Legislative Face-Off

TMA Outdraws Opponents Attacking Physicians, Patients

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Cover Story - August 2005  

By  Ken Ortolon
Senior Editor  

In 2003, Texas physicians celebrated one of their biggest legislative victories with passage of a constitutional amendment and major medical liability reform legislation capping noneconomic damages. But this year, Texas Medical Association's success in the Texas Legislature may best be characterized by what didn't pass rather than by what did.

Physicians this year faced battles on multiple fronts with health plans, business, hospitals, allied health professionals, and others. While organized medicine did not emerge unscathed, TMA and its allies were largely successful in defeating numerous bills that would have been bad medicine for both physicians and patients. In fact, TMA achieved many of the elements of the prescription it laid out at the beginning of the legislative session for curing the state's ailing health care system in its Healthy Vision 2010, when then-TMA President Bohn Allen, MD, called on lawmakers to ensure that Texas' limited health care dollars "are spent on health care, not elsewhere."

By the time the regular legislative session ended in May, TMA had defeated all attempts by allied health professionals to expand their scope of practice, put the brakes on the statewide rollout of Medicaid HMOs for elderly patients and patients with disabilities, beat back an attempt by hospitals to limit physician ownership of health care facilities, and fought off efforts by health plans to impose price controls on out-of-network physicians.

Meanwhile, the Texas State Board of Medical Examiners (TSBME) was reauthorized largely intact, workers' compensation was completely revamped, some funding was restored for graduate medical education, and physicians won another round in the battle against childhood obesity.

Harvey Kronberg, editor of the Austin-based political newsletter Quorum Report , says TMA enjoyed an impressive session. "Considering that for all practical purposes TMA had a freshman legislative staff without a lot of institutional background in the issues from the doctors' perspective, I would say they had a pretty good session," he said.

TMA Council on Legislation Chair Austin I. King, MD, agrees. "I think we did very well. We prevented passage of any legislation dealing with scope of practice, we limited the HMOs as far as Medicaid goes, and workers' compensation was totally revised," the Abilene otolaryngologist said. "And I think our legislative team really came together and prevented bills being passed that were bad for medicine."

But the final chapter on the 2005 legislative session has not yet been written. Lawmakers failed to resolve school finance and tax reform issues during the regular session. At press time, Gov. Rick Perry had called lawmakers back into special session to take another shot at devising a new school-funding scheme.

While it was not immediately clear whether lawmakers could reach a solution this time, TMA leaders believe organized medicine is well positioned to minimize the impact of any new business taxes on physicians' practices. However, Governor Perry threw a couple of new wrinkles into the tax debate when he unveiled a new tax plan on June 21. 

Digging In  

Physicians knew from the outset that the legislative session would be "largely defensive" for organized medicine, said Houston internist Spencer Berthelsen, MD, immediate past chair of the Council on Legislation. With TSBME and most of the allied health professional licensing boards up for sunset review, it was clear that nonphysicians would have ample opportunity to push their scope expansions.

"We knew going in strategically that whenever you have the Medical Practice Act up [for renewal] that there's going to be a run at scope-of-practice issues," Dr. King said. "We knew going in that this was going to be a matter of defending medicine rather than producing new legislation."

TMA also was aware that banning physician ownership of specialty hospitals and other health care facilities was a high legislative priority for the Texas Hospital Association (THA). "It is unusual for us to be on the opposite side of an issue with the hospitals, but we certainly encountered that this session," Dr. Berthelsen said.

He says, however, that playing defense is tremendously important to physicians. "I think the membership should not overlook the fact that a good defensive session when a lot of bad things could potentially happen and are avoided can be as important to the association as a good session in which we get a lot of new things accomplished."

Recognizing the battles it faced, TMA prepared well in advance of the session to position medicine in the best possible posture. A series of ad hoc committees worked throughout the interim following the 2003 session to develop TMA positions on several key issues, including tax reform, workers' compensation, and Medicaid. And, TMA joined nearly a dozen specialty organizations to create the PatientsFirst Coalition to present a unified front on the scope issues.

Dr. King says that coalition was crucial in defeating attempts by optometrists, podiatrists, and others to expand their scope of practice beyond the limits of their training.

