2005 Legislative Compendium: Health Care Funding

 Medicaid Funding  |  Children's Health Insurance Program Funding  |  Child Protective Services  |  Public Health

For the 2006-07 biennium, legislators adopted a budget of $139.4 billion in state and federal funds (or "all funds" in legislative parlance). Of the total budget, $71.6 billion, or 51 percent, is derived from state revenue. The final budget is about 10 percent higher than the budget adopted in 2003 - a budget that included substantial funding reductions for health and human services, public education, and other critical services in order to address a $10 billion shortfall.

Compared to two years ago, health care fared reasonably well. SB 1 provides $50 billion (all funds) for health and human services. Many feared that a tax debate would quash attempts to restore vital Medicaid, Children's Health Insurance program (CHIP), and public health services as legislators scraped together new monies for school finance reform and state property tax relief. In the end, while the legislature did not restore all cuts, it heeded calls by medicine and other advocates to reinstate the most critical health care services.

Medicaid Funding

The budget allocates $50 billion in all funds to health and human services. Of that, $37.9 billion is for Medicaid, with the federal government paying 60 percent and the state, 40 percent ($14.2 billion). Medicaid accounts for 19.8 percent of state dollars. Some commentators questioned the increase in Medicaid spending in SB 1 over the previous budget. It is important to note that the growth did not stem from expanded coverage or new benefits. Rather, additional funds will be used to restore the benefits and services reduced or eliminated last session, cover health care inflation, and pay for caseload growth.

The budget assumes Medicaid enrollment will grow from 2.8 million enrollees today to 3.11 million by the end of state fiscal year (SFY) 2007, a difference of 305,000 patients, most of them children. Texas Health and Human Services Commission (HHSC) assumes higher growth - 3.19 million by end of SFY 2007. The average annual Texas population growth is nearly 2 percent, or 400,000 people per year. The most rapid growth is taking place among those who earn less than $38,700 per year (twice the poverty level for a family of four).

Medicaid Eligibility and Service Restorations
Highlights of Medicaid funding within SB 1, the General Appropriations Act:

  • Restores optional podiatric, vision, and mental health services for adult Medicaid patients, 78 percent of whom are disabled or elderly.
  • Partially restores the "medically needy" program. SB 1 specifies that 75 percent of the restoration be funded via intergovernmental transfers (IGT) from local funding entities versus using state funds to draw down the federal match. It is not certain that local entities will provide the funding. The remaining 25 percent would be funded from savings anticipated from the new Women's Health Waiver ( SB 747, described in the Medicaid and CHIP section ).
  • Restores Medicaid GME, also using IGT funds, thus providing no certainty as to whether the money will actually materialize.
  • Creates a Medicaid "buy-in" program for Texans with disabilities who want to work but cannot enter the job market for fear of losing Medicaid coverage.
  • Assumes $109.5 million in state savings from implementing Integrated Care Management (ICM) for seniors or patients with disabilities enrolled in Medicaid. (For more details, see HB 1771 under Medical and CHIP, Integrated Care Management.)

The Texas Legislature did not restore the 2.5 percent cut in physician reimbursement enacted in 2003; neither was the five percent hospital reimbursement cut restored.

Children's Health Insurance Program Funding

The total CHIP budget for 2006-07 is $1.4 billion all funds, of which $444 million stems from state general revenue. As with Medicaid, much of the new funding restores services eliminated in 2003 and pays for health care inflation. Since 2003, 180,000 fewer children are enrolled in CHIP. SB 1 allocates funding for an additional 72,000 enrollees over the next two years, bringing enrollment to 398,630 by 2007. The enrollment growth includes increases resulting from the CHIP "perinate program" to be implemented early in 2006. Sen. Judith Zaffirini (D-Laredo) sponsored a budget rider giving HHSC the ability to transfer funds to meet a CHIP caseload shortfall before establishing a waiting list.

Highlight of CHIP funding within SB 1:

  • Restores vision, dental, hospice, and mental health services to pre-2003 levels;
  • Authorizes HHSC to implement an enrollment fee versus monthly premiums to make it easier for families to pay cost-sharing requirements; and
  • Establishes a new CHIP "perinate program" to provide prenatal care to the unborn children of women who do not qualify for Medicaid, including legal permanent immigrants and undocumented immigrants. (See the Medicaid and CHIP section for more details.)

The legislature did not restore the 2.5 percent CHIP physician reimbursement cut from 2003 nor the 12 months' continuous eligibility for CHIP enrollees.

Child Protective Services

In January 2005, the governor declared reform of child protective services (CPS) a legislative emergency. The order came in response to numerous media reports of failures by CPS to protect the welfare of children in its custody or whose families were under investigation for abuse or neglect.

SB 1 increases CPS funds by $259.9 million, all funds over the next two years. Of that, $213.6 million is from new state dollars. The new monies will be used to hire more than 900 new caseworkers during the next two years and establish a new health care delivery model for foster children, including development of a medical passport to aid in sharing of medical records. For details of CPS reforms, see the summary of SB 6 in the Child Health, Safety, and Nutrition/Fitness section.

Public Health

In general, SB 1 maintains funding levels at 2004-05 for many services, with some targeted increases. New monies will:

  • Increase the number of immunization doses and increase availability of Hepatitis A and PCV-7 vaccines;
  • Increase by 2,041 the number of low-income patients eligible for HIV/AIDS drug funding; and
  • Fund demographic growth for mental health services for children.

Health Care Funding TMA Staff Contacts:  

  • Hilary Dennis, Legislative Affairs, (512) 370-1370
  • Helen Kent Davis, Governmental Affairs, (512) 370-1401 

Overview  | Tax Reform | Scope of Practice | Physician Ownership | Inadequate Health Plan Networks (Balanced Billing) | Managed Care/Insurance Reform | Texas State Board of Medical Examiners Sunset and Physician Licensure | Agency Sunset Review  | Corporate Practice of Medicine | Medicaid and CHIP | Indigent Care and the Uninsured | Workers' Compensation | Professional Liability Reform | Medical Education/Workforce | Child Health, Safety, and Nutrition/Fitness | Public Health | Border Health | Rural Health | Mental Health | Trauma/EMS | Prescription Drugs | Medical Science | Long-Term Care | Abortion | Transplantation/Organ Donation | Table of Contents  


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