2001 Legislative Compendium: Medicaid

Medicaid Fee Update | Children's Medicaid Eligibility Simplification | Medicaid Cost Containment and Budget Issues | Other Medicaid Budget Riders | Medicaid Coverage/Scope of Services | Medicaid Rate Setting and Reporting | Medicaid Managed Care Reform | Telemedicine | Disease Management

The convergence of several socioeconomic factors - growing demand for services, rising health insurance premiums and medical costs, a declining provider base, and chronic underfunding of the program - compelled the Texas Legislature to spend much of its time during the 77th session addressing Texas' deteriorating Medicaid program.

Despite a tight revenue picture and competing demands to fund other legitimate state needs, such as teacher's health insurance and state employee pay raises, legislators successfully advocated for Medicaid reforms targeting three primary issues:

  • Medicaid provider reimbursement,
  • Eligibility simplification for children's Medicaid, and
  • Medicaid administrative and managed care reform.

All of these reforms were at the top of medicine's health care agenda for the 2001 session, resulting in a three-for-three victory for TMA's Medicaid legislative package.  Unfortunately, Gov. Rick Perry vetoed the omnibus Medicaid bill, SB 1156, which contained all of the association's Medicaid managed care administrative simplification measures (described below in detail).  TMA is now working closely with the Health and Human Services Commission (HHSC) to identify ways to resurrect Medicaid managed care reform through the regulatory process.

Additionally, the legislature adopted scores of other Medicaid-related bills designed to improve access to care and improve care coordination and patient management, including bills extending coverage to women diagnosed with breast or cervical cancer, piloting disease management for children's asthma, expanding the use of and reimbursement for Medicaid telemedicine services, and establishing a study to examine how to extend coverage to Texas' migrant children traveling to other states.

Below is a summary of each component of the 2001 Medicaid reform package.


Responding to mounting concerns about a declining and insufficient Medicaid provider base, the 77 th legislature allocated $197 million in state funds to update reimbursement rates for physicians, allied health professionals, dentists, hospitals, and Medicaid health plans.

Earmarked for physicians and allied health practitioners is $50 million in state funds. Over the biennium, these funds will be matched with another $75.4 million in federal monies, creating a total increase of $125.4 million. HHSC is charged with implementing the fee increase; however, the appropriations rider establishes specific parameters for use of the new monies. The monies allocated for physicians and professional services will be targeted toward the following:

Early Periodic Screening Diagnosis and Treatment (EPSDT)/Texas HealthSteps, including a "bonus" payment for providers who provide care within the recommended time frames;

Office-based evaluation and management codes, with the goal of promoting preventive care and rewarding high-volume Medicaid practitioners; and

Other primary care codes.

In developing parameters for distributing the new monies, the legislative budget writers consulted with TMA on the best approach given limited dollars. The legislature and TMA agreed that what was ultimately adopted is enough to retain existing Medicaid physicians and other health care providers, but not enough to recruit new Medicaid providers or those who already have left the program. That being said, the new monies substantially will improve reimbursement for selected services, particularly EPSDT/Texas HealthSteps.

In determining how to apportion the new monies within the guidelines established by the appropriations rider, HHSC is required to consult with the Physician Payment Advisory Committee (PPAC), a body comprising 11 to 15 physicians chosen from geographically diverse primary and specialty care practices. TMA will work closely with HHSC, state specialty and county medical societies, and the Texas Osteopathic Medical Association to select qualified candidates for PPAC. The first meeting of PPAC will be held later this summer. Issues that the PPAC will help determine include defining a "high-volume" provider, determining the methodology for bonus payments, and identifying other CPT codes that should be selectively increased.

Already, HHSC has allocated a portion of the fee increase toward increasing Texas HealthSteps rates. Effective on or about Sept. 1, 2001, the new reimbursement rate for the EPSDT medical screen will be $70, up from $49. A final implementation date will be set after the Center for Medicare and Medicaid Services (formerly the Health Care Financing Administration) approves the change.

As directed by the appropriations rider, Medicaid managed care plans must pass the fee increase directly on to participating network physicians and providers. Medicaid managed care plans received a separate increase of $35 million to augment their premium rates.

Additionally, the legislature included a specific rider within SB 1 specifying its intent that monies be targeted to "recognize and reward" high-volume Medicaid practitioners where "Medicaid funding is vital to the health care system." PPAC will be involved in determining the methodology for rewarding high-volume providers.

