Medicine’s Recommendations for the 2018-19 State Budget

TO: Senate and House Conferees

Senate Conferees

  • The Honorable Jane Nelson, Chair
  • The Honorable Juan Hinojosa
  • The Honorable Joan Huffman
  • The Honorable Lois Kolkhorst
  • The Honorable Charles Schwertner, MD

House Conferees

  • The Honorable John Zerwas, MD
  • The Honorable Trent Ashby
  • The Honorable Sarah Davis
  • The Honorable Larry Gonzales
  • The Honorable Oscar Longoria


  • Texas Medical Association
  • Texas Pediatric Society
  • Texas Academy of Family Physicians  
  • American Congress of Obstetricians and Gynecologists-District XI (Texas)
  • Texas Chapter of the American College of Physicians Services
  • Texas Association of Obstetricians and Gynecologists
  • Federation of Texas Psychiatry  

SUBJECT: Medicines Recommendations on Senate Bill 1

DATE: May 1, 2017

Download Medicine’s Recommendations for the 2018-19 State Budget

On behalf of the above medical societies, the more than 50,000 physicians and medical students we collectively represent, and the millions of Texans we serve, we present medicine’s recommendations for crafting a biennial budget that will promote a healthier Texas. We fully understand the difficult decisions the Senate and House have had to make over the past few months to fashion budgets that balance Texas’ limited revenue against the needs of a growing population. And we recognize that in the coming weeks you will face with myriad and often competing requests to approve one budget item over another.  

As the process draws to a close, of paramount concern to our members and the patients they care for is that Texas enact a compassionate budget that rejects deep cuts in the state’s health care safety net, and public and mental health systems, cuts that ultimately will cost Texas taxpayers more, harm physicians’ ability to care for Texans, and make our state a less advantageous place to do business. Furthermore, as more people make Texas their home, the backbone of the state’s health care system – the physician workforce – is straining to keep pace. Texas, thus, must preserve investments made in 2015 to expand graduate medical education (GME) capacity to ensure medical students who study here can train here, increasing the likelihood they’ll ultimately practice here too. 

Like our members, we know you share an enduring commitment to improving the health of all Texans. As you reconcile differences between the Senate and House budgets, we respectfully recommend you adopt the following goals as utmost priorities:   

  • Ensure the long-term viability of Texas Medicaid by promoting community-oriented, value-based initiatives while implementing sensible reforms to restrain costs;
  • Invest in Texas’ public health system to maintain the state’s ability to detect disease outbreaks early and to better manage costly chronic diseases, such as asthma and diabetes; 
  • Enhance initiatives to promote early intervention and treatment of behavioral health disorders, and increase local and state mental health inpatient hospital capacity;
  • Sustain preventive health and wellness programs for low-income women and boost outreach to enroll eligible women into these cost-effective programs; 
  • Promote a robust physician workforce to meet Texas’ diverse and growing population; and
  • Devote needed resources to ensure children with developmental delays receive timely early childhood intervention services.  

We urge you to use all available means, including Rainy Day funds, to avert cuts that could limit our ability to care for our patients.

Medicine’s 2018-19 Budget Priorities  

  1. Adopt a cohesive Medicaid management and cost reduction strategy that will preserve community-based initiatives and value-based payment pursuits while surgically reducing costs.
    Our organizations are fully cognizant of the very challenging budget environment. In such times, we know cuts will be made, however painful. At the same time, both the Senate and House Medicaid cost containment proposals are alarming in both the degree of the proposed cuts as well as their policy implications for patients, physicians, and providers. As noted by the Texas Comptroller and the Health and Human Services Commission (HHSC), caseload growth, not per-person expenditures, are driving Medicaid costs. Cuts envisioned by Senate Bill 1 could imperil Medicaid’s ability to constrain medical and pharmaceutical costs by jeopardizing the financial health of community-based health plans and emerging physician-plan partnerships.

    Both chambers’ budgets propose more than a $1 billion (all funds) in cuts to Medicaid through a mix of “traditional” cost containment activities – reducing fraud and abuse, increasing prior authorizations and utilization review, and reducing managed care organizations’ (MCO) payments – as well as pursuit of greater Medicaid flexibility from the federal government.