"It is so important that medicine speak with one voice when you get to the legislature," Dr. King said. "TMA was able to work with the specialties to successfully unify the house of medicine. The importance of that cannot be overstated."

Dr. Berthelsen agrees. "I'm very proud of the effort that TMA put forward, both the Public Affairs staff and the association membership, and all the specialty societies," he said. "I think we again demonstrated that we were much more successful as a unified voice than we would have been as individuals."

Dr. Berthelsen says the strength of TMA's grassroots organization also played a vital role in the association's success this year, particularly the TMA Alliance's First Tuesdays at the Capitol events that brought hundreds of physicians, medical students, and alliance members to Austin on the first Tuesday of each month of the session.

"First Tuesdays is a very visible demonstration of the strength of grassroots politics," Dr. Berthelsen said. "We were told time and again by legislators that First Tuesdays was highly effective. When they wanted to champion medicine's issues, it helped them quite a bit to have the First Tuesdays white-coat crowd spread out around the Capitol in support of those issues." 

Derailing the HMO Train  

With so many major health care issues in play this legislative session, it may be hard to pick TMA's biggest accomplishment. But political observers say TMA's success in slowing the movement of more urban Medicaid beneficiaries into HMOs may be its most surprising victory.

In 2003, lawmakers authorized the Texas Health and Human Services Commission (HHSC) to implement the most "cost-effective" Medicaid delivery system. HHSC announced last summer that it had determined HMOs to be the best option, over vociferous objections from physicians, hospitals, and consumer advocates. Its plan entailed expanding statewide an HMO known as "STAR+PLUS" to cover elderly patients and patients with disabilities living in the community, as well as repealing the popular primary care case management (PCCM) model, which primarily covers pregnant women and children. If implemented, the HHSC plan would have resulted in an HMO-only model for most Medicaid patients.

Darren Whitehurst, director of TMA's Division of Public Affairs, says HHSC was "within a hare's breath" of achieving its goal when TMA and a coalition of business leaders, hospitals, and long-term care providers intervened.

Physicians and safety net hospitals pointed out to lawmakers that establishing the STAR+PLUS Medicaid HMO model in urban counties could cost millions of dollars in federal Medicaid matching funds. Harris County, where Texas piloted STAR+PLUS, already has lost some $35 million as a result of the model and could have lost another $20 million. Dallas, Bexar, Lubbock, El Paso, Nueces, Travis, and Tarrant counties stood to lose at least an additional $150 million collectively over the next two years.

In lieu of STAR+PLUS, House Bill 1771, by Rep. Diane White Delisi (R-Temple), and Sen. Jane Nelson (R-Flower Mound), and a rider inserted into the budget bill require HHSC to pilot a noncapitated integrated care management (ICM) model -- an enhanced form of the primary care case management model -- in Dallas County. Those measures also allow the ICM model to be considered as an option to HMOs in other urban counties.

"It wasn't an unqualified win, but considering the odds that medicine was facing on this, it was pretty remarkable that they were able to virtually hold their own," Mr. Kronberg said.

Neither the bill nor the budget rider prohibits HHSC from repealing PCCM, meaning the state could still move pregnant women and children to an all-HMO system. HB 1771 had contained TMA-backed language requiring that PCCM be replaced by ICM, but HHSC, supported by the governor's office, insisted the language be removed for the bill to advance. TMA will continue to fight any effort to remove PCCM as an option for patients and their physicians.

Representative Delisi says it was critical that lawmakers preserve the federal matching funds for hospitals that treat a high number of Medicaid patients.

"That issue brought to the forefront our need to find a better mousetrap to serve the Medicaid population through the management of care but that was not capitated," she said. She says the ICM model should produce savings to the state equal to or better than the HMO model, while helping to preserve the Medicaid infrastructure, including the physician provider base.

"In the past several years, we have seen numerous physicians drop off providing Medicaid in an HMO setting," she said. "We are very hopeful that the new model will bring back in the workforce that we desperately need." 