In addition to the rate increase for Medicaid professional services, the legislature allocated new state monies toward the following:

  • $35 million for outpatient hospital services,
  • $20 million for dentistry,
  • $35 million for Medicaid HMOs, and
  • $4.5 million for Medicaid STAR+PLUS (Harris County managed care pilot for acute and long-term care).

For long-term care services, the legislature allocated $190 million in general revenue for nursing home and hospice rates and changes in client acuity levels.


Despite the tremendous success of the Children's Health Insurance Program (CHIP) in bringing affordable health insurance to Texas' low-income children, the state lags way behind in covering children eligible for Medicaid.

An estimated 600,000 Texas children are considered Medicaid eligible but not enrolled.  Recent surveys of low-income Texas families show that the primary reason parents do not enroll their children in Medicaid is the hassle: long waits for appointments, inconvenient office hours, and complicated application and enrollment forms.  CHIP-eligible families do not face these barriers.

SB 43, authored by Sen. Judith Zaffirini (D-Laredo) but sponsored by a bipartisan group of Senate and House members, streamlines children's Medicaid, mirroring the efforts of 48 other states. Governor Perry endorsed the bill as did leaders of the Texas Conservative Coalition, a group of primarily Republican House members. 

The bill directs the HHSC and Department of Human Services to implement the following:

  • Establish a consolidated application for Medicaid and CHIP;
  • Allow mail-in application and re-certification for children's Medicaid;
  • Allow a simplified, self-declared assets test that is the same as CHIP, with no additional documents or proof required;
  • Phase in continuous eligibility for children through age 19, with 6 months continuous eligibility by February 2002 and 12 months continuous eligibility as early as September 2002 and no later than June 2003;
  • Direct HHSC to establish a process promoting smooth transitions from Medicaid to CHIP;
  • Require "health care orientation" for new Medicaid enrollees; and
  • Establish policies to ensure that children get their Texas HealthSteps preventive care services.

In the provision requiring families to undergo a "health care orientation" for new Medicaid enrollees, the term "health care orientation" is not defined. The bill specifically states that "health care providers" may provide the orientation. TMA is working with the state Medicaid agencies to define what an "orientation" will be and also to devise reimbursement policies for the new requirement.

SB 43 also establishes policies to ensure that children get their Texas HealthSteps preventive care services. This too will be part of the rulemaking process, which TMA already is working on with HHSC.

Additionally, SB 43 includes provisions allowing the state to "lock in" a Medicaid patient with his or her health plan. During the first three months of participation in Medicaid managed care, patients will be able to switch plans for any reason. After the 91st day of participation, HHSC may require that the patient stay in his or her health plan for the remainder of the year unless there is good cause.

To fund simplification, the legislature allocated $122.6 million in general revenue.


Mirroring national health care spending trends, Texas' Medicaid costs are heading upwards.  Rising costs are attributable to three primary factors - caseload growth, increasing utilization of services, and medical inflation, including the costs of newer and better pharmaceuticals.  Though the projected growth rate - less than 8 percent - is well in line with or even below private sector cost growth and the growth in other public programs (such as the Employee Retirement System), any increase in Medicaid spending significantly impacts Texas' budget. Approximately 40 percent of Texas' Medicaid funding is paid by the state, while the remainder is paid by federal matching dollars.

In response to the program's escalating costs, in February the chairs of the Senate Finance and House Appropriations committees appointed a joint, bipartisan Medicaid workgroup to develop recommendations to streamline the Medicaid program and improve cost-efficiency.

Recommendations from the workgroup were included within SB 1156, which was vetoed by the governor (detailed below). However, SB 1, the state's appropriations bill for 2002-03, also enumerates Medicaid cost-saving mechanisms that HHSC may pursue over the next two years. Cost-savings strategies include:

  • Statewide expansion of Medicaid managed care for pregnant women, children, and adults and elimination of the prescription drug limit. Though not specifically stated in the rider, the managed care model most likely to be used is primary care case management (PCCM), which TMA supports (estimated savings $17.9 million).
  • Mandatory enrollment of disabled Medicaid patients into Medicaid managed care.  Currently, disabled patients may voluntarily enroll ($6.1 million).
  • Expanded use of case management services, particularly for complex, high-cost patients ($3 million).
  • Selective contracting for hospital inpatient services ($24.5 million).
  • "Best pricing" structure for Medicaid drug purchases ($22 million).
  • Required supplemental rebates in selected therapeutic categories ($14 million).
  • Reduced hospital outlier payments ($6.1 million).
  • Expanded use of the Health Insurance Premium Payment (HIPP) program. Under HIPP, which is already in limited use in Texas, a Medicaid-eligible patient with access to employer health insurance can be enrolled in that plan if it is more cost-effective to the state. The state must pay out-of-pocket expenses and benefits eligible under Medicaid but not through the employer's plan ($3.2 million).
  • Establishment of a sliding-scale copayment for Medicaid patients. Federal law currently limits the use of patient cost sharing, so a federal waiver would be needed to require copayments for all Medicaid patients. Without a waiver, copayments could only be used for the elderly and disabled populations ($3 million).
  • Increased utilization review of pharmaceutical usage either through a pharmacy benefit manager or in-house function ($6 million).
  • A pilot of automatic dispensing machines in nursing facilities ($3.2 million).
  • Medicaid waiver for psychotropic medications ($5.9 million).