    The Senate reduces Medicaid funding by $410 million general revenue (GR). We support some provisions of the rider, including reducing Medicaid HMO enrollees’ disenrollment unless there is good cause. But a large chunk of the savings will be achieved by “evaluating payment for dual eligibles.” This translates into slashing payments to physicians who treat low-income patients eligible for both Medicare and Medicaid. We vigorously oppose such a reduction, which will fall heaviest on rural and border physicians. Roughly half of dual eligibles suffer from multiple chronic conditions, including mental illness, and many are unable to perform tasks of daily living on their own. Cutting payments further will penalize the physicians who care for the sickest and frailest patients in the state.

    The House Medicaid budget raises more alarm. It proposes to reduce Medicaid funding by $1 billion (GR) by pursuing greater “federal flexibility.” We understand this is intended to spur discussion with the Centers for Medicare and Medicaid Services (CMS) and will not be used to reduce benefits, services, eligibility, or access to care, a provision we wholeheartedly endorse. Without more details about the flexibility Texas wishes to achieve, however, the language creates anxiety among our members. We urge conferees to ensure any discussions with CMS to implement this rider include a robust public input process.

    More threatening is the $450 million (GR) cut from HHSC contracts in HHSC Special Provisions. Medicaid MCOs comprise the bulk of HHSC contracts, so the cuts will fall heaviest on them. With 92 percent of Medicaid patients now enrolled in managed care, the fate of our Medicaid-participating physicians is now inextricably tied to the plans’. Medicaid MCOs – particularly community-based ones – will not be able to absorb all the envisioned cuts. This will imperil their financial stability and force them to pass these reductions along to contracted physicians.

    Community-based MCOs anchor the program in the communities where they operate. Their community ties and collaborative approach to managing patient care make them the most popular among our members (though none are perfect). As good neighbors, they also act as models for other plans in the market. Indeed, organized medicine fought to require community-based MCOs in Medicaid managed care in the first place, because health care is best delivered at the community level.

    Further, the contract cost reduction will certainly force plans to scale back value-based payments and contracted rates for office visits and procedures, harming patients’ access to service while dampening innovative programs to reduce costs. Value-based payment initiatives are an important part of Medicaid’s cost-containment portfolio. They range from paying physicians more for offering after-hours services, which reduce emergency department usage, to better managing chronic conditions such as high-risk pregnancies, asthma, and diabetes, which improve outcomes while lowering costs. VBP represents the next evolution in managed care – collaborations among MCOs and physicians to constrain costs while improving health outcomes. Without VBP, Texas Medicaid will have no choice but to rely more heavily on outmoded cost-containment strategies – including more red tape and hassles, an outcome no one wants.

    Equally worrisome are proposals to direct HHSC to competitively bid Medicaid MCO contracts and align the Medicaid MCO reprocurement schedule such that the agency will be required to evaluate bids, procure contracts, and assess the readiness of all MCO programs – STAR, STAR+PLUS, STAR Health, STAR Kids, and CHIP – at the same time.

    On paper, competitive bidding sounds reasonable, but we fear competitive procurements will shift emphasis away from best value and instead force the agency to consider only the lowest price contracts. Such a process likely will disadvantage community-based MCOs, which finance care for the sickest in a local community and may be unable to price their products as aggressively as larger for-profit plans can to gain market share. Conversely, in a few other states where competitive bidding has been attempted, plans submitted higher cost bids, forcing states either to pay more or walk away. Senate Bill 1927 by Senator Kolkhorst, which we support, recommends studying competitive bidding before implementing.

    Simultaneously reprocuring all Medicaid MCO contracts will strain HHSC’s ability to thoroughly evaluate each bidder’s proposal and assess the plans’ readiness to fulfill contractual obligations, which include ensuring network adequacy, developing meaningful care coordination, and requiring timely dispute resolution and claims payment. HHSC experimented with such a process several years ago. As part of that effort, it subcontracted readiness review. Weeks after a Medicaid MCO was judged “ready” to begin operations, it was found to have no primary care network, a problem HHSC would have detected had it not been stretched so thin.

