Highlights of Major Health and Human Service
Cuts in HB 1.
Cigarette Fee Increases
Budget. No budget. Budget. After weeks of speculation about
whether Comptroller Carole Keeton Strayhorn would be able to
certify the budget, on June 19 the comptroller announced her office
was, in fact, not able to do so for the first time in 30 years. The
$117 billion budget crafted by lawmakers was, according Comptroller
Strayhorn, $185 million short. The announcement set off sighs of
grief by lawmakers and lobbyists and indignation and frustration by
the governor, lieutenant governor, and speaker. The latter three
felt that an administrative mechanism - across the board cuts -
should have allowed the comptroller to certify the budget
regardless of whether the numbers added up. Attorney General Gregg
Abbott agreed and requested that the Texas Supreme Court make a
final determination. Yet, barely 24 hours after the comptroller's
announcement, the governor ended the standoff by vetoing two
comptroller-backed bills. Combined, the two bills freed up $212
million, which covered the shortfall and allowed the comptroller to
certify the budget.
Texas legislators arrived in Austin confronting a $10 billion
budget shortfall. After campaigning for months with pledges of "no
new taxes" and improved government efficiency, legislative
leadership had few options for tackling the budget - break their
pledges or cut their way out of the budget hole. Texas legislators
chose the latter. Health and human service expenditures are second
only to education within the Texas budget. Few legislators were
willing to publicly discuss cuts to public education, though the
final budget bill did contain substantial cutbacks for higher
education. However, health care services were named a top target.
Many of the cutbacks were cloaked under the guise of "improved
program efficiency" or reductions in "fraud and abuse." Yet, at the
end of the day, Texas' already efficient Medicaid program and
Children's Health Insurance Program (CHIP) could yield savings only
by cutting services and reducing eligibility.
An unprecedented chorus of voices from organized medicine,
county officials, hospitals, and consumer advocacy groups helped to
mitigate the cutbacks. The legislature started budget hearings with
documents outlining elimination of most "optional" Medicaid
services, including Medicaid drug coverage, and 33- percent rate
reductions for physicians and other Medicaid providers. Despite the
progress, by 2005 about 500,000 more low-income Texans will be
uninsured or underinsured, with the costs of their care shifted
directly to physicians, hospitals, local taxpayers, and employers,
all of whom already are reeling from higher health insurance costs,
economic malaise, and higher property taxes.
On the horizon…
At the end of the legislative session, Congress passed a tax
bill that included temporary state relief for rising Medicaid and
other health care costs. Texas gained $1.26 billion as a result of
Congress' generosity. A nonbinding rider within House Bill 1
prioritizes use of the funds once they become available. At the top
of the priority list is restoration of the Medicaid physician and
provider rate cuts, followed by restoring cuts in community care
for elderly and disabled patients, Medicaid prenatal care for
pregnant women, and other important services. To certify the
budget, the comptroller did use the majority of the funds. Yet, at
least $370 million is available. The governor and Legislative
Budget Board (LBB) agreed in August to use $167 million of the
funds to reduce physician and provider rate cuts by half (for
physicians, the impending 5-percent cut will now be 2.5 percent)
and to restore community care services for elderly and disabled
Medicaid patients. The governor and LBB indicated that the
remaining monies will be kept in reserve for emergencies.
Additionally, another $330 million to $430 million could be freed
up as a result of the veto of two bills and technical corrections
to others during the special session.
TMA strenuously advocates all the money being put back into
health and human services. About $1.1 billion is needed to avert
nearly all the reductions in coverage.
Impact of health care funding cuts on physician
There's no way to mince words: spending reductions within HB 1
undoubtedly will have a detrimental impact on patient care and
the financial health of many physician practices, particularly
those in underserved communities. The most direct impact is the
reduction in Medicaid and CHIP payment. Additionally, cuts in
eligibility and services will increase the number of poor and
low-income uninsured or underinsured patients seen in many
physician practices. TMA, together with county medical and state
specialty societies and the Border Health Caucus, will advocate
vigorously throughout the interim the use of any newly identified
funds for the restoration of reductions to health and human
Following are highlights of the major health and human service cuts
in HB 1. (Note: Many of the same cuts are codified in HB 2292,
which is discussed below.)
Reduces Medicaid coverage for adult pregnant women from 185
percent of federal poverty to 158 percent.
Approximately 8,000 women will lose prenatal care. The number
does not include the impact of legal and illegal immigrant women
who no longer will qualify for emergency Medicaid for the
delivery of their babies.
Reduces community care services, such as attendant care, for
disabled and elderly patients.
(Addendum: In August, the governor and LBB agreed to
allocate a portion of newly received federal Medicaid monies to
fully restore community care.)
Hours of services reduced by 15 percent for 100,000 patients.
Loss of services could result in more patients forced into a
Eliminates Medicaid medically needy spend-down program.
