REPORT OF COUNCIL ON SOCIOECONOMICS
CSE Report 1-A-07
Subject: Medicaid and CHIP Legislative and Regulatory Update 2007
Presented by: Susan Strate, MD, Chair
The following update on Medicaid and CHIP initiatives is being submitted jointly by the Council on Socioeconomics, Council on Legislation and the Ad Hoc Committee on Medicaid and Access to Care.
Frew vs. Hawkins : Agreement in Principle
On April 5, House and Senate leaders announced an agreement in principle to settle the 14-year-old Medicaid lawsuit known as Frew vs. Hawkins . The class action lawsuit, originally filed in 1993, alleged numerous, serious failings in the state's efforts to ensure all children enrolled in Medicaid were receiving appropriate preventive and specialty care services available to them via the federally-required Early Periodic Screening Diagnosis and Treatment Act (EPSDT), known in Texas as "Texas Health Steps." In 1995, the state and plaintiffs negotiated a consent decree to resolve the case. However, within a few years the state challenged plaintiffs' right to enforce the decree, compelling the case back to the federal courts, including two state appeals to the Supreme Court. At each juncture, the federal courts sided with the plaintiffs. The settlement was announced just days prior to the case returning to the courtroom of the original federal district judge, William Wayne Justice, to rule on the final Corrective Action Plans.
On April 9, Judge Justice reviewed the proposed agreement, some elements of which will continue to be negotiated over the next several weeks. In June, Judge Justice again will review the agreement and the funding that accompanies it. The agreement is subject to his final approval and oversight.
The agreement allocates $707 million in state general revenue ($1.8 billion state and federal funds combined) to increase physician and dental reimbursement rates, improve outreach and education to Medicaid-enrolled families, and to improve the availability of medical and dental services in rural and border regions of the state. Since the agreement is being fine tuned, a detailed document has not been published. However, what is known is that the agreement will allocate significant new monies to improve physician and dental reimbursement rates - the largest increases in nearly 15 years. Specifically, the agreement allocates:
- $203 million to increase by 25 percent the pool of funding for physician services
- $50 million for targeted rate increases for physician subspecialists
- $258.7 million to fund a 50 percent increase in dental reimbursement rates
- $150 million to implement "strategic medical and dental initiatives." This part of the agreement is being negotiated, but lawmakers indicate that the monies will be used to fund such efforts as mobile dental clinics in underserved communities, loan forgiveness programs for physicians and dentists who agree to practice in underserved areas, and/or improve funding for physician training and graduate medical education.
- $45 million to fund outreach, family and physician education, transportation initiatives, a toll-free hotline, and other components of the Corrective Action Plans agreed to in 1995.
To fund the agreement, lawmakers used $240 million already allocated within House Bill 1, the 2008-2009 appropriations act, to fund physician and dental rate increases. The remaining $466 million will be paid for by applying an across-the-board funding reduction of .59 percent to all ten articles within the budget. However, it is expected that the appropriations conference committee will further establish parameters on how agencies may allocate the reduction.
To advise the state on how best to allot the monies for physician rate increases, at TMA's request, the Health and Human Service Commission is reconstituting the Physician Payment Advisory Committee, which is composed of primary and specialty care physicians from across Texas. PPAC is expected to convene its first meeting in early June. A final roster is not yet approved, but all major state specialties will be represented.
To assure that physicians participating in Medicaid HMOs benefit from the rate increases as well, TMA has requested that health plans be required to pass any rate increases directly to physicians without any administrative deduction or withhold. Additional details of the agreement will be published as they become available.
2007 Medicaid Reform Legislation
For the past 15 years, each session of the legislature has resulted in myriad new legislation to reshape Medicaid. As a result, Texas is far ahead of other states in adopting measures to constrain Medicaid costs, including widespread adoption of managed care, which by the end of the year will cover about 70 percent of all Medicaid enrollees; incorporation of disease management initiatives; and a Preferred Drug List. Building on reforms already in place, the 2007 legislature is putting its own stamp on Medicaid restructuring.
Senate Bill 10 by Sen. Jane Nelson (R-Grapevine) is the omnibus Medicaid reform bill for 2007. Rather than upend the delivery system, focus of the legislation is augmenting what already is in place and adopting preventive health practices that may lower Medicaid costs in the long run, including promoting smoking cessation and weight management. The measure also allows the state to test new options under the federal Deficit Reduction Act, including new cost-sharing requirements and Health Savings Accounts. Additionally, to reduce Texas' sky-high rates of uninsured, legislators are touting Medicaid dollars as a means to finance private health insurance for low-income individuals.
