The state's budget for the next two years was part of House Bill
1, the general appropriations act, and House Bill 15, the
supplemental spending bill. The 2008-09 budget totaled $152.5
billion in state and federal dollars (or "All Funds" in legislative
parlance). The budget excluded $14.2 billion that was set aside for
property tax relief. The state's budget exceeded the last fiscal
year's by $7 billion - a 10-percent increase. Of the total budget,
$80.1 billion (52 percent) is derived from state tax revenues.
The governor used his line-item veto authority when signing HB 1
and HB 15 to reduce the budget by $646.6 million. The vetoes
included $297 million to pay Texas' share of the federal
"claw back" payments for the Medicare Part D program in state
fiscal year 2009. Unless the state is able to negotiate a change in
the claw back formula, the state will have to repay it.
The second largest component of the state's budget (after
education) is health and human services, which includes Medicaid
and CHIP. The legislature increased funding for health and human
services by 4.6 percent. The new allocation of $51.1 billion (All
Funds) will fund Medicaid, CHIP, long-term care initiatives, and a
variety of public health measures. The state portion of the $51.1
billion is $20.7 billion. The state pays for many other
health-related services besides public insurance and preventive
health programs, including health care insurance or coverage for
state employees, teachers, and prisoners. According to the
Legislative Budget Board (LBB), all health-related appropriations
within the budget total about $54 billion All Funds, or 35 percent
of all spending.
Significant new health care initiatives funded over the biennium
include substantial Medicaid rate increases for physicians,
dentists, hospitals, pharmacists, and other health care
professionals (detailed below); rescinding 2003 eligibility cuts to
CHIP; investing in mental health crisis stabilization and
prevention services; continuing reforms begun in 2005 to improve
Child Protective Services (CPS); investing in Texas' ability to
respond to pandemic flu; and reducing the waiting lists for
Medicaid patients needing community-based long-term care
Legislators allocated $39.8 billion (All Funds) for Medicaid.
The lion's share of the Texas program - 60 percent - is paid with
federal matching dollars. These matching dollars are the single
largest source of federal funds in the state budget. Over the next
two years, Texas will receive $15.8 billion.
HB 1 assumes an average Medicaid acute care caseload of 2.83
million in 2008 and 2.88 million in 2009. The Health and Human
Services Commission (HHSC) is forecasting a slightly higher
enrollment of 2.88 million and 2.97 million, respectively. The
caseload projections assume an increase in enrollment of patients
who are aged or who have a disability, and a decline in children's
enrollment. Children will still make up roughly two-thirds of the
Medicaid enrollees. Given the inherent difficulty of forecasting a
Medicaid caseload and cost trends for two years, the budget
includes conservative funding for cost growth, about $1 billion All
Funds/$400 million in General Revenue. If costs are higher, the
difference will be made up in the supplemental spending legislation
filed at the beginning of the 2009 legislative session.
Medicaid Dollars From the
Frew vs. Hawkins
The total Medicaid budget includes $706.7 billion in general
revenue to settle the 14-year old
Frew vs Hawkins
litigation. Counting federal matching dollars, the "All Funds"
figure is $1.77 billion. Filed in 1993, the lawsuit alleged serious
deficiencies in the state's efforts to ensure that children
enrolled in Medicaid received sufficient access to preventive and
specialty care services. The Medicaid Early Periodic Screening
Diagnosis and Treatment (EPSDT) program requires the services. The
program is known as "Texas Health Steps" in Texas.
The dollars will improve reimbursement rates substantially for
physicians and dentists who treat children. The money will fund
improvements to Medicaid outreach, transportation, and case
management systems (among other initiatives). Specifically,
-related dollars are dedicated to items such as these:
$203 million in general revenue ($511.3 million in All
Funds) to increase the funding pool by 25 percent for physician
services provided to children under age 21.
$50 million in general revenue ($125.9 million in All
Funds) to allow targeted rate increases to medical and dental
$258.7 million in general revenue ($661.6 million in All
Funds) to increase the funding pool by 50 percent for dental
services provided to children under age 21.