    We urge conferees to reject these contract management changes until HHSC performs a proper impact analysis and seeks concomitant stakeholder input.

    We also urge conferees to include language within the budget to streamline and simplify the state’s Medicaid vendor drug (VDP) program, which our members revile. Whether the legislature grants MCOs authority to manage the VDP or the VDP stays at HHSC, we need your help to make VDP effective, efficient, transparent, and accountable so that physicians can better care for patients while lowering the state’s prescription costs.

    In the end, rather than a piecemeal approach to Medicaid cost-containment and contract management, we recommend drafting a single, consolidated rider that:  
      a.) Outlines a cohesive framework for achieving judicious cost containment through red tape reductions, improved care coordination for high-risk pregnant women and other high-cost patients, increased third-party recovery and subrogation to avoid Medicaid paying for services for which another entity is responsible, and greater adoption of collaborative value-based payment initiatives.
      b) Directs HHSC to evaluate opportunities to procure and manage Medicaid MCO contracts more efficiently.
      c) Seeks public input into HHSC’s efforts to reduce Medicaid costs or redesign Medicaid MCO contract management.

  1. Enhance Texas’ ability to detect and prevent disease by strengthening our public health defense system.
    While both budgets are quite close in dollars appropriated, we respectfully ask that you consider these critical funding issues:   
  • Support Senate funding for public health preparedness and chronic disease prevention, and add additional resources to more closely approximate the Department of State Health Services’ (DSHS’) exceptional item request relating to public health capacity;
  • Support House funding for infectious disease prevention;
  • Support House funding to provide immunizations to at-risk populations;
  • Provide DSHS sufficient funding to staff and maintain its fundamental functions, including operating the state laboratory, investigating and containing infectious diseases, including Zika and tuberculosis, investigating foodborne illnesses, providing lead surveillance and data, and preserving a high-functioning birth defects registry, which will be essential to Texas’ efforts to assess Zika-related complications.

    Without a high-functioning public health system, ALL Texans are at risk. DSHS works not only to detect and prevent disease, ensure food safety, and immunize at-risk populations, but also to promote improved maternal and child health, including reducing rates of low-birth weight and premature babies, and to reduce dangerous, potentially deadly, hospital-acquired infections.

    In the past two years, new and unsettling infectious diseases penetrated Texas’ borders: Ebola and Zika. Thankfully, widespread infections from these pathogens have not materialized. These incidents should be a wakeup call to state and community leaders regarding the importance of public health preparedness and a rapid response system. Thanks to the quick actions of DSHS, local public health systems, and community physicians, Texas contained the Ebola outbreak. This past year, Texas put in place measures to minimize Zika-related infections and has continued to work with national and local partners to ensure the state is prepared when the number of infections inevitably goes up. A vigilant public health system is necessary to detect and prevent the next infectious disease outbreak, which is only one plane trip or insect bite away from Texas.

    Texas also must improve its efforts to reduce the burden of chronic disease, as well as costly, but preventable hospitalizations. According to the agency, “five of the six leading causes of death in Texas are related to chronic diseases, including heart disease and cancer. Risk of chronic disease is increased by factors such as poor nutrition, inactivity, and smoking. One in five Texans smoke, and one in three are obese. An estimated 7.1 million Texans are pre-diabetic.” An aging population combined with high birth rates in many counties will strain resources in Texas communities. Reducing the burden of chronic disease while also promoting healthier lifestyles not only reduces health care costs but also increases school and work productivity.