Restoring a Few Dollars  

In addition to battling Medicaid HMOs, TMA worked hard to gain additional funding for both Medicaid and the Children's Health Insurance Program (CHIP). The general appropriations bill includes $37.5 billion, including $13.8 billion in state revenue, for Medicaid. That amount will allow caseload growth from 2.86 million to 3.11 million beneficiaries by the end of fiscal 2007.

Lawmakers restored optional podiatric, vision, and mental health services for adult Medicaid patients, a majority of whom are disabled or elderly. They also created a Medicaid "buy-in" program for disabled Texans who work, and partially restored the Medicaid Medically Needy Program. Funding for the Medically Needy Program, however, requires intergovernmental transfers from local funding entities versus the use of state funds to draw down the federal match. It is not certain that local entities will provide the funding.

Medicaid graduate medical education funding also was restored, but the state portion of that funding used a local intergovernmental transfer of funds instead of state general revenue, and thus there is no certainty the money actually will materialize.

Unfortunately, the 2.5-percent cut in physician fees that lawmakers enacted in 2003 was not restored. Dr. Berthelsen says that was "a real disappointment," but that TMA remains committed to working to improve Medicaid physician fees.

"The Council on Legislation recognizes the fraying of the Medicaid network to be a very serious public health problem and is dedicated to continue to advocate for shoring up that network, which requires improvement in Medicaid rates so that physicians will participate," he said.              

Lawmakers also restored some funding cut from CHIP in 2003. They budgeted $1.4 billion, including $444 million in state revenue, for CHIP. Those funds will enable the program to restore vision, dental, hospice, and mental health services to pre-2003 levels and implement coverage for perinatal services for unborn children of pregnant women who otherwise don't qualify for Medicaid or CHIP.

TMA is concerned that caseload growth was not adequately funded and that some eligible children could end up on waiting lists. Lawmakers funded caseload growth of only 52,000 children over the biennium, less than what is anticipated by HHSC. Because CHIP is not entitlement, any caseload growth above what is funded could trigger a waiting list, though a budget rider allows HHSC to transfer funds to first avoid a waiting list. Since 2003, 180,000 fewer children are enrolled in CHIP.

Lawmakers did not restore the 2.5-percent cut in physician fees from 2003 or restore 12-month continuous eligibility for CHIP beneficiaries. 

A Taxing Situation  

The overarching issue of the session was taxes. After failing to win legislative approval for local property tax relief and a new school finance plan in a special session last year, Governor Perry designated the issue as emergency legislation this year.

But it was soon apparent that there was little consensus on where to get the billions of dollars in new state tax revenues needed to make up for a significant cut in local property taxes. The House and Senate passed drastically different versions of the tax bill, and at the session's end, House Speaker Tom Craddick (R-Midland) said the two bodies were still "a universe" apart on reaching a compromise.

The House measure cut maximum local property tax rates from $1.50 to $1 per $100 of assessed value. The bill made up for the loss of local dollars by expanding business taxes. Under the House plan, businesses would have had an option of paying a payroll tax of 1.5 percent of all reported wages or a modified version of the current franchise tax. The bill also raised cigarette, alcohol, and some other taxes.

The Senate bill provided less property tax relief. It gave businesses a choice between paying a 2.5-percent tax on earned surplus or a 1.75-percent tax on employee compensation. It also would have required a constitutional amendment to authorize a statewide property tax to replace local school taxes.

Mr. Kronberg says the strategy of Governor Perry and legislative leaders was to get a bill to conference committee, where a compromise could be reached. But he says Speaker Craddick is not known as a negotiator, and the "palpable dislike" between him and Lt. Gov. David Dewhurst created a "poisonous" atmosphere in which compromise was impossible.

"Last session it was Democrats versus Republicans," Mr. Kronberg said. "This session it was House versus Senate, and I don't know if I've ever seen it as poisonous between those two institutions as it was this session … As that ratcheted up over the last month, it made it almost impossible for them to get anything serious done."

With the failure of the tax bill and the school finance reform plan, Governor Perry vetoed public school funding from the appropriations bill and called lawmakers back for a 30-day special session that began June 21. While that caught some observers by surprise, TMA leaders say the work done during the regular session prepared physicians to minimize any new tax on doctors.