$45 million in general revenue ($$113.4 million in All
Funds) to fund 11 judicially approved Corrective Action Plans.
The plans cover a range of issues including case management,
outreach, provider education and training, provider supply, and
managed care organizations.
$150 million in general revenue to develop medical and
dental strategic initiatives to improve children's services
within Medicaid. HB 15, the supplemental appropriations
legislation, lists the following as possible initiatives that
could be funded. A final decision on which items will get
funded has not been made and will not be until later this
Mobile medical and dental units;
Loan repayment and stipends for health care
professionals who agree to practice in underserved areas
and accept children enrolled in Medicaid;
Improvements in medical transportation;
Additional targeted rate increases to improve care
within children's Medicaid;
Improvements in the Medicaid ID card to remind parents
about well-child visits; and
Efforts to improve specialty care within underserved
communities, such as through development of specialty care
Other newly funded initiatives of HB 1 include these:
$19.7 million in general revenue to increase the number of
locations that provide breast and cervical cancer screening,
diagnosis, and treatment, the goal being to help more
low-income women with cancer obtain needed medical care through
the Medicaid Breast and Cervical Cancer Treatment
$2.7 million in general revenue to implement the
Nurse-Family Partnership. The partnership is an initiative
designed by the Robert Wood Johnson Foundation to provide
community-based nurses and case managers to help educate
low-income, first-time parents about improving prenatal care,
reducing family violence, and promoting early childhood
education. The initiative will benefit about 2,000
$8 million increase in funding to HHSC in general revenue
to increase staffing within the Office of the Inspector General
(OIG) by 85 FTEs per year. The staff increase will implement
provisions of the federal Deficit Reduction Act (DRA) to
increase the state's fraud and abuse prevention and detection
activities. HB 1 specifies that $6.6 million of the new funding
is contingent on certification by the comptroller of available
funds above the Biennial Revenue Estimate.
Out of appropriated funds, HHSC is directed to use $1.7
million to fund an outreach program to inform Medicaid patients
and businesses about the Health Insurance Premium Payment
(HIPP) program and Medicaid Opt-Out option (if implemented).
The program also will train state workers on the availability
of these programs. Under HIPP, Medicaid-eligible patients with
employer-sponsored insurance can have their insurance premiums
paid by the state. The program will pay up to the average
amount Medicaid would have paid for the enrollee. Medicaid also
pays any cost sharing required by the employer plan. Under
Opt-Out, if the employer-sponsored health insurance premiums
exceed what Medicaid would have paid, the patient may still
choose to enroll in his or her employer's plan. However, the
patient would be responsible for any difference in costs,
including all cost-sharing obligations. SB 10, the Medicaid
reform bill, requires that HHSC provide extensive education to
patients before choosing to opt out, and outlines additional
protections. Opt-Out has only been implemented in one other
state to date.
$107 million in increased funding from general revenue to
reduce the waiting lists for community-care services by about
10 percent. The funding will result in about 10,070 more
Medicaid clients receiving these services over the next two
Medicaid Rate Increases
For 15 years, physician Medicaid reimbursement rates have been
virtually stagnant. TMA made a Medicaid rate increase one of its
highest priorities during the 2007 legislative session. We
advocated for a 22.5-percent increase over the biennium with a
commitment to reach at least Medicare parity within five years.
Because of TMA advocacy and the
litigation, legislators appropriated a historic rate increase for
children's Medicaid services. Substantial progress also was made in
improving rates for other Medicaid services.
Physician rate increases will vary depending on the age of the
patient. While TMA aggressively advocated increasing rates for all
physician services, the
litigation related only to children's Medicaid. The legislature did
not increase rates for adult Medicaid services as much as TMA
advocated. However, it did recognize the need for better payments
by allocating $101.8 million in general revenue ($256.4 million in
All Funds). As a result, physicians will receive a 10-percent
increase for adult Medicaid services.
To help primary care physicians and other health care
professionals in border and rural communities, the legislature
allocated $2.8 million in general revenue ($7.1 million All Funds).
The funds increase the case management fee to physicians and other
health care professionals in the Primary Care Case Management
(PCCM) program from $2.93 to $5 per patient per month.
