COVER STORY

A Taxing Problem

It’s back to school for the Texas Legislature. Lawmakers have until October to come up with a new method for financing elementary and secondary education, and proposals for new taxes on business are being collected at the front of the classroom. And that’s just one challenge in store for family medicine this session.

By Jonathan Nelson

Good morning class. Welcome to another semester of Advanced Budget Writing. The 79th Texas Legislature is underway and as always, health care is one of the hottest topics for this year’s term.

This semester, we’ve got some tough subjects to tackle. The good news is the state is not facing a $10 billion shortfall like it was the last time the Legislature met in regular session. The bad news is the state’s biggest budget items are in serious financial straits and legislators will likely have to find some new money. That’s right class, we could be in for a tax session, and everyone will be asked to play.

With another tight budget, Medicaid reform, the sunset of the Texas State Board of Medical Examiners, scope-of-practice fights, workers’ compensation reform, and the business lobby’s determination to focus attention of the rising cost of health care and medical errors, doctors find themselves flanked on all sides.

Setting the Stage

Where politicians are concerned, elections tend to color all proceedings and the Texas Legislature is no exception. According to Quorum Report’s Harvey Kronberg, November’s election was a bit of a surprise. “With Bush at the top of the ticket, the first election after redistricting, Republicans with dramatically more money than Democrats in most races, this should have been a banner year for Republican gains in the [state] House.” Yet the Democrats gained a seat. Their better-than-expected showing in statewide and local races could send a message to Republicans that a dramatic conservative agenda might create a backlash. “You don’t want to overstate that, but it’s kind of like the canary in the coal mine, just a beginning.”

One case in point is Arlene Wohgemuth’s failed bid to unseat U.S. Representative Chet Edwards, (D-Waco). Wohgemuth was the driving force behind last session’s cuts in CHIP and Medicaid, and her campaign team believes those cuts cost her the election last fall in what is a solidly Republican district. “That has to send chills up and down appropriators’ spines,” Kronberg says. “As a matter of fact, the person who is offering to restore the CHIP cuts is Kip Averitt, [R-Waco] the senator who has most of that district in his back yard.”

The 2006 elections will also shape what goes on in Austin for the next few months. Every statewide officeholder including the governor will be up for election and the jockeying for higher office has already begun. Kronberg says the last time the state had a contested governor’s race in a Republican primary, poll numbers went from the usual 500,000 voters to 800,000. Predictions this time range from 1.1 to 1.8 million voters. “The smaller the primary, the more conservative. The larger the primary, the presumption — the belief is the more moderate.”

Kronberg predicts the three issues that will “suck the air out of the session” are the budget, workers’ compensation reform, which is a complex state economic development issue, and you guessed it — school finance. On one side, the school finance debate is about quality of education. On the flip side, it’s about tax policy.

An Unresolved Math Problem

You’ll recall last spring Gov. Rick Perry called a 30-day special session of the Legislature to fix the state’s troubled school funding system. Repealing the so-called Robin Hood method of funding elementary and secondary public education was a frequent topic of debate during the special session, but despite their best efforts, legislators couldn’t agree on a funding scheme that would replace Robin Hood, cut local property taxes and generate additional revenue for Texas’ public schools.

Adding pressure on the Legislature to act, State District Judge John Dietz of Austin issued a ruling last fall that the state’s school finance system is unconstitutional because it does not provide sufficient funding. If the system isn’t fixed by Oct. 1, 2005, the judge plans to halt state funding for schools.

A major point in the court’s ruling is that by funding education primarily through property taxes, which are constitutionally capped at $1.50 per $100 of assessed value, school districts have lost the power to set their own tax rates. So legislators have to come up with an entirely new school finance system. To add to the confusion, the ruling has been appealed to the state Supreme Court, but when the case will be heard is anyone’s guess.