    We have concerns about DSHS Rider 31 in House CSSB1. The language will require the agency to redirect its already limited infectious disease funding from routine state and local surveillance and intervention to focus on a rare set of diseases. We value and recognize Texas’ responsibility to monitor and learn more about emerging tropical diseases. However, this should not be done at the expense of routine surveillance and case tracking that physicians are involved in every day, such as tracking the current mumps outbreak in north Texas, the pertussis outbreaks that often occur in the summer, or foodborne outbreaks that strike every part of the state. Routine surveillance is a critical component of the diagnoses physicians make every day. Please support both of these important functions. 
  1. Boost Texas’ public mental health system to promote early detection and treatment of mental illness and substance abuse disorders.
    We respectfully urge conferees to:
  • Support the Senate’s $803,855 in additional funding for the Neonatal Abstinence Syndrome (NAS) program, which provides medication-assisted management and treatment for pregnant women and newborns addicted to opioids.
  • Support Senate funding for community-based mental health hospital services (G2.2.2) to pay for mental health beds within local communities and to expand the number of community-based mental health beds by 100 over the biennium. 
  • Support the House proposal for $50 million to support jail-based competency restoration in counties across Texas and provide grants to communities to reduce recidivism, arrest, and incarceration (contingent upon passage of House Bill 12 by Representative Price).
  • Support the House’s $5 million to support mental health peer support specialists (contingency rider for HB1486 by Representative Price)

    We applaud both chambers’ steadfast work to improve early detection, intervention, and treatment of mental illness and substance abuse disorders. About one in four adults is affected by mental illness each year, and almost half are affected by mental illness during their lifetime. Texas’ population is growing rapidly, which increases the demand for mental health and substance abuse services. Investing in mental health services ultimately pays for itself through reduced incarceration and emergency department costs.

    Substance abuse is a significant contributor to maternal mortality, and the nationwide opioid epidemic fuels the crisis. Opioids include prescription pain relievers such as oxycodone, hydrocodone, and morphine, as well as illicit substances such as heroin. Among pregnant women, opioid use increased five-fold between 2000 and 2009. It was accompanied by a parallel increase in the incidence of neonatal abstinence syndrome (NAS) — a drug withdrawal condition primarily caused by maternal opioid use. Between 2010 and 2014, rates of NAS in Texas increased by 51.3 percent. Studies indicate babies born with NAS stay in the hospital an average of 21 days. Providing clinical interventions for these mothers can reduce the hospital stay by as much as half, saving Medicaid dollars. Texas’ NAS program is a proven public-health approach, providing treatment for mothers with opioid addiction as well as support services to address opioid misuse. It provides mother and baby clinically recommended treatment to address addiction. The program also keeps children and mothers together, reducing the need for children to be taken into protective custody.
  1. Sustain improvements to women’s preventive health and wellness services.
    We commend the legislature’s enduring commitment to strengthening our women’s preventive health programs. The state’s three women’s health programs – Healthy Texas Women (HTW), Family Planning Program (FPP), and the breast and cervical cancer program – enable thousands of women to obtain important preventive health and wellness services. HTW and FPP provide not only traditional well-woman services, including annual exams and contraceptive services, but also screenings for breast and cervical cancers, diabetes, hypertension, and post-partum depression. In the past year HHSC initiated (at legislative direction) important improvements to HTW that we strongly supported. These include paying primary care physicians and clinics for treatment of diabetes, hypertension, and mild to moderate postpartum depression – common illnesses that affect not only a woman’s immediate health but also the health of any future pregnancy – and automatically enrolling women into HTW when their pregnancy-related Medicaid coverage ends 60 days post-partum, to prevent gaps in care.