SB 1 also includes a rider authorizing HHSC to contract with a consultant to identify additional savings within the Medicaid program.

It also appears that HHSC will proceed with the consolidation of Medicaid acute care services within the commission.  Currently, the Texas Department of Health oversees the acute care component of Medicaid.  SB 1156, vetoed by the governor, authorized the consolidation and also required the appointment of a legislative oversight committee to guide the transition. In vetoing SB 1156, Governor Perry argued that HHSC already had the authority to consolidate. While some lawmakers disagree about whether consolidation can proceed without statutory language, in meetings with TMA, HHSC has indicated the consolidation plan will move forward, effective Sept. 1, 2001.


Related to the riders allocating new state monies for Medicaid provider rate updates (see "Medicaid Fee Update" section above) were riders directing HHSC to pursue additional federal funds for border health initiatives and coverage for low-income patients, including the following directives.

Enhanced Federal Funding for Border Health Care
SB 1 includes a rider directing HHSC to work with the federal government to develop an "enhanced" federal matching rate for Medicaid and other federal programs operated along the Texas-Mexico border.

The federal government currently pays 60 percent of Texas' Medicaid costs.  In recent years, the federal matching portion has declined, reflecting the state's economic prosperity.  However, Texas' border with Mexico presents challenges with which few other states must contend, such as high rates of new and old world diseases; public health threats such as contaminated air, water, and soil; and health care for large numbers of immigrants seeking refuge within the state. Enhancing Texas' federal Medicaid match rate would recognize Texas' unique conditions and much-needed funding for increased provider reimbursements, health care infrastructure development, and public health initiatives.

TMA already is collaborating with HHSC and a coalition of other border states to develop the policy arguments supporting approval of an enhanced federal match rate.

Waivers to Expand Coverage to Low-Income Patients
SB 1 also directs HHSC to pursue federal waivers allowing the state to pilot prescription drug coverage for low-income adults with selected behavioral health disorders or HIV/AIDS. The governor vetoed the statutory component of the riders, SB 1156. However, HHSC has sufficient authority to pursue the waivers without implementation of SB 1156.

Medicaid Managed Care GME Carve-Out
SB 1, the state's appropriations act, directs TDH to enter into a memorandum of understanding with HHSC to carve out Medicaid graduate medical education (GME) payments from payments to managed care organizations. Payments for GME support are to be made directly to teaching programs based on Medicaid volume and number of filled positions in accredited medical residency programs. 


Breast and Cervical Cancer Coverage
SB 532 by Sen. Jane Nelson (R-Flower Mound) and Rep. Glen Maxey (D-Austin) authorizes Texas to implement the Breast and Cervical Cancer Treatment Act (BCCTA), which was adopted and funded by Congress in October 2000.  Under current law, low-income, uninsured women can receive screening exams for breast and cervical cancer through Texas' Breast and Cervical Cancer Control Program (BCCCP). However, if a woman is diagnosed with breast or cervical cancer, funds previously have not been available for treatment. This gap in service has presented the state with an ethical dilemma for years.  To date, the gap has been overcome through the generosity of physicians, hospitals, and treatment centers that have been absorbing the costs to provide BCCCP clients with the necessary surgery, radiation, or chemotherapy following diagnosis. 

BCCTA gives Texas a generous matching rate - 74 percent of the program's costs will be paid by the federal government. An estimated 200 Texas women are expected to benefit annually from the passage of SB 532. 

SB 532 authorizes HHSC to provide full Medicaid benefits to uninsured women under age 65 who are identified through the BCCCP in Texas and are in need of treatment for breast or cervical cancer. TMA, along with the American Cancer Society and other stakeholders and experts, actively supported SB 532. 

