The Budget Blues 
Clear skies over Austin? For health care issues at the Capitol, the forecast is stormy.

by Tom Banning 

The political winds of discontent have picked up speed as the fiscal waves of a mounting budget shortfall continue to hammer the Texas Legislature. Over a year ago, TAFP leaders warned of several political, fiscal, and health-care-related fronts that would converge on the 78th Texas Legislature to create the “perfect storm” and it is within these confines that the Legislature and TAFP currently find themselves.

Adding to the stress of the current situation are the complex health care issues the Legislature must address this session. These issues include: reining in escalating costs within the Children’s Health Insurance Program and Medicaid, while at the same time maintaining the integrity of the programs by providing access to high quality health care; addressing Texas’ medical liability insurance crisis by passing comprehensive reforms to ratchet down on frivolous lawsuits and cap non-economic damages to decrease medical liability premiums; and cracking down on abusive practices of managed care plans by closing the loopholes in the current prompt pay statute to ensure timely and accurate payment of services.  

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It’s the Budget, Stupid

Unlike the federal government, which frequently spends more money than it takes in, Texas by law, cannot spend more money than it has available. So when Texas Comptroller Carole Rylander Strayhorn announced in early 2002 that Texas would face at least a $5 billion shortfall to maintain current services for 2004-2005 biennium, legislators started getting nervous. In January 2003 when she revised those projections and announced Texas would face at least a $9.9 billion shortfall for 2004-05, as well as a $1.8 billion shortfall for the current 2003 fiscal year, lawmakers became downright worried about how they would balance the budget.

So how did we get in the budget predicament we now face? Simple, with the downturn in the economy, state tax revenues are significantly down while at the same time, demands have increased on state services, like the Medicaid and CHIP programs, the prison system, public schools, and institutions of higher education.

With Republicans controlling every branch of government, including the recent takeover of the House of Representatives, don’t look for the Legislature to approve any tax increase during the regular session, which means that the shortfall will have to be made up from current revenues by cutting spending.

The Medicaid Mess

Within the Medicaid and CHIP programs increased caseload along with increased cost of prescription drugs and technology have helped drive the state budget into a black hole. The Medicaid debate is being waged primarily on two fronts: 1) funding for the program; and 2) redesigning the program.

The Health and Human Services Commission, like all other state agencies were charged by the Governor, Lt. Governor, and Speaker of the House to come up with a 12.5-percent across-the-board cut for the programs they oversee, which include the Medicaid and CHIP programs as well as mental health and mental retardation programs, among others.

The funding proposals look bleak. To come up with the required savings, HHSC has proposed the following:

• Reduce Medicaid physician, hospital and provider reimbursement rates by 33 percent;

• Eliminate CHIP, which insures 500,000 children;

• Eliminate Medicaid services for 17,000 pregnant women;

• Eliminate Medicaid coverage for more than 19,000 nursing home patients;

• Eliminate all Medicaid Graduate Medical Education funding; and

• Eliminate mental health and mental retardation services for 25,000 Texans.

The House Appropriations Committee and Senate Finance Committee have yet to vote on these proposals and the Academy is working overtime to stop these proposed cuts.

The second front is implementing program and benefit design changes within the Medicaid program to achieve meaningful cost savings. To that end, the Speaker of the House created a new Select Committee on Health Care Expenditures, chaired by Diane White Delisi (R-Temple). The committee will likely support legislation to roll-out primary care case management to border and rural counties not covered by Medicaid managed care, create a preferred drug list within the Medicaid Vendor Drug Program, implement disease management initiatives, and other pilot projects.      

Keeping the Doors of Medicine Open

After a brief hiatus, physicians are again experiencing unprecedented and economically unsustainable increases in their medical liability premiums. Gov. Rick Perry has declared medical liability reform an emergency issue, fast tracking any reform measures.

Medical liability reforms will focus on three main areas: pursuing lawsuit abuse measures to ratchet down on the severity and frequency of medical malpractice lawsuits, strengthening the State Board of Medical Examiners, and giving the Texas Department of Insurance expanded ability to review medical liability carriers’ rate setting to ensure that premiums are commensurate with losses and to implement rate roll-backs if necessary.

Rep. Joe Nixon (R-Houston) has filed HB 3 and HJR 3 that mirrors California’s Medical Injury Compensation Reform Act, which many believe has helped keep liability premiums stable in California since 1975. Provisions of HB 3 include a $250,000 hard cap on non-economic damages, limits on plaintiff’s attorneys’ contingency fees, periodic payments of judgments for future medical costs and economic damages, a collateral source rule to prevent plaintiffs from “double dipping” on damages, and removing loopholes from the state’s expert witness requirements. HJR 3 is a Constitutional amendment that would allow the Legislature to cap damages and get around any judicial scrutiny.

Rep. Nixon also filed HB 4, an omnibus tort reform bill that would apply to causes of action outside the scope of medical liability, including third party liability, class action reform, products liability protections, and others. Nixon and the legislative leadership decided to roll together our medical liability reform package, HB 3, into HB 4. As of press time, HB 4 is being debated on the floor of the House of Representatives.

SB 104 by Sen. Jane Nelson (R-Flower Mound) has passed both the House and the Senate and is on the way to a conference committee to work out differences between the House and Senate versions of the bill. SB 104 gives the State Board of Medical Examiners more authority and money to quickly discipline and weed out bad doctors. The legislation would increase medical license fees $80 per biennium to strengthen the Board’s enforcement division and set up expert panels to review standard-of-care cases. The legislation would also prioritize certain complaints and set strict time guidelines for resolving complaints.

Several pieces of legislation and amendments have been filed to give the Texas Department of Insurance expanded ability to review medical liability carriers’ rate setting and to roll back rates if necessary. One amendment that has been agreed upon would require medical liability carriers to roll back liability premiums 15 percent once the cap on non-economic damages is found constitutional, either by judicial decision or public vote. After the roll-back, the Commissioner of Insurance would have the ability to lower rates based on rate setting data that liability carriers would be required to submit to the department.