As outlined above, the
settlement resulted in the legislature allocating $203 million in
general revenue to increase the funding pool by 25 percent for
physician services provided to children. An additional $50 million
was added to allow targeted rate increases for both physician and
dental subspecialists. The Medicaid Physician Payment Advisory
Committee (PPAC), a committee composed of physicians and dentists
from across the state, recommended a methodology to implement the
new rates, which includes these:
The federal judge as well as the HHSC executive commissioner
must approve the PPAC recommendations. Once adopted, the new rates
will take effect Sept. 1, 2007. The Medicaid HMOs also must pass on
the rate increases to physicians without any deductions.
Other Medicaid providers also received these rate increases:
Hospitals: $150 million in general revenue/$377.8 million
All Funds to rebase Medicaid payments;
Ambulance: $31.3 million in general revenue/$78.8 million
Home health: $39.7 million in general revenue/$100 million
Dentists (in addition to dollars allocated in
): $3.1 million in general revenue/$7.8 million All
Pharmacists: $52.8 million in general revenue/$133 million
All Funds to increase Medicaid dispensing fee;
Foster care providers: $13.4 million n general revenue/$39
million All Funds;
Community care: $86.2 million in general revenue/$203.1
million All Funds; and
Nursing facilities: $99 million in general revenue/$248.6
million All Funds.
HB 1 did rescind the 2.5-percent reduction made in 2003 to
physician payments for the Children's Health Insurance Program
(CHIP). However, the bill did not increase rates commensurate with
Medicaid as advocated by TMA. The legislature also restored the
2.5-percent funding cut for services provided via the Children with
Special Health Care Needs programs, family planning services, and
women's and children's health services. Post-session UPDATE:
Using its budget authority, in August 2007 HHSC announced that
physician reimbursement rates under CHIP also would increase an
average of 25 percent in order to be commensurate with rates paid
in Medicaid for children's services.
Across all providers, the legislature invested more than $1.2
billion in general revenue and $3 billion All Funds to improve
Children's Health Insurance Program
HB 1 allocates $637.8 million in general revenue and $2.1
billion All Funds for CHIP. Seventy-two percent of the Texas CHIP
program is paid for by federal matching dollars (compared with 60
percent for Medicaid). Funding includes $73.8 million in general
revenue to implement House Bill 109 - the CHIP-eligibility reform
Funding covers enrollment in both the traditional CHIP program,
which covers children up to age 19, and two full years of the CHIP
perinatal program. Legislators enacted the perinatal program in
2005 to provide prenatal care to low-income women earning up to 200
percent of poverty but who do not qualify for Medicaid because of
their income or immigration status. The CHIP perinatal program
receives the same federal matching rate as traditional CHIP.
HB 1 assumes that by the end of state fiscal year 2009, there
will be 401,578 CHIP enrollees, of which some 69,316 would be CHIP
prenatal enrollees. HB 1 assumes an additional 96,396 children will
gain traditional CHIP coverage because of HB 109. HHSC has
estimated that 127,500 new children would gain coverage. Worth
noting, HHSC forecasted a significant higher enrollment in the CHIP
perinatal program: 101,977 in 2009 compared with the HB 1
assumption of 69,316.
The budget specifies that should total CHIP funding be
insufficient to cover enrollment, the HHSC executive commissioner
may transfer funds to prevent a waiting list, subject to approval
from the LBB. The budget also specifies that in the event of
insufficient funding, HHSC must prioritize funding for the
traditional CHIP program over the perinatal program.
Medicaid and CHIP Eligibility
HB 1 includes two important budget riders sponsored by Rep. Garnet
Coleman (D-Houston) and Rep. Eliot Naishtat (D-Austin). The riders
direct HHSC to minimize gaps in coverage, to the greatest extent
possible, for children transitioning from Medicaid to CHIP or vice
versa. Specifically, HHSC is required to provide simultaneous
screening for children who apply to either CHIP or children's
Medicaid using a consolidated application. Children who are
eligible for Medicaid or CHIP must be enrolled automatically
without further application. If HHSC finds that a child is no
longer eligible for children's Medicaid, the state must, before
terminating coverage, determine whether the child is eligible for
CHIP using currently available information. If the child is
eligible, he or she must be enrolled unless the parent objects.