No consensus has been reached among legislators on how to come to a solution. “Everybody agrees that there are too many people escaping taxes,” Kronberg says, “that in fact, the franchise tax is a voluntary tax because there are so many ways to get out of it.” Another analysis is that sales tax captures a declining part of the economy — material goods and manufacturing — and leaves out the growing sector of the economy, services. “So absent an income tax, … I think there’s pretty much a broad consensus that they’ve got to find a way to capture a bigger part of the business economy.”

That puts the target on professional services, which means doctors, and Kronberg says no matter how much uncompensated care physicians provide, they’ll have a hard time avoiding some form of new tax.

MEDICAID MALAISE

When you’re talking state budgets, you’re talking Medicaid. Every state in the union is struggling with the ever-increasing cost of the program. It is larger than Medicare and for the first time, Medicaid spending has eclipsed the cost of elementary and secondary education nationwide, according to a recent report published by the governors association.

The Texas Health and Human Services Commission estimates that Medicaid rolls will swell by about 24 percent with nearly 1 million new enrollees during the biennium. That will require about $6.3 billion in new money. As the Medicaid caseload in Texas continues to climb at this unsustainable rate, lawmakers worry that the spending demands of government-financed health care systems will force reductions in spending on other government programs like education and transportation.

So how do you control those costs without jeopardizing care to the people who need it? TMA’s director of governmental affairs, Helen Kent Davis says the options are to either radically restructure the delivery system or to focus more on prevention and the management of chronic illnesses.

“I think there is a recognition among many lawmakers that just cutting optional populations, benefits and services probably doesn’t achieve any long-term savings,” Davis says. “It often winds up costing them more.”

HHSC’s appropriations request for the biennium includes restoration of some funds cut by the previous Legislature, like vision and dental benefits for CHIP recipients and Medicaid services like podiatry and mental health counseling. Plus, the commission has requested the restoration of the 2.5-percent cut in provider fees enacted last time around and they’ve included a physician rate increase of 5 percent in ’06 and another 5 percent in ’07.

While these requests are promising, former Texas Health Commissioner Don Gilbert believes the proposed reimbursement hikes won’t be enough to address a major issue facing lawmakers: the inadequacy of the Medicaid provider network. Burdensome regulation and low reimbursement rates drive physicians away from the program so that patients in many parts of the state have trouble accessing the care they need, especially specialty care. “You can’t continue to pay physicians less than it costs to practice and expect that you’ll have a sufficient supply of physicians to provide access to care for your Medicaid population,” says Gilbert, who is now a consultant to TMA. “The reimbursement rate for a physician office visit is considerably less than you’d pay to have the oil in your car changed, for example, and I think that’s taking a toll on the Medicaid program in terms of access.”

The state’s Medicaid delivery system is another problem lawmakers will have to address. Consider this: in 2003, elderly and disabled patients made up 25 percent of the country’s Medicaid enrollees. That same population represented nearly 70 percent of total Medicaid spending. “What we do in Texas is with HMOs and various schemes of management, we manage very aggressively the wrong population,” Gilbert says, alluding to the Temporary Assistance for Needy Families program, comprised mostly of relatively healthy adults and children. “The state has got to recognize where the expense of the Medicaid program is and design models, as other states have, to effectively manage the cost and quality of care for those high-risk, high-utilizing Medicaid patients.”

Other states like Arizona and North Carolina have put in place enhanced primary care case management delivery systems for Medicaid designed to ensure that patients receive timely and appropriate care effectively and efficiently. Texas has had some success with a primary care case management (PCCM) system for Medicaid, but HHSC has recommended that it be repealed in urban areas in favor of an HMO model. TAFP and TMA have argued against that recommendation.

According to TMA, there is no difference in outcomes between the HMO model and the PCCM model, and the cost difference for actual services provided can be measured in pennies. The difference is in the administrative costs, where the HMO model is considerably more expensive. Gilbert argues that if the state could couple disease management with primary care case management and solid comprehensive care coordination, we could control cost and increase the quality of care.

“If you enhance [the PCCM] model, if you pay physicians reasonable reimbursement and if you have care coordination systems that focus on those most in need of care coordination, then you’re going to get better outcomes.”

