LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 77th Regular Session May 17, 2001 TO: Honorable Elliott Naishtat, Chair, House Committee on Human Services FROM: John Keel, Director, Legislative Budget Board IN RE: SB1839 by Moncrief (Relating to certain long-term care facilities.), Committee Report 2nd House, as amended ************************************************************************** * Estimated Two-year Net Impact to General Revenue Related Funds for * * SB1839, Committee Report 2nd House, as amended: an 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. * ************************************************************************** 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 $17,854,395 $26,972,106 26.0 * * $(18,616, $(27,973, * * 446) 967) * * 2003 19,173,011 28,843,546 26.0 * * (19,814,215) (22,559,560) * * 2004 19,263,969 28,980,381 26.0 * * (19,905,173) (29,696,395) * * 2005 19,270,656 28,990,441 26.0 * * (19,911,860) (29,706,455) * * 2006 19,271,147 28,991,181 26.0 * * (19,912,351) (29,707,195) * *********************************************************************** *************************************************************************** *Fiscal Probable Revenue Gain/(Loss) Probable Savings/(Cost) from * * Year from New Policyholder New Policyholder Stabilization * * Stabilization Reserve Fund for Reserve Fund for Profit and * * Profit and Not-For-Profit Not-For-Profit Nursing Homes * * Nursing Homes * * 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 add a new 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 insurance maintenance tax surcharge that would be established by the bill or from other authorized sources. Article 9 would amend Chapter 252 of the Health and Safety Code to impose a Quality Assurance Fee (QAF) on state-licensed intermediate care facilities for the mentally retarded (ICF/MR) providers. The fee would be collected monthly by the Health and Human Services Commission of Texas (HHSC) or the Department of Human Services (DHS) in an amount equal to 6% of total ICF/MR gross receipts from operations in the state. The fee would be allocated by HHSC or DHS to individual institutions based on patient-days of service as specified in the bill. During the transitional period, from when the fee becomes effective until HHSC or DHS obtains the necessary information to determine the institutional distribution of the fee, it would be set at $5.25 per patient-day. Fee proceeds would be deposited into a new Quality Assurance Fund held outside of the State Treasury by the Texas Treasury Safekeeping Trust Company. Moneys in the fund, including fund earnings, would be combined with matching federal Medicaid receipts and could be used only for offsetting allowable State Medicaid expenses or increasing Medicaid reimbursement rates. 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 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 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 HHSC estimate included 22 FTEs for the sections relating to quality of care monitors (15 Nurse IV and 1 Attorney IV), quality assurance early warning system (1 Program Specialist IV), and administration of the fee collections (3 Accountants, 1 Auditor, and 1 Admin Tech). FTEs and the associated operating costs were estimated to be $2.1 million in FY 2002 and approximately $1.4 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. It is assumed the costs associated the related processes could be paid for using new Quality Assurance Funds and federal funds. HHSC assumed there would be no new costs associated with the transfer of informal dispute resolution to HHSC from DHS. 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. The HHSC estimated revenues generated by the new fund would be between $18.4 million in FY 2002, to $19.7 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 $28 to $29.7 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. To implement Chapter 254, relating to the survey process, DHS estimated that it would need 4 FTEs and associated operating costs. Those costs were estimated to be approximately $223,000 per year. 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, 304 Comptroller of Public Accounts, 529 Health and Human Services Commission LBB Staff: JK, HD, ML