Likewise, if the state finds a child is no longer eligible for
CHIP, the state must assess whether the child qualifies for
Medicaid and enroll the child if found eligible.
The riders further specify that HHSC must assure that Medicaid
and CHIP applications and redeterminations are completed within
state and federal timeliness standards
Additionally, with the termination of the contract with
Accenture to manage the eligibility call centers and other
functions, a separate rider within HB 1 ensures that HHSC can add
eligibility workers as needed to replace contracted workers and
meet all federal performance standards.
Child and Adult Protective Services
HB 1 appropriates $150.5 million in general revenue to maintain
reforms put in place in 2005 for both child and adult protective
services. The budget includes an additional $33 million in general
revenue specifically for Child Protective Services (CPS) reforms to
maintain increased staffing, among other improvements.
HB 1 increased general revenue funding by $82 million for community
mental health crisis services to prevent costly hospitalizations.
The funding will help pay for mobile crisis units, in-home crisis
services, and respite care. HB 1, Rider 69, specifies that as part
of the funding, DSHS must distribute a portion of the funding to
achieve equity in state funding among local mental health
authorities, a portion on a per capita basis, and a portion using a
competitive process. DSHS must develop performance measures
relating to mental health crisis services, such as number of new
psychiatric emergency observation sites, number of persons
receiving observation, mobile outreach and children's crisis
outpatient services, mental health relapse and hospitalization
rates, and criminal justice recidivism rates. No later than Sept.
1, 2008, DSHS must contract for an independent evaluation of mental
health crisis services.
Pandemic Flu Preparation
HB 15 includes $11 million in general revenue to purchase vaccines
in the event of a flu pandemic.
Tobacco Prevention and Control
HB 1 increased funding by $10.5 million in general revenue. HB 1,
Rider 66, establishes a competitive statewide tobacco prevention
community grant program. Cities, county health departments, and
school districts may apply for funding to implement tobacco
prevention programs. DSHS may require matching local funds.
Grantees must establish programs based on best practices for
cessation, prevention, and enforcement. DSHS must report to the
legislature on the progress of the program by Oct. 1, 2008. The
rider also directs DSHS to publish on its Web site evidence-based
approaches for tobacco prevention, cessation, and enforcement. Out
of the $10.5 million, $2 million is to be used to reduce use of
smokeless tobacco products among children in rural areas.
Additionally, HB 1, Rider 72, Article II, and Rider 84, Article
III, requires DSHS and the Texas Education Agency (TEA) to develop
an interagency contract for developing initiatives that will reduce
and prevent use of tobacco products by children in grades 4 through
12. DSHS and TEA must each allocate $6 million over the biennium to
fund the initiative.
TB and HIV Services
Tuberculosis and HIV services received increased funding of $17
million in general revenue to provide additional clients
To the extent funds are available, DSHS Rider 80, Article II,
directs DSHS to allocate up to $750,000 each year to implement a
stroke survival system.
DSHS Rider 84, Article II, specifies that DSHS shall award $400,000
annually to the Governor's Advisory Council on Physical Fitness to
provide grants to local mayors' councils for developing and
implementing wellness and physical fitness programs.
K-8 Physical Education and Fitness
Rider 89, Article III, directs TEA to appropriate $10 million each
year of the biennium to support grants to school districts that
develop in-school PE and fitness programs for children in grades 6
through 8. TEA and the comptroller will develop criteria for the
grant program, ensuring that (1) initiatives are designed to help
reduce childhood obesity and type 2 diabetes in schools with a
large number of economically disadvantaged schools, and (2) all
school districts regardless of size have access to the grants. The
funding is contingent upon the comptroller certifying at least $20
million over the Biennial Revenue Estimate.
Other Important Medicaid and Public Health-Related Budget
HHSC Rider 60, Article II, outlines the broad goals of a federal
Medicaid reform waiver, which are detailed more specifically in the
companion legislation SB 10. The budget rider specifies that any
reform waiver must include the following principles:
Leverage local, state, federal, and other funding to (a)
provide health coverage to more Texans, (b) allow Texas to be a
more prudent purchaser and payer of health care, and (c)
promote a "culture of insurance" by encouraging the transition
of consumers from public to private health insurance.
