Declining Revenues, Growing Caseload Challenge Lawmakers
Legislative Affairs Feature - March 2009
Tex Med . 2009;105(3):29-31.
By Ken Ortolon
Texas has thus far escaped the worst of the nation's economic blight, but the state is feeling the impact nonetheless. State officials say the number of Texans seeking assistance from programs such as Medicaid and the Children's Health Insurance Program (CHIP) will swell over the next two years as businesses continue to cut jobs. And, while demand goes up, the amount of money lawmakers have to spend on those and other programs appears to be going down.
Texas Comptroller of Public Accounts Susan Combs in January estimated that lawmakers would have $9 billion less in state general revenue funds to spend in 2010-11 than they had in 2008-09. That means lawmakers face a tough juggling act in trying to find money to pay for expanding caseloads in health and human services programs, rising enrollment in public schools, growing prison populations, and all of the state's other funding needs.
Texas Medical Association leaders call the budget outlook dire. Even so, they will lobby legislators to find the cash necessary to maintain access to care for Medicaid and CHIP patients, improve payment rates for physicians who treat those patients, boost funding for residency training programs for the future physician workforce, and address other vital health care needs.
"Things like CHIP and Medicaid funding are obviously going to be jeopardized by the tight budget situation," said Austin obstetrician-gynecologist Albert Gros, MD, chair of TMA's Council on Legislation. "Anything with a fiscal note is going to be problematic. But we still need to put forth our positions. It's never a good time in a time of financial austerity to push for increased spending, but we have to demonstrate the potential impact on access to care and show lawmakers it's a matter of priorities."
Where's the Money?
Only a few months ago it appeared Texas would be flush with cash for this legislative session.
"We expected to have more money available this session, and we don't," said state Sen. Judith Zaffirini (D-Laredo), a key player in health and human services budget debates in the past several legislative sessions as a member of the Senate Finance Committee. "When we were at our pessimistic worst we expected a surplus of $2 billion. Now it's not even that."
Comptroller Combs ties the revenue decline directly to the bad economy.
"Though Texas has avoided the worst economic impacts affecting other states, the national downturn has finally begun to touch Texas," she said. "Our new economic forecast indicates Texas will be affected in fiscal 2009 before regaining economic momentum in fiscal 2010."
She predicts the state will have $77.1 billion in state funds available for 2010-11, compared with $86.2 billion available in 2008-09. She estimates that sales taxes will continue to rise, but motor vehicle taxes and oil and natural gas severance taxes will decline. In addition, revenue from the state's new business tax - which has not generated as much as lawmakers initially predicted - likely will be flat.
After the comptroller issued her revenue estimate, the Legislative Budget Board (LLB) released preliminary budgets for the House and Senate that call for spending roughly $171 billion in 2010-11. Those numbers include state general revenue, federal funding, and other revenue sources.
Even with the federal funds, however, budget writers say the state is looking at a deficit of about $3 billion between the baseline budget and available revenue. That means lawmakers likely will have to cut spending on some programs or use funds from the "Rainy Day Fund" to balance the budget. The Texas Constitution prohibits deficit financing of the state budget.
Covering the Caseload
While Senator Zaffirini says "there are always places to cut," Medicaid likely isn't one of them. The program already is short roughly $1.3 billion for the current biennium because the Health and Human Services Commission (HHSC) underestimated caseload growth for 2008-09. HHSC wants $2.6 billion to cover caseload growth in the new biennium, but the preliminary Senate version of the budget includes only $2 billion in new spending for HHSC. Not all of that money is earmarked for Medicaid.
"The problem with Medicaid is going to be caseload," said San Antonio pulmonologist John R. Holcomb, MD, who chairs TMA's Select Committee on Medicaid, CHIP, and the Uninsured. "Caseload is something that can't be controlled by the legislature. That's an entitlement program, and we've got our eligibility set at pretty much the lowest level that it can be set and still have the federal match."
Dr. Holcomb says lawmakers have no choice but to find funding to cover caseload projections, which he says could put CHIP funding at risk.
"CHIP can be capped," he said. "It's not an entitlement program." Lawmakers approved additional funds in 2007 to add about 127,000 children to the program. But, enrollment declined in previous years, due in part to rules changes that made it harder for families to enroll and stay in the program.
Even if lawmakers find the dollars to cover the projected caseload, Dr. Holcomb says Medicaid and CHIP patients still could face access problems if there are not enough physicians in those programs to treat them.
TMA supports increasing Medicaid and CHIP payment rates to bring them more into parity with Medicare fees to encourage more doctors to participate. In 2007, lawmakers did increase fees for children's Medicaid by 25 percent and adult Medicaid by 10 percent, which Dr. Holcomb says has positively impacted participation.
"Even with those increases, though, we only brought the ratio up to about 73 percent for children's services as to what Medicare would pay for the same services," he said. "On the adult side, it's only 58 percent."
Senator Zaffirini supports additional fee increases. She says it's a matter of maintaining the state's health care infrastructure. "If the reimbursement rates are not satisfactory, then we're not going to have the infrastructure we need to provide services to these children."
GME Funding in Doubt
Several other TMA legislative funding priorities also could have a rough path this session in light of the budget woes, particularly efforts to increase funding of residency training slots and a proposed physician loan repayment program intended to get physicians to practice in underserved areas.
TMA and medical educators have lobbied for several years for full formula funding of roughly $16,000 per residency slot to cover faculty costs in training programs. While lawmakers have responded, current funding is only about $5,000 per slot. A TMA analysis shows the Senate budget proposal recommends increased funding to add residency slots and boost medical school enrollment, but formula funding recommended in that budget remains flat.
Dr. Gros says that is a very real concern. "Even with tort reform and the influx of physicians that we've seen as a result, we're still projecting a shortfall in the physician workforce, particularly in primary care," he said. "So that makes improving graduate medical education funding critically important."
Finding the Will
While the budget presents a serious challenge for lawmakers, Senator Zaffirini says the money can be found to meet the state's health care priorities if there is a will to do so.
"Texas is an enormous state with an enormous budget," she said. "And we can always find money for the priorities. Now, what are those priorities?"
She was encouraged by Lt. Gov. David Dewhurst's remarks in January calling for expansion of CHIP. About 900,000 children currently eligible for CHIP are not enrolled.
"If I had a magic wand, I'd get them all enrolled in the CHIP program," the lieutenant governor said. "Why? I think that at the end of the day, it's the moral thing to do and over the long term, it's the most economic thing to do."
But Senator Zaffirini is disappointed that Gov. Rick Perry barely touched on health and human services issues in his State of the State address. And, new House Speaker Joe Strauss (R-San Antonio) has not yet indicated his priorities on those issues.
If lawmakers can't find enough places to cut spending to free up funds to cover Medicaid and CHIP growth and other health care priorities, Senator Zaffirini supports using some of the money in the "Rainy Day Fund," which will stand at $6.7 billion at the end of the current biennium. "It's raining. It's time," she said.
But former House Appropriations Committee Chair Talmadge Heflin, who now represents the conservative Texas Public Policy Foundation, recently told the Quorum Report that lawmakers need to practice further fiscal constraint.
"The legislature needs to be mindful of the hard lesson it learned in 2001, when it spent the entire accumulated surplus of the 1990s at once and dug itself a $10 billion hole in 2003," he said. "The way for the legislature to avoid setting the same trap for itself is to continue to show fiscal restraint."
Ken Ortolon can 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.
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