TO: | Honorable Jane Nelson, Chair, Senate Committee on Health & Human Services |
FROM: | John S O'Brien, Director, Legislative Budget Board |
IN RE: | SB7 by Nelson (Relating to strategies for and improvements in quality of health care provided through and care management in the child health plan and medical assistance programs designed to achieve healthy outcomes and efficiency.), Committee Report 1st House, Substituted |
Fiscal Year | Probable Net Positive/(Negative) Impact to General Revenue Related Funds |
---|---|
2012 | ($4,847,200) |
2013 | $23,369,400 |
2014 | $28,456,539 |
2015 | $29,350,035 |
2016 | $30,289,269 |
Fiscal Year | Probable Savings/(Cost) from GR Match For Medicaid 758 |
Probable Savings/(Cost) from Federal Funds 555 |
---|---|---|
2012 | ($4,847,200) | ($14,577,800) |
2013 | $23,369,400 | $31,923,821 |
2014 | $28,456,539 | $38,765,003 |
2015 | $29,350,035 | $39,981,091 |
2016 | $30,289,269 | $41,259,277 |
HHSC assumes implementation activities including preparing an amendment to the Medicaid state plan, obtaining necessary federal approvals, promulgating rules, completing systems changes, hiring/training of staff, and conducting outreach can be accomplished by September 1, 2012.
SECTION 1: According to HHSC, conversion to a DRG methodology that would allow the commission to more accurately classify specific patient populations in Medicaid and CHIP would involve implementation of an all-patient refined diagnoses related groups (APR-DRG) payment system for inpatient hospital services and an Enhanced Ambulatory Patient Groups (EAPG) system for outpatient services. One-time automation costs for the APR-DRG payment system would be $648,700 in General Revenue Funds ($6.3 million in All Funds, assuming 90 percent federal participation for initial development cost and 75 percent federal participation for system changes for implementation) and for the EAPG system would be $460,000 in General Revenue Funds ($4.6 million in All Funds, assuming 90 percent federal participation), both in fiscal year 2012. This analysis assumes the periodic evaluation required by the bill could be accomplished using existing resources.
According to HHSC, the one-time system development costs for implementing a payment methodology to reduce potentially preventable readmissions (PPRs) and potentially preventable complications (PPCs) would be $133,500 in General Revenue Funds ($1.3 million in All Funds, assuming 90 percent federal participation) in fiscal year 2012. HHSC indicates payment adjustments for PPRs would begin by September 1, 2012 and payment adjustments for PPCs would begin by September 1, 2013.
According to HHSC, the combined impact of use of the APR-DRG and EAPG payment systems and changing reimbursement for PPRs and PPCs in Medicaid and CHIP would result in $20.8 million in gross General Revenue savings ($48.8 million in All Funds) for the 2012—13 biennium. These savings may be assumed in Senate Bill 1, as introduced.
HHSC assumes the portion of savings attributed to the APR-DRG system and changing
reimbursement for PPRs and PPCs includes a savings of $8.9 in General Revenue Funds ($20.8 in All Funds) in fiscal year 2013, $16.1 in General Revenue Funds ($37.8 in All Funds) in fiscal year 2014, $16.6 in General Revenue Funds ($39.0 in All Funds) in fiscal year 2015, and $17.2 in General Revenue Funds ($40.3 in All Funds) in fiscal year 2016. HHSC assumes implementation in the fee-for- service and Primary Care Case Management service delivery models would begin in fiscal year 2013 and for managed care organizations in fiscal year 2014.
According to HHSC, the savings related to use of the EAPG system/outpatient fee schedule would result in a client service savings of $11.9 million in General Revenue Funds ($28.0 million in All Funds) in fiscal year 2013, $12.3 million in General Revenue Funds ($28.9 million in All Funds) in fiscal year 2014, $12.7 million in General Revenue Funds ($29.9 million in All Funds), in fiscal year 2015, and $13.1 million in General Revenue Funds ($30.8 million in All Funds) in fiscal year 2016.
SECTION 2: It is assumed that the cost to evaluate the existing physician incentive programs could be absorbed within existing resources. The bill directs HHSC to include only cost-effective components in the physician incentive program implemented in the Texas Medicaid program. As a result, the cost of the program would be offset by reductions in non-emergent use of the emergency room. Depending on the extent to which implementing a physician incentive program reduces non-emergent use of the emergency room, there could be savings in the Texas Medicaid program.