Restructure Medicaid finance system to ensure that
financing supports public policy goals.
Protect and maintain the health care safety net.
Promote health care access and affordability for uninsured
Promote positive incentives to support consumer health
choices and outcomes.
Enhance the administration and effectiveness of the
program by (a) improving consistency of reported program data,
and (b) enhancing the Medicaid program's care management
Support increased personal planning and investment for
long-term care needs.
Include broad-based stakeholder input.
The rider further states that it is the intent of the
legislature that any Medicaid reform waiver "recognize the unique
needs of the state's rural providers, trauma centers, and primary
care residency programs."
HHSC Rider 66, Article II, allows HHSC to make GME payments to
state-owned teaching facilities contingent upon receipt of allowing
matching funds from the state-owned teaching hospital to be used
for the state share of funding.
DSHS Rider 70, Article II, allows DSHS to use family planning
funds to pay for services not covered by the Medicaid Women's
Health Program, including testing and treatment for certain
sexually transmitted diseases (STDs), cholesterol screening, and
facility costs for tubal ligations.
DSHS Rider 77, Article II, clarifies that a family planning
organization that is "affiliated" with an abortion services
provider will not be disqualified for funding so long as the
family-planning provider meets certain stipulations, including
being a legally separate entity that has an easily distinguishable
name and separate board of directors.
DSHS Rider 55, Article II, County Indigent Health Care program
(CIHCP) was amended to specify that DSHS must not allocate more
than 10 percent - instead of 20 percent - of CIHCP funding to any
DSHS Rider 34, Article II, DSHS Services Budget, states that a
total of $155,700 each fiscal year of the 2008-09 biennium shall be
used for the Childhood Lead Registry.
DSHS Rider 61, Article II, requires DSHS to include educational
information about respiratory syncytial virus in its materials
already provided to mothers-to-be about childhood immunizations and
HHSC Rider 55, Article II, directs HHSC to pursue federal
approval to reimburse physicians and providers for consultations
provided to mothers regarding collection of umbilical cord
HHSC Rider 56, Article II, directs HHSC to enter into a contract
with an accredited public cord blood bank for $4 million to gather
and retain umbilical cord blood from live births for the primary
purpose of making umbilical cord blood available for transplant.
Additionally, HHSC must enter into a $1 million contract with a
health science center for research using stem cells collected from
umbilical cord blood from a live birth.
HHSC Rider 59, Article II, directs HHSC to compile a report on
the services and costs provided to undocumented immigrants. The
report shall include services provided by each hospital district.
The report is due Dec. 1, 2008.
Sec. 19.86, Article IX, allocates $10 million over the biennium
to TEA to help school districts purchase automated external
defibrillators as required by Senate Bill 7. Funds of $500,000 must
be used to establish a cardiovascular health-screening pilot for
students in sixth grade. The pilot must include electrocardiogram
(EKG) and echocardiogram evaluation.
Sec. 19.109, Article IX, allocates $6 million in 2008 to TEA to
help school districts implement Senate Bill 8, which requires high
schools to test high school athletes for steroid usage.
Sec. 54, Article III, provides $18 million to The University of
Texas Southwestern Medical Center at Dallas for research on
obesity, diabetes, and metabolism. A portion of this budget, $8
million is from general revenue funds and is contingent on surplus
funds beyond the comptroller's January 2007 Biennial Revenue
Estimate. In the same rider, Texas Tech University Health Sciences
Center in Lubbock received approval for $4.8 million to support a
pilot program for new research opportunities in clinical trials of
cancer therapy and control for rural and underserved areas of
Tax on Sexually Oriented Businesses
House Bill 1751 by Rep. Ellen Cohen (D-Houston) and Sen. Royce West
(D-Dallas) imposes a $5 per customer fee for patrons of certain
sexually oriented businesses. The new revenue will be deposited in
an account managed by the comptroller. The bill requires $25
million in general revenue to be credited over the biennium towards
the Sexual Assault Program Fund. The Office of the Attorney
General, DSHS, and a variety of academic institutions will use the
dollars to fund grants, education, and research initiatives
designed to reduce the incidence of sexual assault. Any funds
collected above the $25 million will be deposited in the Texas
Health Opportunity Pool (THOP), as created by SB 10, the Medicaid
Reform legislation, to help pay for health insurance premiums for
uninsured Texans who qualify. The LBB estimates the fee will
generate $9.2 million in 2008 and $53 million in 2009 for THOP. If
Texas is able to secure a federal Medicaid waiver, these funds may
be eligible for federal matching dollars.
