Proposed Dues Increase for Active Members

REPORT OF BOARD OF TRUSTEES

BOT Report 16-A-07
Subject: Proposed Dues Increase for Active Members
Presented by: C. Bruce Malone, MD, Chair
Referred to: Reference Committee on Financial and Organizational Affairs

The board acknowledges that there is never a good time to implement a dues increase, especially when physician practices are, more than ever, threatened economically. However, it is this ongoing onslaught of rapid changes and economic pressures within and around the practice of medicine that leads members to demand and expect increased levels of advocacy and service from TMA. These include the need to:

• Help members prepare for and implement health information technologies, such as electronic medical records and other practice changes, to prepare for and respond to market-driven demands for so-called transparency in health care pricing and quality. Physicians must be able to maintain records and data to actively measure outcomes and quality of care. Initiatives, such as pay-for-performance, and payer tactics, such as tiered networks, will mandate physician readiness.
• Stop where possible - and otherwise help members appropriately respond to - the health insurance industry's attempts to further control physician practices and reduce payments for services.
• Fight off attempts to unravel the transforming gains accomplished in the 2003 medical liability reforms and Proposition 12.
• Stop any efforts to expand scope of practice beyond that safely permitted by non-physician practitioner's education, training, and skills, defend the definition of medical practice, physicians' role as leaders of the health care team, and physicians' right to delegate and supervise medical services while remaining responsible for patient care.
• Provide leadership in solving serious problems that threaten physicians' ability to care for patients, such as Texas' huge uninsured population and Texans' unwillingness or inability to take better care of themselves.
• Advocate for long-overdue increases - or halt proposed cuts - in government payments for health care services (Medicare, Medicaid, CHIP, workers' compensation).
• Meet member expectation for 'round-the-clock information and services in today's 24/7 environment.

These demands and expectations fall squarely within TMA's core mission - to support Texas  physicians by providing distinctive solutions to the challenges they encounter in the care of patients . Meeting them requires availability of funds for staff and programs. To date, the board has been able to accomplish this by eliminating unnecessary activities and improving operational efficiencies. (See examples in the section on  TMA 2010 .) The board believes it has reached the limits of effectiveness for these strategies and must now seek a modest dues increase.

Historical Dues Levels

Annual dues for active TMA members are currently $435. The table below details the dues levels for the past 12 years.

In order to meet financial strategies and emerging needs of the membership, the house historically has implemented dues increases every three years, with an annualized increase of approximately 3.4 percent. Recognizing the serious threats to the viability of physician practices, the board stretched the current dues level to a fourth year, and did not request a dues increase for 2007.

By deferring any dues increase until 2008, the board is faced with a tight budget in 2007. The board initially adopted a balanced budget for 2007; but due to amendments already adopted to meet legislative advocacy needs, budgeted expenditures now exceed budgeted income by $194,200.

Any dues increase request for 2008 and beyond must be consistent with the board's financial goals. These include:

1. Support the integrity and excellence of current and future TMA programs.
2. Provide an annual surplus of approximately $250,000 for budget request considerations, per historical budget guidelines. This surplus provides the association the ability to remain nimble and quickly respond to urgent matters throughout the year.
3. Meet the board's goal of reserves exceeding 50 percent of the annual operating budget.
4. Allow for modest annual expense increases to meet programmatic and human resource needs.
5. Stay within the 3.4 percent annualized increases of the past 20 years.
6. Establish a five-year dues structure through the year 2012.
7. Minimize the impact of dues increases on active members.

The board felt the need to be as innovative as possible in determining an adequate budget for the future and evaluated budget scenarios associated with several different dues-increase proposals. A flat increase of $60 (to $495 per year) would have met the association's budgetary requirements for the next five years., and that 3.4 percent annualized increase also would have been consistent with previous dues increases. In addition, the board considered that executives from several of the large county medical societies, however, expressed significant concern that the $60 increase could possibly lead to membership attrition and hinder their own efforts to raise dues. They suggested that TMA instead consider a "phased-in" approach to the next dues increase.

Following extensive evaluation of options, the board proposes the following dues schedule:

• An initial dues increase of $30 for 2008, providing a "catch-up" for the anticipated increase that was deferred for 2007.
• For 2009 through 2012, an annual dues increase of $12 (an increase of approximately 2.5 percent per year).

This phased-in approach will hold down the costs of TMA membership. It will bring dues for an active member to $513 in 2012. If the historical 3.4 percent annualized rate of increase from 2004 through 2012 were implemented, dues would be $581 in 2012.

Effective Cost of Increases
The $30 increase for 2008 would amount to 8 cents per day, or $2.50 per month. The subsequent annual increases of $12 would amount to a nominal $1 per month.

Liquid Reserve
The Board of Trustees has policy to maintain the liquid reserves at 50 percent of the annual operating expense budget. Thus, in 2008, the reserve is projected to be funded at $10,185,000. This reserve is intended to (1) protect the association from the financial impact of a calamitous event; (2) provide funds for significant and unexpected undertakings, such as the Proposition 12 campaign; and (3) generate investment income for operations. In 2007, $344,000, or 1.7 percent of TMA's total operating income, will come from dividends and interest earnings on the reserve.

The board has considered use of reserves to forestall dues increases and, in fact, will dip into the reserves for the 2007 fiscal year as a consequence of forestalling the dues increase for a fourth year. However, extensive use would be contrary to the principal purpose of the reserve account.

Dues of Other State Medical Societies
At $435, TMA's dues rank 25 ^th in comparison to other state societies. Dues range from $320 in South Carolina to $693 in Hawaii. Several large states are quite a bit higher than TMA, including New York ($460), Michigan ($495), Colorado ($520), Illinois ($525), California ($545), and Ohio ($560).  Even with TMA's proposed increase to $465, Texas would rank 31 ^st , assuming other states' dues remain static. The fact that TMA's membership continues to grow while most other states are experiencing declining membership is evidence of Texas physicians' perceived value of TMA membership. In addition, TMA has never experienced measurable attrition following a dues increase.

TMA 2010
The board takes its fiduciary responsibility very seriously. As TMA considers its dues structure for the future, it is important to review current and projected financial and operational strategies to ensure prudent use of TMA resources to achieve the maximum benefit for members. Expense controls are in place and several expense reductions have been implemented across the association. As part of the TMA 2010 process, the board not only has focused the efforts and resources of the association on the four goals of TMA 2010, it also has performed a systematic, program-level cost-benefit review to ensure ongoing measurement of relevance and value of TMA programs and their governance oversight. This process has brought about some key changes and cost savings, paving the way for adoption of new - and often more efficient - programs. Attachment A ( PDF ) highlights examples of these changes and cost savings.

Summary
As always, the stakes are high for Texas physicians and their patients, and responses to threats against the practice of medicine do not come without a price. The association needs additional income to respond to member needs, provide state leadership in health matters, and achieve its mission. The generation of nondues income remains a very high priority of the board; primary sources are investments, advertising, royalties, and practice management services. For 2007, nondues revenue will account for 40 percent of the budgeted income stream. To maintain TMA's independence and focus as a professional association, the board believes that nondues revenue should not exceed 50 percent of budgeted income.

The board believes that members will support a modest dues increase, the first in four years, in order to pursue association priorities and continue to ensure a health care environment in Texas that supports the ability of physicians to care for their patients.

Recommendation:  That the Texas Medical Association adopt a phased-in dues structure with flat increases of $30 in 2008 and $12 per year for years 2009 through 2012.

TMA House of Delegates: TexMed 2007