While medicine had a number of concerns about the bill as filed over the past two months, TMA and the Primary Care Coalition have worked closely with Senator Nelson and other stakeholders to assure that the legislation promotes high quality care without imposing new administrative burdens and costs on patients or physicians. The bill also includes safeguards to protect the financial viability of safety-net institutions which will be asked to contribute funds to help finance new measures to reduce the uninsured.
On April 17, the Senate adopted SB 10 unanimously. Rep. Dianne Delisi (R-Temple) will sponsor the bill in the House, where debate on the bill already has begun in committee.
Highlights of SB 10 (as adopted by the Senate):
Directs HHSC to establish a pilot program to provide Medicaid patients' positive incentives to adopt healthier lifestyles, such as rewards for participating in weight management and smoking cessation programs.
Allows HHSC to develop and implement additional incentives to encourage children to obtain timely well child (EPSDT) visits. HHSC also must develop incentives for Medicaid health plans, participating physicians, and providers to deliver and document complete EPSDT screenings.
Directs HHSC, if cost-effective, to test a voluntary Health Savings Account (HSA) model for adult Medicaid patients.
Allows HHSC to seek a federal Medicaid waiver to establish "tailored benefit packages" to meet the specific needs of each Medicaid population: children and families, persons with special health needs or disabilities, and the elderly. While the state already has developed specialized Medicaid managed care plans - STAR, which is geared to children, pregnant women, and low-income parents, and STAR+PLUS, which targets patients who are elderly or have disabilities -- the intent of the provision is to augment and expand those efforts, including developing a tailored benefit model specifically geared to children with special health care needs or disabilities. Tailored benefit packages may not be implemented prior to Sept.1, 2009, and may not offer benefits lower than coverage levels in effect prior to Sept. 1, 2007. Further, the bill stipulates that any package developed for children must include at least the services required by the Early Periodic Screening Diagnosis and Treatment (EPSDT) program.
Establishes a new "Texas Health Opportunity Pool" (THOP) as a means to expand health insurance coverage for low-income Texans. HHSC is authorized to pursue a federal Medicaid waiver that likely would establish a federal block grant or cap on new Medicaid disproportionate share (DSH) and Upper Payment Limit (UPL) funding in exchange for additional federal monies to expand coverage for the uninsured. In addition to placing DSH and UPL dollars in the pool, HHSC is authorized to identify other state and local spending as possible dollars to be matched with federal monies. To protect the financial viability of safety-net facilities, any waiver pursued by HHSC must include safeguards to ensure that aggregate federal funding for safety-net hospitals does not decline below existing funding levels. A waiver obtained from the federal government also would be required to include annual adjustments in inflation, population, and other demographic factors that would impact the availability of funding within the pool.
Once established, monies for the pool would be placed in an account outside the treasury to be used to (1) offset hospitals' uncompensated care costs; (2) subsidize private health insurance premiums for low-income workers; and (3) promote improvements in the public health infrastructure.
The bill specifies that to be eligible for funding from the pool, hospitals must implement strategies to reduce uncompensated care and hospital emergency department usage, including: (1) fostering primary care systems of care that promote a "medical home"; (2) promoting premium payment assistance initiatives, such as three-share models; (3) making contributions to eligible patients' Health Savings Accounts; and (4) improving health care efficiency by promoting use of electronic medical records. Up to 10 percent of the money in the pool also may be used to improve community health infrastructure, including developing and maintaining EMR systems or investing in the development of physician and provider networks that serve Medicaid and low-income residents.
In developing the federal waiver, HHSC must establish a broad stakeholder workgroup to provide input. To oversee the development of the federal Medicaid waiver, including implementation of the THOP, and other reforms outlined within the bill, SB 10 directs the Lieutenant Governor and Speaker of the House to appoint a joint Legislative Oversight Committee consisting of three senators and three representatives. The HHSC executive commissioner will serve ex-officio.
- Directs HHSC, if feasible and cost-effective, to implement copayments for patients who use the emergency department for non-emergency health care needs when an alternative, lower cost provider is available.
- Promotes use of "three-share initiatives" by local communities to help expand coverage for low-income workers.
- Directs HHSC to evaluate the feasibility and cost-effectiveness of expanding the Integrated Care Management (ICM) model to rural communities as well as urban communities where STAR+PLUS is not available.