Graduate Medical Education/Workforce Funding
Legislators appropriated record-high funding levels to train more
physicians at Texas graduate medical education (GME) programs. The
funding increase reflected greater awareness among legislators of
Texas' growing physician shortage and the need for more GME
programs with which to educate and retain physicians.
TMA, Texas medical schools, and teaching hospital professional
associations joined forces before the session to develop a
consensus statement outlining Texas' critical need for GME funding.
This effort helped to educate legislators and resulted in more
funding. Specifically, lawmakers appropriated:
$63 million to Texas medical schools, up from $25 million
last biennium, to cover faculty costs and create new GME
$23 million directed toward the Higher Education
Coordinating Board as continued support for primary care GME
$13 million in special item requests to medical schools
for GME programs.
Long-awaited funds of $48 million also were appropriated to
Texas Tech Health Sciences Center in El Paso for hiring faculty and
staff. The funding will allow Texas Tech to move forward with its
expansion from a two-year medical school to an independent,
four-year institution. The first class is expected to matriculate
in fall 2009.
The Texas A&M Health Science Center received $33 million in
new funds for medical school enrollment expansion. This will help
both Bryan/College Station and Temple develop a four-year medical
school. At least $9 million was directed to establish a two-year
clinical training facilities in Round Rock.
Another long-awaited funding source was the $6 million allocated
for the Irma Rangel College of Pharmacy in Kingsville, an
institution placed in the A&M System following the 79th
Texas Medical Board
HB 1 appropriated $18.3 million to TMB, an increase of 2.1 million,
or 13 percent, over the previous budget. The additional funding is
primarily targeted at increasing staffing levels and technology to
expedite licensing for new physicians. Additionally, HB 15, the
supplemental appropriations bill, allocated $1.2 million in general
revenue primarily for licensing and enforcement as well as $600,248
to hire six new full-time employees (FTEs).
Rider 7, Article VIII, specifies that out of the new monies,
$267,000 in 2008 and $198,000 in 2009, as well as the six new FTEs,
is contingent upon TMB prioritizing physicians who treat Medicare
and Medicaid patients.
Miscellaneous Budget Provisions
Background Check Procedures
Sec. 19.68, Article IX, requires all state agencies conducting
background checks to submit to the state auditor, Texas Department
of Licensing and Regulation (TDLR), Department of Public Safety
(DPS), and the LBB a report regarding how they conduct background
checks. The report must be submitted by Nov. 1, 2007. The state
auditor will review the procedures and identify any deficiencies.
They also will determine if any agencies that should be conducting
such checks are not. Additionally, DPS will report to the 81
legislature the availability of background check information. This
includes the sufficiency level of background checks needed and
recommendations for improving background check procedures across
Sec. 19.104, Article IX, specifies that DPS is allocated an
additional $703,536 in 2008 and $101,436 in 2009 to implement
Senate Bill 1879, which will increase regulation and enforcement
relating to Schedule III to V controlled substances.
Health Care Funding TMA Staff Team:
Legislative: Michelle Romero
Policy: Helen Kent Davis, Gayle Love, Marcia Collins,
and Susan Griffin
Legal: Kelly Walla
Managed Care/Insurance Reform
Scope of Practice
Retail Health Clinics
Corporate Practice of Medicine
Medicaid, CHIP, and the
Emergency Medical Services and
Medical Science and Quality
Physician Workforce, Licensure,
Health Information Technology
Franchise Tax Reform