Agreement in Principle: Frew vs. Hawkins

On April 5, Texas House and Senate leaders announced an agreement in principle to settle finally the 14-year-old Medicaid lawsuit known as Frew vs. Hawkins . The class action lawsuit, originally filed in 1993, alleged numerous, serious failings in the state's efforts to ensure all children enrolled in Medicaid were receiving appropriate preventive and specialty care services available to them via the federally-required Early Periodic Screening Diagnosis and Treatment Act (EPSDT). These services are known in Texas as "Texas Health Steps." In 1995, the state and plaintiffs negotiated a consent decree to resolve the case. However, within a few years the state challenged plaintiffs' right to enforce the decree, compelling the case back to the federal courts, including two state appeals to the Supreme Court. At each juncture, the federal courts sided with the plaintiffs. The settlement was announced just days prior to the case returning to Federal District Judge William Wayne Justice to rule on the final Corrective Action Plans.

On April 9, Judge Justice reviewed the proposed agreement, some elements of which will continue to be negotiated over the next several weeks. In June, Judge Justice will again review the agreement and the funding that accompanies it. The agreement is subject to his final approval and oversight.

Legislative leaders and lawyers for plaintiffs in the case recognized that dwindling physician participation in Medicaid has left many of the program's recipients without a medical home, and that means increased costs to the state and poorer health care for Medicaid patients. A 2006 Texas Medical Association survey found that only 38 percent of Texas physicians accept all new Medicaid patients, down from 67 percent in 2000.

The agreement allocates $707 million in state general revenue ($1.8 billion in state and federal funds combined) to increase physician and dental reimbursement rates, improve outreach and education to Medicaid-enrolled families, and improve the availability of medical and dental services in rural and border regions of the state. Since the agreement is still being fine tuned, a detailed document has not been published. However, what is known is that the agreement will allocate significant new monies to improve physician and dental reimbursement rates - the largest increases in nearly 15 years. Specifically, the agreement allocates:

  • $203 million to fund a 25-percent increase in physician reimbursement
  • $50 million for targeted rate increases for physician subspecialists
  • $258.7 million to fund a 50-percent increase in dental reimbursement rates
  • $150 million to implement "strategic medical and dental initiatives." This part of the agreement is still being negotiated, but lawmakers indicate that the monies will be used to fund such efforts as mobile dental clinics in underserved communities, loan forgiveness programs for physicians and dentists who agree to practice in underserved areas, and/or improved funding for physician training and graduate medical education.
  • $45 million to fund outreach, family and physician education, transportation initiatives, a toll-free hotline, and other components of the Corrective Action Plans agreed to in 1995

To fund the agreement, lawmakers used $240 million already allocated within House Bill 1, the 2008-2009 appropriations act, to fund physician and dental rate increases. The remaining $466 million will be paid for by applying an across-the-board funding reduction of .59 percent to all ten articles within the budget. However, it is expected that the appropriations conference committee will further establish parameters on how agencies may allocate the reduction.

To advise the state on how best to allot the monies for physician rate increases, at TMA's request, the Health and Human Service Commission is reconstituting the Physician Payment Advisory Committee (PPAC), which is composed of primary and specialty care physicians from across Texas. PPAC is expected to convene its first meeting in early June. A final roster is not yet approved, but all major state specialties will be represented.

To assure that physicians participating in Medicaid HMOs benefit from the rate increases as well, TMA has requested that health plans be required to pass any rate increases directly to physicians without any administrative deduction or withhold.

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