    Both the Senate and House fund women’s health services at similar levels. To offset Texas’ expenditures for HTW, both budgets would pursue a federal Medicaid 1115 family planning waiver, which would pay 90 percent of the program’s costs if CMS approves Texas’ request. Senate budget rider 184 directs HHSC to apply for $180 million in federal funding, while the House expressed support for the family planning waiver during floor debate on House CSSB 1. Organized medicine strongly favors pursuing the Medicaid 1115 family planning waiver, particularly since the additional federal funds could mitigate the need to cut health care funding further. We respectfully ask that you clarify in the final budget these important policy issues regarding the waiver
  • Retain the auto-enrollment feature for women transitioning from pregnancy-related Medicaid to HTW.
  • Preserve treatment for hypertension, diabetes, perinatal depression, and other chronic conditions. Historically, the federal family planning waiver provided funds exclusively for preventive services, including annual well-woman exams, chronic disease and cancer screenings, and contraception. It is unclear whether CMS will approve enhanced federal matching funds to treat women diagnosed with these illnesses. If CMS does not agree to fund treatment-related costs, we urge the legislature to continue paying for these services using general revenue. 
  • Specify Texas will fully fund women’s health services if the federal waiver is unexpectedly denied or reduced.
  • Fully fund the state family planning program. HHSC requested $74 million for family planning. However, the agency spent $45 million in 2016 for FPP contracts and will spend a similar amount in 2017. A more realistic assumption is that FPP will need up to $90 million (GR). Underfunding these services will increase Medicaid costs as more women have unintended pregnancies. FPP provides essential services to women not eligible for HTW and is an important component of Texas’ effort to reduce unplanned pregnancies and improve birth outcome by helping women time and space their pregnancies. 
  • Support the House’s HHSC Riders 60, 196, and 206. Respectively, these riders would improve WHP reporting, task HHSC with evaluating the benefits of targeted outreach regarding FPP, and require HHSC to develop a five-year strategic plan to reduce barriers preventing women from accessing Long-Acting Reversible Contraception, such as implants or IUDs. 
  • Support the Senate’s HHSC Rider 187 to implement additional measures to improve maternal and neonatal health.  
  1. Invest in Texas’ physician workforce to improve availability of physician services.
  • Support $32 million additional GME investment in House budget to ensure newly created residency slots can be refilled to maintain the physician pipeline.
  • Support House funding for the Family Medicine Residency Program and the Physician Education Loan Repayment Program, both of which are essential to attracting physicians to underserved communities.
  • Support Senate funding of $97 million for the GME Expansion Grant Program. With the opening of new medical schools and projected increases in medical school graduates, we must expand our GME capacity to give our graduates a chance to complete residency training in the state.
  • Support House funding for formula and special-item funding for the health-related institutions (HRIs), including: medical student and GME formula funding (Instruction/Operations), research, infrastructure, and special-item support. 
  • Maintain funding for physician pipeline programs: Primary Care Preceptorship Program, Joint Admission Medical Program, and Mental Health Professions Loan Repayment.
  • Reject the Senate proposal to phase out special items by providing one-time funding, which will have the unintended consequence of weakening the medical schools’ and HRIs’ infrastructure. This makes it more difficult for the schools to teach medical students and provide GME. 

    Insufficient GME positions will force more Texas medical school graduates to leave the state for training. Texas thus loses its investment in those future physicians, undercutting our ability to care for a burgeoning population. If we do not grow GME, we are guaranteeing that more Texas graduates will leave the state for training elsewhere. Given the strong relationship between where physicians train and where they enter practice, we can expect that most who leave will be lost to the state at a time when Texas needs more doctors. Texas graduates who do not return take with them at least $180,000 of the state’s investment in their medical education. We support funding to achieve the state’s target of 1.1 entry-level GME positions for every graduate.

    Texas’ Physician Education Loan Repayment Program is one of our most important tools to correct the geographic maldistribution of physicians in the state. Today, rural Texas has too few physicians to support the needs of patients, many of whom are older and sicker and struggle to travel to urban areas for care. Rural Texas has an average of 84 physicians per 100,000 people, compared to 190 for urban areas. Restoring funding for this program will have a direct impact on the health of Texans in underserved areas.

    Furthermore, family physicians provide primary care services to all ages and are needed in all areas of the state. They play an even greater role in meeting the medical needs of rural Texas; family physicians are the backbone of rural medicine. The Family Medicine Residency Program helps to offset the disadvantage these programs face in obtaining Medicare GME funding.