While both failed House and Senate bills would have taxed physician practices, TMA worked hard to educate lawmakers on the unique aspects of physician practices that make them different from other business entities, Dr. Berthelsen says.

"The case that we made that there is this huge hidden tax of both undercompensated federally and state-sponsored medical care with Medicare and Medicaid, as well as the charity care that physicians deliver, really resonated with legislators," he said. "And consistently we received the message that they appreciate the efforts of physicians and the contributions we make to the health of Texans."

Both tax bills included credits for physicians that would have offset most of the impact of the proposed taxes. The final version of the House bill gave a credit to physician practices equal to 20 percent of their Medicaid, CHIP, and Medicare revenues. The Senate plan included a credit for all physicians at 20 percent of their Medicaid and CHIP revenues but did not include Medicare.

Mr. Kronberg says TMA's ability to secure those credits was "impressive," as legislative leaders were determined to spread the tax to all business entities.

And, Drs. King and Berthelsen say lawmakers' support for a physician tax credit during the regular session bodes well for the special session.

But the tax plan unveiled by Governor Perry at the start of the special session contained two proposals that drew immediate concern from physicians. The governor's plan would tax elective cosmetic surgery, and it would double the occupation fees paid by doctors, dentists, and several other licensed professionals.

Lawmakers boosted physician licensing fees by $40 annually in 2003 to help fund additional lawyers and investigators at TSBME. TMA supported that increase but was still analyzing the impact of the governor's proposal at press time.

In a statement issued June 21, TMA President Robert T. Gunby Jr., MD, called the proposed cosmetic surgery tax "an inappropriate and inherently flawed answer to our state's fiscal problems." 

Off the Scope  

Allied health professionals came into the 2005 legislative session with an ambitious agenda of potential scope-of-practice expansions. The sunset review of TSBME and about a dozen other health professional licensing boards gave them numerous potential bills upon which to attach their scope-of-practice expansions. Optometrists and podiatrists were the most aggressive.

The optometrists initially filed a bill that would have allowed them to perform more than 30 surgical procedures on or around the eye using both scalpels and lasers. Podiatrists sought legislative authority to perform surgery on the ankle and higher up the leg.

Psychologists, chiropractors, advanced practice nurses, and other allied health groups also thought the time was right to seek more clinical independence.

But the PatientsFirst Coalition circled the wagons and opposed any attempt by allied health practitioners to expand their scope beyond what their education, skills, and training safely allowed.

Because of organized medicine's staunch opposition, most of these scope efforts disintegrated during the early months of the session; anticipated legislation to grant psychologists prescriptive authority was never even filed. By April, only the optometry and podiatry bills were still in play, but they were defeated by the grassroots efforts of TMA and the PatientsFirst Coalition.

TMA also defeated attempts by psychologists and advanced practice nurses to gain authority to issue medical reports under which individuals could be removed from their homes and committed under the Child Protective Services and Adult Protective Services system.

The various sunset bills also could have been vehicles to move scope expansions, but Rep. Burt Solomons (R-Carrollton) and Senator Nelson worked diligently to keep scope expansions off the TSBME bill. And, Representative Delisi, chair of the House Public Health Committee, which heard a dozen sunset bills, also pledged to keep other sunset measures from being used for scope expansion. She said she did not want the sunset bills to end up "hung like a Christmas tree" with numerous special interest provisions.

"Before we ever met as a committee, I individually met with every member of Public Health," she said. "We all agreed what we wanted to be about. We wanted to take a longer view of how to improve health outcomes." 

An Ownership Society  

While scope of practice is a perennial battle for organized medicine, physicians usually don't find themselves at odds with hospitals on major legislative issues. But the hospital association made a major push this year to enact legislation that would have prohibited physician ownership of specialty, or so-called "niche," hospitals.

Mr. Whitehurst says the term "niche hospital" is really a misnomer because THA attempted to prohibit all referrals in circumstances where the physician has an ownership interest, including ownership of ambulatory surgical centers and even certain equipment within physicians' individual offices.