The bill, which takes effect Sept. 1, 2001, specifies the following:

  • Medicaid coverage must be provided for a continuous period during the course of treatment;
  • The department must simplify the enrollment process for Medicaid providers and adopt rules to allow the use of presumptive eligibility for patients eligible for coverage under this act;
  • The state cannot require a face-to-face interview in determining a person's eligibility for Medicaid.

Medicaid Buy-In Pilot for Disabled Patients
Many disabled patients who are capable of working choose not to do so because of the risk of earning too much and losing Supplemental Security Income (SSI) and Medicaid coverage. SB 531, by Sen. Mike Moncrief (D-Fort Worth), establishes three pilot projects to extend Medicaid benefits to disabled patients between the ages of 16 and 64. In 1999, Congress adopted the Ticket to Work and Work Incentives Improvement Act authorizing states to set up buy-in arrangements for disabled workers. The pilots will be implemented in one urban area, one rural area, and one area along the Texas-Mexico border that also have a local workforce development board.

Additional eligibility guidelines, such as the patient's income, assets, and resource limitations, will be established by HHSC. Patients may be required to share in their health care costs by paying copayments or a portion of their premium. 

The bill is effective Sept. 1, 2001. By December 2002, HHSC is required to report to the legislature findings about the effectiveness of the three pilots. If the pilots are successful, HHSC is directed to include a request for funding of the program in its budget request for 2004-05.

Medicaid Coverage for Adolescent Foster Children
SB 51 by Senator Zaffirini extends Medicaid benefits to foster children who "age out" of the program.  Foster children currently are eligible for Medicaid benefits. Though Medicaid covers children up to age 21 through the Medicaid EPSDT/Comprehensive Care Program, when foster children leave their foster home or residential facility at age 18, Medicaid benefits end. Under the federal "Foster Care Independence Act of 1999," states are allowed to extend coverage to these children up to age 21. SB 51 requires HHSC to extend Medicaid to independent foster adolescents as allowed by federal law. The bill becomes effective Sept. 1, 2001.

Medicaid Case Management
In an effort to curtail Medicaid costs, Rep. Kyle Janek (R-Houston) passed HB 1516 directing TDH to establish a case management program for patients with catastrophic illnesses or injuries. TDH will identify the services to be assigned to a case manager. As part of the case management program, patients will receive assistance with making arrangements to receive medical services, travel and lodging in connection with the care, education of the patient and family members about the illness or injury, referral to appropriate support groups, and other services that will result in better, cost-effective care.  

Migrant Care Network
HB 1537 by Rep. Garnet Coleman (D-Houston) and Sen. Mike Moncrief (D-Fort Worth) directs HHSC to study the feasibility of contracting with one or more existing networks to arrange for or provide out-of-state coverage to Medicaid or CHIP-eligible migrant children whose parents reside in Texas and intend to return to Texas at the end of their seasonal employment in another state. Texas is home to thousands of migrant and seasonal agricultural workers. While many of these families' children are eligible for Medicaid or CHIP, while out of state, the children frequently go without health care coverage because Texas does not have arrangements with other states to extend Texas Medicaid or CHIP coverage.

HB 1537 also requires that if the results of the study indicate that a migrant care network is cost-effective, HHSC should proceed with development of the network, including development of appropriate eligibility and enrollment standards. HHSC will issue a report on its findings to the governor and legislature prior to the 2003 legislative session.

Health Insurance Premium Payment (HIPP) Program
Seeking to expand the use of private health insurance in the Medicaid and CHIP programs, Rep. Carl Isett (R-Lubbock) passed HB 3038.  The bill allows the state to expand the use of a little- known program within TDH that enrolls Medicaid patients into employer-sponsored health plans. When a Medicaid recipient has access to employer-sponsored coverage, the HIPP program allows TDH to require a patient to enroll in the group health benefit plan rather than Medicaid if it is cost-effective to do so. Just as for patients enrolled in regular Medicaid, patients enrolled in the HIPP program do not pay copayments or other cost-sharing arrangements; plan premiums and cost sharing are paid by the state. Additionally, Medicaid serves as the secondary insurer, covering services available in Medicaid but not covered by the employer's health plan.

HB 3038 also states that if enrolling a Medicaid patient in a group health benefit plan also requires the enrollment of a non-Medicaid eligible parent or other family member, TDH may pay the family premium, again assuming it is cost-effective for the state. However, the state will not pay any cost-sharing requirements for the parent or family member who is not Medicaid eligible.

Upon notice from TDH, issuers of group health benefit plans must enroll Medicaid patients regardless of enrollment period restrictions.