HHSC assumes that implementing a Medicaid co-payment/cost-sharing initiative would be cost neutral. The agency assumes there would be system development and on-going automation costs associated with implementation. HHSC estimates those costs to be $1.8 million in General Revenue Funds ($3.5 million in All Funds), in fiscal year 2012, $1.0 million in General Revenue Funds ($1.9 million in All Funds), in fiscal year 2013, and between $1.2-1.3 million in General Revenue Funds ($2.4-2.6 million in All Funds), in each year for fiscal years 2014 to 2016. Costs are assumed to qualify for 50 percent federal participation.
Costs to Enrollment Broker for system changes and increased contract costs would be $255,000 in General Revenue Funds ($510,000 in All Funds) in fiscal year 2012, $92,500 in General Revenue Funds ($185,000 in All Funds) in fiscal year 2013, and $105,000 in General Revenue Funds ($210,000 in All Funds) each year from fiscal years 2014 to 2016. HHSC also assumes a one-time cost of $595,000 in General Revenue Funds ($1,190,000 in All Funds) in fiscal year 2012 to modify the Texas Integrated Eligibility Redesign System to include the new reimbursement methodologies. Costs are assumed to qualify at 50 percent federal participation.
HHSC estimates the client services savings associated with Medicaid copayments/cost-sharing would be $3.7 million in General Revenue Funds ($8.6 million in All Funds) in fiscal year 2013, $1.3 in General Revenue Funds ($3.1 million in All Funds) in fiscal year 2014, $1.3 million in General Revenue Funds ($3.2 million in All Funds) in fiscal year 2015, and $1.4 million in General Revenue Funds ($3.3 million in All Funds), in fiscal year 2016. Savings are assumed to be matched at the Federal Medical Assistance Percentage (FMAP).These savings may be assumed in Senate Bill 1, as introduced. According to HHSC, co-payments could act as a deterrent to over-utilization of services, but future estimates of related cost avoidance and savings cannot be determined at this time. Federal requirements limit application of cost sharing to a small percentage of the Texas Medicaid population. HHSC cannot deny services if clients do not contribute toward cost-sharing, and hospitals are required to meet the requirements of the Emergency Medical Treatment and Active Labor Act regardless of a patient’s ability to pay. It is assumed that savings will be achieved through reduced hospital payments.
SECTION 3: According to DADS, the agency would contract with a vendor for the development of quality-based outcome measures and provider reimbursement incentives for nursing facilities. DADS would also contract with a vendor to evaluate the feasibility of expanding incentive payments to Intermediate Care Facilities for Persons with Mental Retardation (ICF-MR) and providers of home and community-based services. DADS estimates the above contracts would be a one-time cost of $1.0 million in General Revenue funds ($2.0 million in All Funds), in fiscal year 2012.
HHSC estimates application and system modifications to Texas Integrated Eligibility and Redesign
Systems would cost $595,000 in General Revenue Funds ($1.2 million in All Funds) in fiscal year
2012, representing 14,000 hours at $85 per hour.
HHSC estimates that system costs would be $648,700 in General Revenue Funds ($6.3 million in All
Funds) in fiscal year 2012 for implementation of APR-DRG, and $460,000 in General Revenue Funds
($4.6 million in All Funds) in fiscal year 2012 for implementation of EAPG.
HHSC estimates that system development costs for implementing a payment methodology based on
reducing PPRs and PPCs would be $133,500 in General Revenue Funds ($1.3 million in All Funds) in
fiscal year 2012.
HHSC estimates system development and on-going automation costs for Medicaid co-payments
would be $1.7 million in General Revenue Funds ($3.5 million in All Funds), in fiscal year 2012, $1
million in General Revenue Funds ($1.9 million in All Funds), in fiscal year 2013, and between $1.1-
1.3 million in General Revenue Funds ($2.4-6 million in All Funds), in each year for fiscal years 2014
to 2016.
Source Agencies: | 529 Health and Human Services Commission, 539 Aging and Disability Services, Department of
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LBB Staff: | JOB, CL, JI, LL
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