    Special-item funding to the medical schools and health-related institutions includes many long established programs that provide substantial support for medical education (including Texas Tech University’s Foster Medical School in El Paso and Texas A&M’s Round Rock medical school campus) and GME (primary care at UT Southwestern, UTHSC-Tyler, and multiple residency programs at Texas Tech Permian Basin Regional Academic Health Center). They also support a lengthy list of research programs that study illnesses such as Alzheimer’s disease, post-traumatic stress syndrome, and chronic diseases such as heart disease, stroke, and diabetes. This research is translational and results in best practices adopted by physicians in community practice. In short, this research improves and saves lives. 
  1. Invest in Early Childhood Intervention (ECI)
  • Support the House’s HHSC Rider 72, authorizing HHSC to expend $19.75 million in unexpended balances for IDEA Part C if HHSC confirms the balance is available

    ECI is a statewide program for families with children, birth to three, with disabilities and developmental delays. For more than 30 years, ECI has helped children in more than 800,000 families reach their potential through developmental services. Family-centered, coordinated services that support parent-child relationships are the core of intervention. By intervening early, when a baby’s cognitive and physical health are still forming, we can bend the cost curve for other interventions such as school age special education services and improve a child’s functional trajectory for life. Children with access to ECI services have better outcomes in school readiness, academic achievement, behavior, delinquency, and crime. As our state’s population increases, we must invest more to keep up with need among the newest and youngest Texans. Already, ECI providers are withdrawing from the program due to funding issues, hamstringing physicians’ ability to care appropriately for clinically complex children, including premature babies and children with Down’s syndrome or spinal disorders. Texas physicians depend on a robust network of ECI providers to address a child’s developing needs. We urge the legislature to maintain current eligibility criteria and fully fund the HHSC base budget request and exceptional item for enrollment growth. Our organizations strongly believe that ECI is a cost effective and best practice model of care to address developmental delay and disabilities and improve outcomes for some of the youngest of Texans.
  1. Employees Retirement System (ERS) Riders of Concern
          a.) Payment for Services at Health Related Institutions
  • Reject Senate Rider #62, Art. III, Special Provision, Contingency for Formula Funding - Providers of Direct Health Care Services. This rider makes all formula funding for HRIs providing services to state employees and other employers contingent upon reducing ambulatory care payments to physicians to Medicare rates.

    The Medicare Payment Adequacy Commission issues regular reports to Congress regarding Medicare fee adequacy. In its March 2017 report to Congress, the commission reported that physicians’ Medicare payment rates were only 78 percent of commercial PPO rates.

    Due to financial losses on Medicare patients, 36 percent of Texas physicians have limited their acceptance of Medicare patients. On the other hand, 82 percent willingly accept all new PPO patients. Limiting payment for state employees to Medicare rates is likely to have a materially negative impact on HRIs and limit state employees’ ability to get the medical services that they want and need.  
          b.) Encouraging Appropriate Use of the Emergency Services by State Employees
  • Amend Senate Rider 15, Employee Retirement System (ERS), to apply higher copayments for emergency department usage to freestanding emergency departments (FSEDs) and hospital emergency departments (EDs).

    Standing in an FSED or hospital-based ED, few people would be able to tell them apart. The facilities have the same equipment, physicians, clinical and ancillary staff, and protocols. Requiring patients to pay more at an FSED simply because it is not physically attached to a facility makes little sense. Patients, after all, can just travel a couple blocks to visit a hospital ED instead. (And patients know all about hospital EDs because they routinely advertise to encourage patients to use their services for care best provided in a primary care setting.) We respectfully request that ERS establish a copayment for emergency department visits regardless of whether a patient seeks care in an FSED or hospital-based ED. If the goal is to direct patients to less costly primary or urgent care clinics, ERS should consider low or no copayments for urgent care provided by the patient’s primary care physician or clinic, followed by a slightly higher rate for urgent care clinics, with the highest rate for non-emergency use of the ED. Whatever approach is adopted, we ask that ERS seek input from practicing primary care and emergency department physicians and ED facilities to craft a workable policy for patients and the state.

    At the same time, patients do not always know whether an illness or injury is truly life threatening until they are evaluated by a physician. In a true emergency, the higher copayment should be refunded to employees to avoid penalizing them for seeking services appropriately in an ED for a life-threatening condition or illness. Further, we urge the legislature to direct ERS to undertake an educational campaign to help employees better understand when ED usage is appropriate versus when to seek care from their own physician or urgent care clinic. 

Thank you very much for your consideration of our recommendations. We are available at any time to answer your questions and work with you to craft a cost-effective budget that addresses Texas’ significant health care needs.

Last Updated On

May 01, 2017