HB 3038 also applies to CHIP. However, it is not yet clear whether federal law will allow Texas to implement this program for CHIP.  The state is directed to pursue a federal waiver allowing use of this approach within CHIP.

HB 3038 also requires TDH to study mechanisms to increase Medicaid patients' enrollment in group health benefit plans as well as the feasibility of implementing an income-based, sliding scale premium for patients receiving transitional Medicaid and who have access to employer-sponsored health care.


For years, South Texas legislators, policymakers, physicians, and patients have decried the lack of sufficient health care providers and resources along the Texas-Mexico border.  High rates of poverty, the uninsured, and old and new world diseases along with inadequate health care funding have crippled many border communities' efforts to attract and retain new health care professionals and to enhance and update aging infrastructure.

Adding insult to injury, a high percentage of South Texas and border patients qualify for Medicaid or CHIP. While these programs are vitally important to providing health care coverage to low-income families and children, inadequate reimbursement for Medicaid and CHIP services makes it difficult for border physicians to sustain Medicaid-dominant practices. For some border physician practices, Medicaid and CHIP patients compose as much as 80 percent of their entire patient base.

Legislators addressed this situation in two important ways:  (1) implementing a provider rate update (detailed under the "Medicaid Fee Update" section above) and (2) to keep the spotlight on the issue, adopting legislation establishing workgroups to examine health care rates and expenditures along the Texas-Mexico border and other underserved communities.

Advisory Committee on Medicaid and CHIP Rates Along the Texas-Mexico Border
SB 1053 by Sen. Eliot Shapleigh (D-El Paso) and Rep. Norma Chavez (D-El Paso) requires HHSC to establish an advisory committee charged with developing recommendations to eliminate health disparities between the border and other regions of the state. The nine-member committee will include physicians, hospitals, patient advocates, Medicaid and CHIP health plans, state agencies, and civic leaders who live or work along the border and are knowledgeable about Medicaid and CHIP. 

The legislation specifically directs the advisory committee to examine disparities relating to Medicaid managed care and CHIP health plan capitation rates and Medicaid and CHIP fee-for-service per capita expenditures for hospital and professional services provided to children. The committee is instructed to make recommendations to HHSC to ameliorate funding disparities with its first report due January 2002.

With advice from the committee, HHSC is required to ensure that:

Disparities in CHIP and Medicaid reimbursement rates for children's services are eliminated as soon as practicable by increasing rates for health plans and providers along the Texas-Mexico border.  Rate increases are based upon available funding and, if implemented, must equal the statewide average rates and expenditures for these programs.

Border physicians providing Medicaid services to children or participating in CHIP also receive a bonus payment.

SB 1, the appropriations act, did not specifically dedicate funds for implementation of SB 1053.  However, the intent of the language - to increase Medicaid reimbursement for high-volume, border providers - is contained within the budget rider for the Medicaid professional and outpatient hospital rate increase. (See the "Medicaid Fee Update" section above.)

SB 1053 also directs HHSC to contract with a university to measure what impact provider rate increases have on retaining and attracting new health care providers, expanding patient access to care, or if rate increases envisioned under the bill were sufficient to have a measurable effect. The study also must assess whether rate increases should be extended to services for adults. The study is required to be submitted to the legislature by December 2004.

Other provisions of the bill require HHSC to exclude the Texas-Mexico border region from its calculation of the statewide average Medicaid and CHIP capitation rates, to consider varying rates paid to providers according to type of service provided, and to assure that rate increases are passed directly to providers participating in Medicaid managed care.

Task Force on Medicaid and CHIP Rate Setting
In addition to SB 1053, Sen. Eddie Lucio (D-Brownsville) passed SB 1299 directing HHSC to establish an 11-member task force to examine the way in which Texas sets its reimbursement rates for Medicaid and CHIP. Committee members must include health economists; public health professionals, including at least one epidemiologist; state agencies officials; CHIP and Medicaid health plans; a consumer advocate; and health care providers, including physicians, hospitals, long-term care facilities, dentists, and emergency medical providers.

The task force is charged with examining the incidence and prevalence of disease in comparison to utilization of Medicaid and CHIP services; the number of health care providers participating in Medicaid and/or CHIP; the number of eligible patients for each program; the effects of developing incentive payment arrangements, such as bonuses, to increase provider participation; and Texas' Medicaid and CHIP expenditures as compared to other large, industrial states. 

Based on its review of pertinent factors , the task force is asked to submit to the legislature by December 2002 recommendations on how to improve Texas' Medicaid and CHIP reimbursement rates.  