THA argued that physician-owned hospitals were siphoning better-paying patients away from general community hospitals, harming their continued viability. THA also argued that physicians were ordering unnecessary tests and overutilizing services when they had an ownership interest. But Dr. King says he thinks corporate hospitals simply tried to eliminate one source of competition.

"I think that argument was purely a facade," he said. "I think it strictly was an issue of competition because most of the physician-owned facilities take Medicare, Medicaid, and managed care. They also work with patients who don't have health insurance and are paying for their health care services out-of-pocket. The only types of patients they don't take are trauma patients when the facilities are not equipped to handle these complex cases."

With Senator Nelson's help, TMA defeated the THA-backed legislation and pushed through Senate Bill 872, which requires the Texas Department of State Health Services (DSHS) to study the true impact of physician-owned facilities on general hospitals.

"There are many opinions on niche hospitals but little information on their impact on the community," Senator Nelson said. "This bill protects consumers through its disclosure requirement, while directing DSHS to study these facilities. With that information, the next legislature will be able to make an informed decision on the future of niche hospitals."

Another tough battle revolved around an attempt by health plans to limit physician charges when patients are treated by out-of-network physicians. Under legislation filed by Sen. Robert Duncan (R-Lubbock), the health plans sought to prohibit physicians from balance-billing patients for charges not covered by their insurance plan. The measure targeted hospital-based specialties, such as radiologists, anesthesiologists, emergency physicians, and pathologists, who work at in-network hospitals but who are not themselves under contract with the health plans. A second piece of legislation would have limited any physician who had medical staff privileges at the hospital from billing out-of-network patients for medical services.

TMA argued the real issue was the plans' own failure to provide adequate physician networks to meet their enrollees' needs. Working with Senator Duncan, TMA eliminated the balance-billing prohibition and replaced it with provisions that would have required physicians to disclose to patients that they could be billed for charges not paid by their plan. The legislation, however, got caught up in the last-minute rush of bills at the end of the session and never reached the House floor for debate.

Dr. Berthelsen says he expects the issue to reemerge next session, but he says it really does not require a legislative fix. "This issue is something that the health plans have control over," he said. "The plans can solve the problem simply by effective contracting and including these specialties in their contracting arrangements. It does not require a legislative solution." 

Getting Back to Work  

The Texas Workers' Compensation Commission came under sunset review this year squarely in the sights of its critics. It did not survive. With physicians, employers, workers, lawmakers, and virtually every other stakeholder in the workers' compensation system disgruntled, there was near unanimous consensus that major reforms were needed.

In the end, lawmakers scrapped the controversial agency and transferred the bulk of its duties to a new workers' compensation division within the Texas Department of Insurance (TDI). The new division will be run by a deputy insurance commissioner to be appointed by the governor.

TMA worked closely with Representative Solomons and Sen. Todd Staples (R-Palestine) to craft the new workers' compensation system. While TMA has concerns with some aspects of the bill, physicians hope it will improve the system for everyone involved.

"We are cautiously optimistic," said San Antonio pathologist David Henkes, MD, who chaired the TMA Ad Hoc Committee on Workers' Compensation. "There are a number of provisions that are favorable toward doctors. If these are effectively put into practice from the rulemaking side, we could have a pretty good bill to work with."

Texas had some of the highest workers' compensation premiums in the nation but also had some of the longest delays in getting injured workers back on the job. Employers and workers' compensation insurance carriers complained that overutilization was driving up costs, while physicians complained that low fees and high hassle factors were driving good doctors out of the system.

Under the compromise bill crafted by Representative Solomons and Senator Staples, workers' compensation will look more like a traditional managed care system, Dr. King says. The bill authorizes creation of provider networks to help control costs and utilization, but also guarantees physicians prompt payment and other managed care protections that currently apply to commercial managed care plans.

The bill also orders a new fee schedule that uses multiple conversion factors to determine fees for various specialties, and physicians in the workers' compensation networks will be able to negotiate fees with the carriers.

Additionally, physicians will no longer have to worry about plans denying payment for services already provided on grounds that an injury is not a compensable, work-related injury. The new law requires carriers to notify physicians if there is any dispute over compensability. If compensability is denied, the carrier must pay for any care provided before that notification is given, up to $7,000.

