Showdown in Austin: Major Health Battles Are Brewing in the Legislature

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Cover Story -- February 2005

By Ken Ortolon
Senior Editor

Texas physicians scored a monumental victory in the Texas Legislature in 2003 with passage of a constitutional amendment and statute to cap noneconomic damages in medical liability cases. But the 79th legislative session, which convened Jan. 11, could have an even greater influence on Texas physicians and their patients.

Lawmakers will have to craft solutions to a list of several important issues that directly impact the practice of medicine. Topping the list is the renewed debate over school finance reform and property tax relief, sunset review of both the Texas State Board of Medical Examiners (TSBME) and the Texas Workers' Compensation Commission (TWCC), and shoring up a crumbling Medicaid and Children's Health Insurance Program (CHIP).

On top of that, physicians almost certainly will have to battle numerous attempts by allied health professionals to expand their scope of practice, and will face other looming fights with business, health insurance plans, and even hospitals.

Since the end of the 2003 legislative session, the Texas Medical Association has had a series of ad hoc physician committees examining many of these issues in preparation for this year's session. And TMA leaders say that how legislators address these issues could have a profound impact on organized medicine and the health of Texans.

"This session has as much potential to affect physicians and patients as any session that we've had in recent memory, including the most notable session that we just had two years ago in which we got very significant and effective tort reform," said Houston internist Spencer Berthelsen, MD, chair of TMA's Council on Legislation. "But this session will be a little bit different in that there are some large issues facing the state that have direct health care implications; however, these issues are statewide issues and not just medicine issues."

The breadth of these issues means organized medicine will have to participate in "a much larger circle of debate than for the medicine-focused issues that we've had in the past," Dr. Berthelsen said.

A Taxing Situation

School finance and tax debate are expected to dominate the 2005 session. "I think the session certainly is going to be defined by the public school finance and tax debates," said Darren Whitehurst, director of TMA's Division of Public Affairs.

Some lawmakers agree. State Rep. Diane Delisi (R-Temple), who was being mentioned before the session as a potential replacement for outgoing House Public Health Committee Chair Jaime Capelo (D-Corpus Christi), says the tax debate may be the thorniest issue lawmakers face this year.

School finance has been a constant problem for lawmakers for more than a decade, since state courts in the mid-1990s ruled that the state's system for financing public education was unconstitutional because of disparities in the abilities of property-wealthy and property-poor school districts to raise money. That ruling led lawmakers to enact the so-called "Robin Hood" plan, which requires rich districts to share their wealth with poor districts.

Never a popular plan, it eventually was challenged by property-wealthy districts. Last fall, an Austin district court judge ruled in their favor. He said the Robin Hood plan was unconstitutional because it created a de facto statewide property tax, which is banned by the Texas Constitution.

Both rich and poor districts have had to boost local property taxes to pick up an ever-increasing share of public education expenditures.

Representative Delisi says the state now puts in 39 percent of all school monies, and the locals through property taxes put in 61 percent. "Back in 1995, the state put in 55 percent," she said. "What has that done to your local property taxes? They've just gone through the roof."

In fact, most of the state's nearly 1,100 school districts are taxing at or near the constitutional cap of $1.50 per $100 of assessed value. Those districts virtually have nowhere else to go to raise additional revenue.

With pressure mounting from both school districts and property owners, Gov. Rick Perry called lawmakers into special session last spring to provide some property tax relief and craft a new system of public school finance. A wide array of taxes were considered, including expansion of the state taxes on sales, franchises, payrolls, gross receipts, business activity, cigarettes, and liquor. But lawmakers could not reach consensus, and the special session adjourned in failure.

Last fall's court ruling simply added fuel to the fire, and a renewed effort to cut property taxes and revamp the school finance system is under way. Lt. Gov. David Dewhurst was expected to lay out a school finance plan early in the session that likely will rely on a new business activity tax, while House leaders were contemplating a payroll tax.

Organized medicine's biggest concern in the upcoming tax debate is how new taxes might impact both physicians' practices and patients. The state traditionally has not taxed health care services, and physicians have been exempted from the state franchise tax. Political observers say it will be difficult to keep physicians' practices out of any new tax bill.

"Obviously, that has a substantial impact on physicians if medical practices are taxed in any way, and will also have an impact on our patients in terms of affordability and availability of health care," Dr. Berthelsen said. "We're going to stay engaged with that process very carefully to make sure that medicine's issues are heard."

TMA argues that physicians should not be taxed because of the large amount of charity care and uncompensated care they provide, as well as the fact that government-sponsored programs such as Medicaid and Medicare frequently reimburse physicians at rates below the cost of providing care. And, because most reimbursement rates are set by such programs and private health plans, physicians have little ability to pass on the added cost of the tax to patients.

"For those reasons alone, physicians are different from any other service industry," Mr. Whitehurst said. "If you look at the amount of charity care, uncompensated care, and care that's provided at less than what it costs to provide, physicians are unique. For that reason, physician services should not be taxed."