Medicaid Financial Reporting and Consolidated Budget
To make it easier for the legislature to track all Medicaid funding and expenditures, SB 832 by Senator Moncrief requires HHSC to submit a consolidated biennial Medicaid budget report for every state agency receiving and dispensing Medicaid funds. The report must describe the Medicaid programs administered by the agency and a detailed accounting of how the agency disbursed its Medicaid funds during the period covered by the report.

Additionally, HHSC also must submit a report to the legislature every quarter describing each agency's Medicaid expenditures by program type, including the amount spent on each service or benefit. Quarterly reports also must specify the amount agencies spend on their Medicaid program's operations, such as eligibility determination, claims processing, case management, and other administrative costs. Reports must be shared with the governor, legislature, state auditor, and comptroller. 

Medicaid Encounter Data Reporting
HB 1591 by Rep. Ann Kitchen (D-Austin) prohibits HHSC from using Medicaid managed care encounter data in developing health plan premium rates unless the encounter data has been certified to be complete, accurate, and reliable for the most recent fiscal year and there is no statistically significant variability in the encounter data attributable to incompleteness, inaccuracy, or other data deficiencies.  HHSC must appoint a person to certify the validity and reliability of the encounter data.

The state uses encounter data to evaluate health care utilization, quality, and cost for patients participating in a Medicaid health plan. Encounter data include information regarding the patient's medical history, diagnosis, and treatment. Accurate data helps the state examine both the under- and over-utilization of services, particularly services relating to pregnant women and children.

HB 1591 states HHSC also shall collaborate with Medicaid managed care plans and Medicaid providers participating in the plans' networks to develop incentives and mechanisms to encourage providers to report complete and accurate encounter data on a timely basis.

Medicaid Near Miss


On June 17, Governor Perry vetoed SB 1156, the 2001 Omnibus Medicaid Reform bill. The bill, negotiated by a bipartisan group of legislators and strongly supported by the association, contained language consolidating Medicaid acute care services within one state agency as well as numerous provisions designed to improve access to care for low-income patients, including women's health and care for patients with mental illness or HIV/AIDS. 

Most important for physicians, the governor's veto sank TMA's Medicaid managed care reform package, which was included within the bill. Reforms contained in the bill would have:

  • Reduced paperwork and standardized utilization management requirements for physician offices,
  • Eliminated preauthorization processes for routine services,
  • Prohibited the expansion of Medicaid managed care to rural counties,
  • Limited the number of Medicaid managed care plans in a service area, and
  • Established a systematic complaint reporting and notification system.
  • Additionally, the bill contained a TMA recommendation to simplify the EPSDT/Texas HealthSteps enrollment and reporting processes for health care providers.

In vetoing the bill, the governor stated that he believed HHSC already had the authority to achieve many of the provisions in the bill and that other provisions in the bill, such as pursuing federal waivers to expand health care coverage for low-income women and other populations, would distract from the commission's need to focus on streamlining the Medicaid program.  

Other provisions lost through the veto process included language establishing a Medicaid legislative oversight committee, requiring HHSC to expand its outreach efforts to Medicaid eligible children, extending Medicaid coverage to legal immigrants who entered the country after 1996, and implementing patient cost-sharing, such as copayments, within Medicaid.

What is most surprising about the governor's veto is that the legislation scored approximately $200 million in Medicaid savings over the 2002-03 biennium. Most of the administrative savings envisioned in the bill also are enumerated within SB 1, the appropriations act. (See the "Medicaid Cost Containment and Budget Issues" section above for details.) However, what is not included in SB 1 is statutory intent as to how the cost-saving measures will be implemented, including provisions requiring substantial public input into the development of any cost-saving initiatives.

The association's disappointment regarding the governor's veto of SB 1156 is mitigated to some degree by TMA's collaborative and constructive relationship with HHSC and TDH. In the coming months, TMA will work closely with the Medicaid agencies to try to revive through the regulatory process the Medicaid managed care reform package and other measures contained in the bill.

Medicaid TMA Staff Contacts

  • Helen Kent Davis, Director, Office of Governmental Affairs, (512) 370-1401
  • Rich Johnson, Director, Division of Medical Economics, (512) 370-1315


Searching for innovative and cost-effective mechanisms to expand health care access to underserved communities, legislators sponsored a plethora of telemedicine-related bills during the 2001 legislative session. The concepts for the bills emerged after an extensive public hearing process during the 1999 to 2001 legislative interim. Both the House and Senate health committees included telemedicine as a topic in their legislative interim deliberations as did HHSC and the Statewide Health Care Coordinating Council.  TMA and the Texas Academy of Family Physicians spearheaded organized medicine's research and testimony regarding the telemedicine legislation, coordinating efforts with other medical specialties and county medical societies and TMA councils and committees.

