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
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* 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. *
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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 $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) *
***********************************************************************
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*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