Keeping physicians out of a tax bill will be difficult. Observers say it is highly likely that some lawmakers or medicine's foes in the business, health plan, or allied health lobby may try to play the tax issue against physicians to force a compromise on other issues.

Not all political observers agree that a tax bill can get passed in this session. Harvey Kronberg, editor of the Austin-based political newsletter Quorum Report , says taxes will be the "900-pound gorilla in the room," but that some lawmakers will wait for the Texas Supreme Court to rule on appeals of the current court case before committing to any new taxes.

"You don't have any consensus among the big three -- the governor, lieutenant governor, and speaker -- as to a direction. And my sense is that people don't want to commit to tax votes unless they've got full cover from the Supreme Court."

Mr. Kronberg thinks lawmakers likely will be back in special session some time this summer to resolve the matter.

Watching the Sun Set

While everyone will be closely watching the tax debate, medicine also has a full plate of other issues to monitor, not the least of which is "sunset" review of TSBME and the other boards that license and discipline allied health professionals.

Sunset is the process by which the legislature reviews the operations of all state agencies and determines whether they should continue in their current form, be modified in some way, or abolished. Each agency is reviewed once every 12 years, and all of the health professions licensing boards are up for review this year.

TSBME underwent extensive legislative review in 2003, and lawmakers passed Senate Bill 104 to enhance the board's investigative and disciplinary powers and speed licensure application processing. The bill increased licensing fees for physicians to pay for new investigative and licensing staff, and required the board to use panels of physician experts to review quality-of-care complaints against physicians.

But last session's action does not mean the board won't undergo intense scrutiny this year, and the Sunset Advisory Commission staff has recommended several changes in the board's operations. The staff has proposed changes to increase stakeholder involvement in its rulemaking process, to require the board to develop guidelines for evaluating the mental and physical health status of applicants for licensure, to require at least two expert physician panelists in each standard-of-care investigation, and to develop clear guidelines for its informal hearing process.

Sen. Jane Nelson (R-Flower Mound), who sponsored SB 104, says the board may still need some "refinement" in its operations and agrees with at least some of the Sunset Advisory Commission recommendations.

"I think the board needs to do a better job of including stakeholders in its rulemaking process," she said. "This is a great way to head off lawsuits and resolve disputes before they happen. While they obviously can't make everyone happy, they can provide the public a voice prior to publishing rules."

She added that she wants "to be certain that the board follows the intent of SB 104 and completes case investigations within 180 days, not add in an 'evaluation' period and then start the clock."

Senator Nelson also wants the board to concentrate on egregious cases of physician misbehavior, such as sexual abuse, drug abuse, and other criminal activities.

TMA has been closely monitoring the sunset process through an ad hoc committee appointed by the Board of Trustees. That committee developed a set of guiding principles and legislative goals that were approved by the House of Delegates last fall. Foremost among those legislative goals is support for a "strong and accountable TSBME that uses its powers fairly to protect public safety and license qualified physicians to practice medicine in Texas."

Dr. Berthelsen says one specific reform for TSBME on medicine's agenda is to require out-of-state physicians who testify in legal proceedings, such as medical liability cases, to obtain a temporary Texas license. "That would make them subject to discipline by the Texas State Board of Medical Examiners if they give false or spurious testimony," Dr. Berthelsen said.

Defending Medical Practice

While the TSBME sunset review is a major issue itself, it also presents a major challenge for medicine to defend the definition of the practice of medicine. A former TMA lobbyist once said the sunset process is like an empty flatbed truck that special interest groups can load up with whatever they want. With the practice acts of physicians and all other health professionals open for debate, allied health groups that want to encroach on the practice of medicine could have a field day.

Dr. Berthelsen says it is imperative that medicine defend itself from scope-of-practice expansions that could put the public at risk.

"We are going to be facing some interesting dynamics during this legislative session," he said. "Because of the BME sunset legislation and because all of the other allied health professions have their regulatory boards up for sunset review, I think you'll be seeing them make a run at increasing and enhancing their own scope of practice against the physicians' scope."

Among the most likely scope battles will be attempts by optometrists to gain authority to perform laser surgery on the eye, psychologists to again seek authority to prescribe psychotropic medications, and podiatrists to expand their ability to operate not only on the foot, but also on the ankle, knee, and upper leg.

Representative Delisi says she does not want to see the sunset process devolve into one huge scope battle. Instead, she says scope-of-practice issues must be addressed in the context of what produces the best health outcomes using evidence-based best practices.

"I am very uncomfortable with the legislature practicing medicine without a license," she said. "I believe when you put up that grid on all scope-of-practice issues -- best practices, health outcomes, evidence-based data -- it's a grid that will shine the light of day on what's best for Texas."

Healing the Comp System

The other major sunset issue is workers' compensation. Stakeholders in the system are universally unhappy with it. Employers' costs are high and physicians face low reimbursement and too many hassles. And patients are not getting the care they need in a timely manner so they can return to work.

"It doesn't take a lot of time to figure out that the current system is broken and that nobody is satisfied," Dr. Berthelsen said. "Texas is a very expensive place to get workers' comp medical care, and a lot of physicians have left the system out of frustration at not being able to help their patients."