Policy goals of organized medicine were to protect existing medical relationships and the fragile rural health infrastructure while allowing for expansion of quality telemedicine medical services and reimbursement of services based on clinical evidence.

Other stakeholders involved in developing the legislation were the health science centers, particularly Texas Tech and The University of Texas Medical Branch at Galveston; the Texas Hospital Association; the Texas Organization of Rural and Community Hospitals; and various consumer advocacy organizations. 

SB 789 by Senator Moncrief  and Representative Maxey emerged from the debate as the primary telemedicine legislative vehicle. A host of smaller, but equally important, telemedicine bills also was debated, relating to border telemedicine pilots and grant monies to help providers underwrite the cost of expanding telemedicine services. An analysis of each of the telemedicine bills is provided below.

A critical component of telemedicine legislative implementation will be the rulemaking process, whereby stakeholders will flesh out important details involving supervisory standards, reimbursement policies, and coverage and quality of care issues. To assure continued coordinated stakeholder input on these issues, the legislature directed HHSC to form a Telemedicine Advisory Committee (detailed below). TMA and component county medical and specialty societies will be integral members of the committee, which will be appointed later this year.

Omnibus Telemedicine Legislation
SB 789 establishes the framework for regulating and reimbursing telemedicine medical services in Texas, including expanding the availability and funding for telemedicine within the Medicaid program and lifting restrictions on who can present and consult on telemedicine medical services. A key component of the legislation is its definition of "telemedicine medical services," which is defined as a physician-directed medical act that can be carried out only by a physician or by a licensed health care professional under the direction of a physician. The bill establishes quality-of-care safeguards, including rulemaking authority to establish appropriate physician supervisory requirements and face-to-face follow-up visits. To make telemedicine services more widely available to physicians, the bill also allows the Telecommunications Infrastructure Board to develop a grant program for physicians and other health care providers. Specific provisions of SB 789 include the following:

  • Ensures that telemedicine medical services by law must be physician directed and delegated;
  • Instills model definitions of "telemedicine medical service" and "telehealth service" across multiple codes in state law:
    • "Telemedicine Medical Service" is a health care service initiated by a physician or a health professional acting under the delegation and supervision of a physician. These services include patient assessment, diagnosis, or consultation by a physician; treatment; or the transfer of medical data through advanced telecommunications technology. 
    • "Telehealth Service" is a health service other than a telemedicine medical service provided by a health professional acting within his or her scope of practice. An example would be services provided by a dietician.
  • Charges the Board of Medical Examiners (BME) to set quality of care and supervisory standards by establishing supervisory requirements for a service delegated to and performed by an individual who is not a physician and by defining situations when a face-to-face consultation is required;
  • Calls for coordination of services with existing health care systems and relationships and gives the HHSC and BME the authority to ensure compliance by any means of enforcement, including a corrective action plan;
  • Creates parameters for development of a reimbursement system based on clinical evidence defining appropriate service delivery under Medicaid by requiring HHSC to consult with TDH and the newly created telemedicine advisory committee to review clinical efficacy of the delivery of health care services using telecommunications;
  • Expands opportunities for physician participation in telemedicine medical services by removing the reimbursement requirement to be affiliated with a medical school, teaching hospital, or selected rural facilities. Currently, for purposes of reimbursement under Medicaid, providers must be tethered to an academic health center and their services provided to rural communities.

Pilot projects in telemedicine medical services and telehealth services are authorized under the bill as well. HHSC is required to report to the legislature on the impact of telemedicine medical services on the state Medicaid program. More specifically, HHSC is required to report on the effects of telemedicine on the following:

  • The number of Medicaid physicians and health care professionals using telemedicine;
  • The geographic and demographic disposition of physicians and health care professionals using telemedicine; and
  • The number and types of services being provided and the cost of utilization. 

SB 789 also requires HHSC and the Telecommunications Infrastructure Fund Board to establish minimum telemedicine technology standards.  SB 789 takes effect on Sept. 1, 2001. 

The legislature allocated $3.5 million over the next two years to implement SB 789.  Another $212,000 was appropriated to fund telemedicine pilots in one rural and one urban location.  The pilots will focus on providing prenatal and related services to low-income women.