At least 9,959 severely ill adult patients will not be eligible
for Medicaid once they "spend down" their income to 17 percent of
poverty. The number does not include the impact to legal and
illegal immigrant patients who qualify for emergency Medicaid as
a result of extreme illness.
Preserves CHIP at 200 percent of poverty, which TMA strongly
supported, but rolls back continuous coverage from 12 months to
six; imposes a 90-day waiting period for children initially
enrolled in CHIP; and increases family cost sharing to federal
Combined, these policy decisions are expected to cut 170,000
children from CHIP.
Eliminates mental health benefits, rehabilitative and
habilitative services, home health, hospice, dental, and durable
medical equipment (DME) coverage from CHIP.
Will affect an unknown number of children; the reduction in
benefits will impair significantly the ability of chronically ill
or disabled children to receive medically necessary care. The
Health and Human Services Commission (HHSC) is authorized within
HB 1 to adjust the benefit package so long as changes are budget
neutral. HHSC is in the process of identifying mechanisms to
reinstate as many services as possible, particularly physical,
occupational, and speech therapies and DME. The federal
government must approve the new benefit plan. If approved, Texas
will be the only state to implement a benefit package without
coverage of mental health and beneath the actuarial requirements
within the CHIP enabling legislation.
Retains six months continuous eligibility for children's
Assures continuous and better care for low-income children. TMA,
together with the Texas Pediatric Society and Texas Academy of
Family Physicians, vigorously advocated retaining this provision
within Medicaid. TMA helped enact continuous eligibility in 2001
when the legislature passed Senate Bill 43 to simplify children's
Medicaid. The budget and related legislation freeze Medicaid
continuous eligibility at six months rather than going to 12
months coverage in June of this year. The freeze will allow the
legislature to revisit the issue in 2005.
Reduces Medicaid and CHIP physician, hospital, and health plan
rates by 5 percent.
(Addendum: In August, the governor and LBB agreed to allocate
a portion of newly received federal Medicaid monies to reduce the
payment reductions by 2.5 percent).
Fewer than half of Texas physicians currently accept new Medicaid
patients. A recent survey of family physicians showed that only
one-third would continue to accept Medicaid patients if rate cuts
were imposed, thus jeopardizing vulnerable, low-income patients'
access to timely, quality care. Further rate reductions will
undoubtedly decrease access to care for low-income patients and
further strain already overcrowded emergency departments and
public clinics. In the final hours of budget talks, legislators
agreed to a rider dedicating $1.26 billion in new federal monies
to restoring some or all of the cuts. However, allocation of the
funds is predicated on funds not otherwise being used by the
comptroller to certify the budget. To certify the budget, the
comptroller did use a portion of the federal funds. It is not yet
known whether sufficient dollars will be available to restore
Cuts funding for HIV/AIDS medication for poor and low-income
The legislature reduced this program's budget by $11.5 million, a
comparatively low amount when contrasted with other programs.
However, growth in the number of patients needing services and
increased medication costs means that 2,000 fewer patients will
receive services over the next two years.
Reduces community mental health and mental retardation
Three thousand fewer patients will receive community mental
health services. The cuts in services are in addition to
elimination of the CHIP mental health benefit, effectively
cutting off any mental health treatment for most low-income
children in need. Texas already services less that one-third of
the children requiring treatment for severe mental and emotional
Reduces graduate medical education funding by $41.6
It is not known how this measure will affect direct patient, yet
the reduction in funding undoubtedly will strain Texas' ability
to train the next generation of physicians and provide indigent
care by physician residents.
Eliminates most "optional" Medicaid services for adults.
HB1 eliminates adult Medicaid patients' coverage for podiatric
care, chiropractic, mental health counseling, hearing aids, and
eyeglasses. Approximately 175,000 patients, most of whom
are elderly and disabled, will lose coverage.
Health Care Funding near misses
CIGARETTE FEE INCREASES
Several bills were filed this session to increase
fees on cigarettes by $1 per pack. The comptroller estimated that a
$1 fee increase would generate $1.5 billion over the next two
years, enough to avert the health and human services cutbacks.
Moreover, higher cigarette costs would discourage teenagers from
smoking, a major public health goal for Texas. TMA strongly
supported the legislation. While a few bills did get a cursory
hearing, they died without much debate. Governor Perry announced
early in the session his opposition to
tax increase, including sin taxes. His position remained
inalterable all session. However, Governor Perry has indicated that
sin taxes will be considered in the special session on public
school finance, which is expected to be called early in 2004. TMA
will continue to advocate use of a cigarette tax for restoring
health and human service reductions.
Health care funding TMA staff contacts:
-Helen Kent Davis, director, Office of Governmental
Affairs, (512) 370-1401
-Stephen Brown, associate director, Legislative Affairs
Department, (512) 370-1367
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