- Directs HHSC to implement outreach efforts to inform patients who have access to group health insurance about the Medicaid "Health Insurance Premium Payment" (HIPP) program. Under HIPP, if group health premiums are at or below what Medicaid would have paid, the state will pay the patient's premiums, allowing the patient to enroll in the employer-sponsored plan instead of Medicaid. Medicaid also pays for the patient's cost-sharing and copayments and provides "wrap around" services not covered by the employer plan.
- Allows Medicaid patients who have access to group health insurance to "opt out" of Medicaid entirely. While similar to HIPP, under this provision Medicaid would pay the employer plan up to the amount Medicaid would pay, but the patient would be responsible for any amount exceeding what Medicaid pays as well as any cost-sharing requirements such as deductibles or cost-sharing. Opting out of Medicaid would be voluntary. Prior to leaving Medicaid, HHSC would be required to offer extensive counseling to inform the patient of his or her cost-sharing obligations. Additionally, HHSC would be required to adopt guidelines specifying the conditions a patient may return to Medicaid (e.g. such as loss of job).
- Requires HHSC to conduct a study on the feasibility of using a medical passport in children's Medicaid and CHIP to promote an integrated, electronic health record.
- Establishes a legislative committee to study and recommend measures to promote the purchase of long-term care insurance.
Insuring TexasKids Campaign
Texas leads the nation in the percent of uninsured children. Some 20 percent of Texas children --- 1.4 million -- lack health care coverage. Of these, about 700,000 are eligible for but not enrolled in CHIP or children's Medicaid. A top legislative priority for TMA during the session has been to adopt measures to reduce this embarrassing statistic. Texas has forfeited more than $900 million in CHIP funds over the past decade by not fully funding its CHIP program. Without health insurance, children rely on the ER for routine illnesses or, worse, require hospitalization for ailments that could have been better managed at a lower cost at a physician office visit.
Heading medicine's message, on April 3 the House of Representatives adopted 125 to 16 House Bill 109 to expand health insurance coverage to low-income children by rescinding eligibility changes made to the Children's Health Insurance Program in 2003. If enacted, the bill would (1) restore 12 months continuous coverage under CHIP; (2) return to the original 90-day waiting period so that uninsured children no longer have to wait to obtain coverage; (3) establish a more realistic asset test for working families; and (4) allow families to deduct from their income child-care related expenses.
The legislation adopted by the House is a bipartisan, conservative approach. In fact, seven Republicans co-authored the bill, including Rep. John Davis (R-Houston), chair of the House Appropriations Subcommittee on Health and Human Services. TMA, along with all metro chambers of commerce, faith organizations, and consumer advocates, strongly supported the bill as a sensible compromise to insuring more children.
As of this writing, the bill has not been set a hearing in the Senate. Several Senate leaders, including the Lieutenant Governor, have expressed concern about restoring 12 months continuous coverage. However, that opposition may be softening as Senate leaders learn more about the impact of the policy on children's health and costs to local taxpayers. TMA, along with a coalition of business, faith, and advocacy leaders, is working with supporters of the legislation to get the bill set for hearing in early May.
Simplification of the Medicaid Preferred Drug List
In 2003, the legislature directed the Texas Health and Human Services Commission to adopt a Medicaid Preferred Drug List to curtail spending on Medicaid prescription drugs. Drugs that are "preferred" do not require prior approval to be prescribed while those that are not preferred do require approval. To advise the state on implementation of the PDL, the legislation directed HHSC to appoint a Pharmaceutical and Therapeutics (P&T ) Committee of physicians and pharmacists. To be considered a preferred drug, the committee must not only consider whether the drug is safe and effective, but whether the manufacturer agreed to provide Texas an additional supplemental rebate to further lower the drug's cost to the state.
While the P&T committee has worked collaboratively with medicine to address administrative and clinical concerns of the PDL, the actual administration of the preferred drug list has been burdensome to physicians and patients. To that end, last fall TMA requested that HHSC adopt measures to simplify the PDL. Recommendations included adopting a searchable, online database of preferred and non-preferred drugs; assuring the supplemental rebates apply to the entire line of a manufacturer's product not just particular doses; and that the Medicaid PDL be available via Epocrates so that physicians can readily download the list to palm devices while at the patient point-of-care.
In early April, HHSC informed TMA that it had negotiated an arrangement with Epocrates to make the Texas PDL available to participating physicians. The new service will begin in May. Additionally, this summer, HHSC will redesign the PDL Web site to make it more user friendly. A panel of physicians will give advice on the format and usability. The council and committee will work closely with HHSC to implement these changes as well as other changes recommended to simplify the PDL.
TMA House of Delegates: TexMed 2007