"I think we got a lot of what we wanted," Dr. Henkes said. "In fact, we got almost as much as we could get out of it. We got something positive for us in every category -- in fees, in the way that networks are set up, in the way they're managed, in compensability, in treatment guidelines."

How well the system works for patients, physicians, and other stakeholders, however, depends largely on what rules TDI adopts to implement the bill over the next 18 months, Dr. Henkes says. Physicians will have to remain diligent to make sure the new system is implemented as lawmakers intended.

"I think the potential is there to get physicians to come back into the system," Dr. Henkes said. "Again, it's going to depend on how insurance and business respond to this, whether they want to identify good physicians who are practicing in the best styles of medicine and to fairly compensate them . If anyone takes this as a mechanism to drive down costs and doesn't look at the implications to the patient, it's going to fail miserably."

Ken Ortoloncan be reached by telephone at (800) 880-1300, ext. 1392, or (512) 370-1392; by fax at (512) 370-1629; or by email at  Ken Ortolon.  


Lawmakers Tackle Wide Range of Health Care Issues

While taxes, scope of practice, Medicaid funding, and other high-profile issues got most of medicine's attention this legislative session, TMA actively tracked and lobbied more than 1,000 bills.

"The amount of bills that dealt with medicine was enormous," said Abilene otolaryngologist Austin I. King, MD, chair of TMA's Council on Legislation. "For our lobbyists and physician leadership to track that many issues just showed what a good organization we have."

While only a fraction of the health-care related bills actually passed, a significant number of TMA-supported measures were successful. Below is a brief list highlighting some of the more significant health-related measures considered by the legislature.

Childhood Obesity  

Senate Bill 42 by Sen. Jane Nelson (R-Flower Mound) expands physical activity requirements in public schools. The bill requires middle and junior high school students to participate in physical activity twice weekly and expands the focus on health curriculum in public schools. The measure builds on legislation sponsored by Senator Nelson in 2001 that mandated physical activity for elementary students.

"We need to ensure that our children receive basic nutrition and exercise during the school day to prevent these life-threatening illnesses associated with obesity and inactivity," Senator Nelson said, "and this legislation will help ensure that our students are put on the path to good health."

Newborn Genetic Screening  

House Bill 790 by Rep. Myra Crownover (R-Denton) directs the Texas Department of State Health Services (DSHS) to increase from eight to 29 the number of genetic conditions for which newborn infants are screened. DSHS is directed to conduct a study by March 1, 2006, to determine the most cost-effective method of conducting the screening and to implement the new program by Nov. 1, 2006. TMA supported increasing newborn screening but raised concerns about whether DSHS has the necessary infrastructure to ensure that infants identified with genetic disorders receive the necessary follow-up and treatment.

Graduate Medical Education  

The 46-percent cut to Texas Higher Education Coordinating Board graduate medical education (GME) funds that lawmakers made in 2003 essentially was restored, and a state per-resident formula funding process for GME was established. Lawmakers, however, did not fully fund the formula funding process. The formula allows $4,806 to be allocated per resident in an accredited program, but lawmakers provided funding for only half of that amount, or $2,403 per resident.       

Human Cloning/Stem Cell Research  

Thirteen bills dealt with human cloning or stem cell research. None passed. TMA supported several bills that would have prevented human cloning for reproductive purposes but did not restrict scientific research. The association opposed bills that would have prohibited or limited embryonic stem cell research.

Women's Health Services  

SB 747 by Sen. John Carona (R-Dallas) and Rep. Vilma Luna (D-Corpus Christi) directs HHSC to seek a federal Medicaid women's health waiver to provide family planning and preventive health services, including cancer, diabetes, sexually transmitted disease, and blood pressure screenings, to women 18 years and older with incomes up to 185 percent of poverty. Federal law and SB 747 prohibit use of funds for elective abortions.

Under the waiver, which has been approved in 13 other states, Texas would gain a 90-percent federal match rate for waiver-related services versus 60 percent for regular Medicaid services. Over five years, the waiver is expected to save the state nearly $25 million. TMA strongly supported the bill. 

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