payable
from a new surcharge fee that would be established by the bill.
Section 7.01 requires the Department of Human Services (DHS) to establish
an early warning system to detect conditions that pose a threat to
patient health and safety and predict when the commission needs to take
action.
Section 531.058, Informal Dispute Resolution (IDR) for Certain Long Term
Care Facilities, transfers the IDR process for facilities under 32 of
the Human Resources Code or Chapter 242, 247, and 252, of the Health
Safety Code i.e., Nursing Facilities, Assisted Living Facilities and
Intermediate Care Facilities for the Mentally Retarded to the Health and
Human Services Commission (HHSC).
Section 531.057, creates a Quality Assurance Early Warning System for
Long Term Care Facilities; Rapid Response Teams for Assisted Living
Facilities, ICF/MR facilities, and Nursing Facilities.
Sec 5.07, 5.08 & 5.09 amend Article 21.49-3 of the Insurance Code by
addressing rates and rating plans for nursing homes, outlining criteria
for initiating of the stabilization reserve fund charge, and describing
the issuance of bonds for the Texas Public Finance Authority to fund
professional liability insurance.
Section 9.01 amends Chapter 242 of the Health & Safety Code to add
Subchapter Q to allow for a quality assurance fee to be collected from
nursing facilities. The funds collected under this provision are to be
held, outside the State treasury, by the Texas Treasury Safekeeping
Trust and are to be used by the HHSC to match federal Medicaid funds.
Methodology
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 ten years.
The bonds would be paid solely from a surcharge fee 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 authorized in the bill, 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 ten years. The bonds
would be exempt from State and local taxes, however, under federal tax
law the bonds would not be tax-exempt.
The bill would require DHS to provide an Early warning system,
quality-of-care monitors, and rapid response teams. DHS estimated a total
of 15 quality-of-care monitors would be needed plus a manager. A total
of 15 rapid response team members would be needed to support consultation
with facilities. Survey staff would be used to respond to
quality-of-care complaints. A total of 3.2 support staff and one manager
would also be needed to support these efforts. Four staff would be needed
to support review of the survey process. In FY 2002, DHS estimated one
time costs would be $26,552 and recurring costs would be $223,435.
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
state-licensed intermediate care facilities for the mentally retarded
(ICF/MR) providers 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
$562,000 annually with a one-time technology cost of $100,000 and a
one-time cost of $200,000 for the development off the fee collection
system in FY 2002. Five FTEs were estimated to be required to
administratively collect the fee (1 Accountant VI; 2 Accountant IVs; 1
Auditor III; and 1 Admin Tech III). HHSC included one attorney to do the
following: establish a dispute resolution process; review the evidence
of violation and ensure that there are sufficient facts to establish a
prima facie case of failure to comply with state or federal law; and
adopt rules to adjudicate claims in contested cases.
The HHSC estimated revenues generated by the new fund would be between
$17.9 million in FY 2002, to $19.3 million in FY 2006. The HHSC assumed
that because provisions of the bill require the funds generated be used
for rate reimbursements to ICF/MR facilities, the State would use the
funds to draw down additional Medicaid funds. The Commission estimated
these additional federal funds to be between $27 to $29 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 ICF/MR facilities, 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, 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, 347 Texas
Public Finance Authority, 454 Texas Department of
Insurance, 529 Health and Human Services
Commission
LBB Staff: JK, SD, HD, ML