Honorable Joe Straus, Speaker of the House, House of Representatives
FROM:
Ursula Parks, Director, Legislative Budget Board
IN RE:
HB595 by Kolkhorst (Relating to certain health programs and councils.), As Passed 2nd House
Estimated Two-year Net Impact to General Revenue Related Funds for HB595, As Passed 2nd House: a positive impact of $24,502,000 through the biennium ending August 31, 2015.
The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.
Fiscal Year
Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2014
$24,502,000
2015
$0
2016
$0
2017
$0
2018
$0
Fiscal Year
Probable Savings/(Cost) from General Revenue Dedicated Account 5102 - Tertiary Care Account
Probable Revenue Gain from General Revenue Fund 1
Probable Revenue Gain from Vendor Drug Rebates-Sup Rebates 8081
Probable (Cost) from Vendor Drug Rebates-Sup Rebates 8081
2014
($24,502,000)
$24,502,000
$69,483,249
($69,483,249)
2015
$0
$0
$73,866,820
($73,866,820)
2016
$0
$0
$73,866,820
($73,866,820)
2017
$0
$0
$73,866,820
($73,866,820)
2018
$0
$0
$73,866,820
($73,866,820)
Fiscal Analysis
The bill would amend the Health and Safety Code and the Government Code relating to certain health programs and councils. The bill would repeal Chapters 38, 46, 83, 86, 90, 91, and 112 of the Health and Safety Code. Under the provisions of the bill, any funds remaining in General Revenue-Dedicated Account 5102-Tertiary Care would be transferred to General Revenue Fund 1 and the GR Account 5102 would be abolished on September 1, 2013.
The bill would amend Section 533.005 (a-1), Government Code, which sets an expiration date for the requirement that managed care organizations (MCOs) and pharmacy benefit managers exclusively employ the state's vendor drug program formulary, preferred drug list, and prior authorization requirements and procedures for the prescription drug benefit in the Medicaid Program; the bill would change the expiration date from August 31, 2013 to August 31, 2018.
The bill would take effect on September 1, 2013.
Methodology
Changing the expiration date in Section 533.005 (a-1), Government Code, would continue the requirement that MCOs and pharmacy benefit managers utilize the state's vendor drug program formulary, preferred drug list, and prior authorization requirements and procedures through fiscal year 2018. The formulary and the preferred drug list are the basis for the collection of supplemental drug rebates in the Medicaid program. Under current law, this requirement would expire at the end of fiscal year 2013 and the Health and Human Services Commission (HHSC) would no longer collect supplemental rebate revenue if the Medicaid MCOs were allowed to implement their own formularies and other requirements related to outpatient pharmacy benefits; the extent to which the loss of supplemental rebates would be offset by other savings achieved by the MCOs and incorporated into the capitation rates is not known and the full fiscal impact cannot be determined. Extending the expiration date would continue the practice of HHSC collecting supplemental drug rebates, which would continue to be used to support the Medicaid program, through fiscal year 2018. As such, implementing the provisions of the bill would result in increased collection and expenditure of Vendor Drug Rebates - Supplemental Rebates estimated to be $69,483,249 in fiscal year 2014 and $73,866,820 in fiscal years 2015 through 2018 and there would be no expected change to capitation rates for outpatient pharmacy benefits in Medicaid managed care during that period.
Based on the analysis provided by the Comptroller of Public Accounts, the balance remaining in General Revenue-Dedicated Account 5102-Tertiary Care is estimated to be $24,502,000 on September 1, 2013, and that balance would be transferred to General Revenue Fund 1.
Based on the analysis provided by the Department of State Health Services (DSHS), the advisory committees and programs that are abolished in the bill are no longer active. Based on the analysis provided by DSHS and the Office of the Attorney General, it is assumed that the provisions of the bill can be implemented within existing resources. Based on the analysis provided by the University of Texas System, it is assumed that the provisions of the bill will have no fiscal impact on the system.
Local Government Impact
There could be a significant fiscal impact to units of local government to the extent that they are reimbursed for outpatient prescription drugs through Medicaid managed care and would experience a change in that reimbursement under the provisions of the bill.
Source Agencies:
537 State Health Services, Department of, 302 Office of the Attorney General, 304 Comptroller of Public Accounts, 529 Health and Human Services Commission, 720 The University of Texas System Administration