Border Telemedicine Pilot Program
To improve health care access and patient health status along the border , HB 2700 by Representative Chavez and Sen. Robert Duncan (R-Lubbock) requires HHSC to establish Medicaid telemedicine pilots within 150 miles of the Texas-Mexico border. The pilots are to be implemented before Jan. 1, 2003.  Before establishing the pilots, HHSC must obtain support from the local medical community and government officials.

Telemedicine TMA Staff Contacts

  • Helen Kent Davis, Director, Office of Governmental Affairs, (512) 370-1401
  • Rich Johnson, Director, Division of Medical Economics, (512) 370-1315


Medicaid Disease Management for Children's Asthma
SB 616 by Sen. Leticia Van de Putte (D-San Antonio) requires development and implementation of a Medicaid disease management pilot program for children's asthma in counties with a high incidence of children's asthma and high rate of hospital emergency room care for the treatment of children's asthma. The bill directs HHSC to develop the pilot program by rule and directs TDH to administer the program.   The pilots must be initiated by Nov. 1, 2001.

The pilot program will provide continuous care, case management, and asthma education to Medicaid recipients younger than 19 years of age who have been hospitalized or received emergency care services for asthma. Health care provider education will be another component. HHSC is also to consider the disease management pilot programs for Medicaid recipients with asthma operated in Virginia (community-based program) and Florida (vendor-based program). In implementing the program, HHSC and TDH are to use services of local health care professionals to the extent possible.

It is assumed that only children already meeting current Medicaid eligibility requirements will participate, thereby avoiding new client services costs, and that TDH can absorb any new administrative expenses within existing resources. Another bill requirement is a report due to the lieutenant governor and the speaker of the House of Representatives no later than December 2004 on the effectiveness and costs of the program.

In addition to SB 616, the legislature also passed HB 342 directing TDH to establish a pilot study to compare preventative disease management methods with traditional methods of treating children's asthma. Rep. Ruth McClendon (D-San Antonio) and Senator Van de Putte sponsored the legislation. SB 616 and HB 342 are similar in intent, though vary in terms of where and how the asthma pilots should be established as well as what outcomes should be measured.

Under HB 342, TDH will implement pilots in six areas of the state, both urban and rural. Disease management techniques that are transferable to private practice and to other geographical areas of the state are to be used. Outcomes measures that will be examined include school absenteeism, hospitalization, frequency of asthma symptoms, impact of the disease on the family, and economic effects of the disease. An interim written report containing the findings of the pilot study is to be submitted to the legislature no later than November 2002, and the final report containing TDH's recommendations is due November 2003.

HB 342 also replicates the language in SB 616 that establishes an Asthma and Allergy Research Advisory Committee. The only additional item is the charge to this committee to advise HHSC in conducting the children's asthma disease management pilot program.

As stated above, SB 616 has a provision establishing an Asthma and Allergy Research Advisory Committee. Reps. Diane Delisi (R-Temple) and Jaime Capelo (D-Corpus Christi) sponsored the provision. The advisory committee will include nine members selected by the governor. The committee's charge is to develop a plan to research asthma and allergy and associated medical conditions in Texas, assess resources in Texas as possible sites for research opportunities, analyze the impact of asthma and allergy on the economy of the state and on the health of residents, and make recommendations to the legislature and governor concerning research programs and funding alternatives. The bill requires the committee to be abolished by January 2003.

The Texas Asthma Coalition, recently created through the efforts of TDH, the American Lung Association, and other professional organizations, was involved with the successful passage of this bill.

Medicaid Managed Care Disease Management
SB 283 by Senator Nelson mandates that HHSC ensure that Medicaid managed care plans develop and implement special disease management programs to address chronic health conditions, including asthma and diabetes, and to use outcomes measures to assess the programs. HHSC will study the benefits and costs of applying disease management principles in the delivery of Medicaid managed care to recipients with chronic health conditions. The hope is that long-term health care costs will be reduced; patient care improved, including coordination of that care; and utilization patterns improved.

TMA opposed the bill because it mandates the inclusion of disease management within Medicaid managed care rather than allowing it on a voluntary basis.  TMA asked that the state resolve outstanding administrative issues with Medicaid managed care before implementing additional requirements. 

Disease Management TMA Staff Contacts

  • Barbara James, RN, Director, Science and Quality Department, (512) 370-1400
  • Helen Kent Davis, Director, Office of Governmental Affairs, (512) 370-1401
  • Rich Johnson, Director, Division of Medical Economics, (512) 370-1315

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Last Updated On

July 23, 2010

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