The Sunset Commission has recommended that TWCC be scrapped and the bulk of its duties transferred to the Texas Department of Insurance (TDI). The commission also proposed creating managed care networks to care for injured workers.

TMA is not advocating workers' compensation networks, but believes many of the same TDI regulations on private health insurance plans also should apply to workers' compensation if the state moves in that direction.

And, the TMA Ad Hoc Committee on Workers' Compensation recommended that fee guidelines be revisited and that payment be guaranteed for the initial examination to determine compensability. Also, the committee believes compensability determination must be simplified and standardized.

Representative Delisi says she does not know if the rest of the legislature will agree with the Sunset Commission proposal to abolish TWCC, but the status quo is unacceptable.

"Workers' comp rates are extraordinarily high in Texas, and something has to be done about that," she said. "The Sunset Commission has done what I consider a good job of looking at why our rates are higher than some states around us, and measures have to be taken to bring these rates down."

Repairing the Safety Net

Also among the major health care issues confronting the legislature is shoring up the health care safety net for the uninsured and low-income Texans. Faced with a $10 billion budget shortfall in 2003, lawmakers reduced eligibility in Medicaid and CHIP and cut reimbursement for physicians and other health care professionals.

Dr. Berthelsen says physicians must call lawmakers' attention to the impact the cuts have had on children and other individuals dropped from Medicaid and CHIP, and that "the net 2.5-percent reduction that physicians received in their fees has further frayed the physician network that sees these patients."

Despite the cuts in eligibility, the caseload continues to increase significantly. Mr. Whitehurst says the Health and Human Services Commission's legislative appropriations request for Medicaid predicts an increase of as many as 1 million additional enrollees during the next two years. That would cost about $2.5 billion, he says.

Sen. Kip Averitt (R-Waco) has filed legislation to restore some of the cuts in CHIP eligibility, and Representative Delisi says physician reimbursement should be at the top of the list for any new money put into Medicaid and CHIP.

But getting that new money could be difficult. While lawmakers expect a brighter economic picture and more revenue this year, the school finance debate may suck up any new money that's available. Plus, demand for services may outstrip any increase in revenues.

"How do you continue to fund all of our state services when the costs are rising faster than our revenues?" Senator Nelson asked. "How do you fund the services in a way that does not stifle businesses or tax families out of their homes? We have a bit more breathing room, but the challenge remains daunting."

Another ad hoc committee has been looking at Medicaid and CHIP issues for the past several months. Dr. Berthelsen says it has produced several recommendations that could help rein in costs, including simplifying the eligibility process, promoting quality and accountability, emphasizing prevention and health risk assessment, incorporating health education for students in public schools, and carefully designing disease management programs that are sponsored and directed by physicians.

Representative Delisi says the state must do a better job of managing chronic illnesses, such as asthma and type 2 diabetes, within the Medicaid and CHIP programs.

"I would like to see one-year eligibility in Medicaid and CHIP -- no questions asked -- for those children who are diagnosed with asthma and diabetes, particularly diabetes," she said. "We just can't do the disease management that we need to do with these children cycling on and off. We need to be smarter about how we handle some of these populations that are the most expensive."

Watching Doctors' Backs

TMA has developed numerous other legislative priorities on issues such as obesity, immunization, graduate medical education funding, and prompt pay. It almost certainly will work with Senator Nelson to build on her landmark 1999 legislation that mandated a minimum amount of physical activity in public elementary schools. The senator already has filed SB 42, which would add some accountability measures for the schools and address the types of food and beverages available in school vending machines.

But organized medicine will also have to fight off attacks from its adversaries in the business and insurance communities. In addition to the expected scope-of-practice battles, the Texas Association of Business (TAB) set forth a legislative agenda that focuses on health care fraud and abuse, public reporting of medical errors, and further restrictions on patients' right to choose their own physician as ways to control rising costs.

"Let's set the record straight, the Texas Association of Business is a front group of big insurance, for big insurance, and by big insurance," TMA President Bohn Allen, MD, said in response to the TAB proposal. "TAB is committed to seeing that the big insurance companies replace doctors in making medical treatment decisions for Texans. TAB's 'prescription for progress' is really a prescription for profits -- for big insurance."

TAB also has joined the Texas Hospital Association to push for limits on physicians' ability to refer patients to specialty hospitals in which they have an ownership interest.

Mr. Kronberg says these groups are trying to use fraud and medical errors as leverage to keep physician compensation off the table. He says the issue of medical errors "is a good propaganda tool" but doesn't resolve anything. "It's an easy issue for them to gin up, and there will be a lot of sympathy from folks who are adversaries to medicine's interests. It will be an easy issue for them to capitalize on and a daunting challenge for medicine to turn the subject back to keeping providers in workers' comp or keeping providers in a variety of other programs."

Ken Ortolon can be reached by telephone at (800) 880-1300, ext. 1392, or (512) 370-1392; by fax at (512) 370-1629; or by email at Ken Ortolon.


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