That’s been the experience in North Carolina, where health officials have built an enhanced PCCM delivery system using community-based health networks of physicians, hospitals, social service and health organizations. Steven Wegner, M.D., J.D., says Community Care of North Carolina is a Medicaid managed care plan that works. He is the president and medical director of AccessCare, Inc., one of the program’s networks, and he and Charles Willson, M.D., addressed a group of physicians at TAFP’s 2004 Legislative and Leadership Conference last November. Willson is the medical director for another of the networks, the Pitt Community Care Plan.

The program began in the mid ‘90s with a goal of creating a medical home for Medicaid patients. Physicians receive a $2.50 fee per member per month from the state whether or not care is provided and they are reimbursed for services at 95 percent of the Medicare payment schedule. The networks study and implement best practices and disease management strategies. Case managers help ensure that patients follow their treatment plans and maintain access to appropriate levels of care.

The program reports outstanding results. For example, in the area of asthma disease management, the networks have lowered hospitalization rates by 35 percent and they’ve reduced the frequency of emergency department visits by 34 percent. A recent study shows the asthma disease management program saved the state $3.5 million from 2000 to ’02. Willson told the physicians at the leadership conference that Community Care of North Carolina has saved $27 million in emergency department visits alone over the first four years of the program.

“We are just surprised that these proposals that we sat down and wrote back in ’96 and ’97 are doing as well as they’re doing,” he said. “From my point of view, we’ve just scratched the surface.”

Wegner believes unsustainable growth in government-financed health care will make 2005 a watershed year for Medicaid at the state and federal levels. “I don’t know what the answer is,” he says, “but we have to engage. We have to be at the table. These are our patients.”

Reforming the Texas Medicaid delivery system to an enhanced PCCM model like North Carolina’s could be a solution to the reimbursement problems Don Gilbert identifies, which would presumably attract more physicians to the program addressing the access problem as well. That’s one opportunity Gilbert hopes for in the current legislative session.

Another is to restore the money cut from Medicaid and CHIP last time around. “Leading the nation in uninsured children is not good for business and not good for the health status of the state,” he says. “What the state fails to do in funding Medicaid, in terms of regional reimbursement, in terms of covered populations is nothing more than a cost shift to businesses and to local government.”

Of course, things could go the other way. If legislators can’t find a way to reform the delivery system and fully fund the program, the number of uninsured will surely rise, the population’s health status will deteriorate and more physicians will stop seeing Medicaid patients. One of the federal requirements of the program is that the state must provide reasonable access to care for Medicaid recipients. Gilbert says the state doesn’t provide reasonable access today and he warns that this could become an issue in the federal courts if the state were challenged.

“I think the opportunity exists for the business community, medicine and hospitals to come together with one voice that says ‘we are digging ourselves into a hole here and we’ve got to recognize that funding a cost-effective, smart model of care that impacts this huge number of uninsured Texans is good for the state’s economy and certainly good for the health of the population.’”

Sunset and Beyond

Over the last year, the Texas State Board of Medical Examiners has been going through the every-12-year ritual known as Sunset, a thorough review of the agency to determine if it is still needed and if it is carrying out their duties in an appropriate and efficient manner.

The Sunset Commission, a 12-member board consisting of four State Senators, four members of the House of Representatives, and two public members gave the BME a clean bill of health, recommending its continuation. According to its report, the Sunset Commission found that the BME has “instilled a more assertive attitude across all agency operations” but needed further statutory directive in some areas. The commission recommended requiring the BME to reach out to stakeholders in developing rules and policies, stating, “doing so would allow the Board to make more-informed decisions.”

Now come the treacherous waters. A bill to continue the BME and the Medical Practice Act must be filed and passed through both chambers of the Legislature and signed by the governor. The caption of the bill will read something like “Relating to the Practice of Medicine,” which means that at any time through the legislative process, any and all amendments considered germane to the practice of medicine will be up for debate. This is typically an invitation for battles over scope of practice.

“Scope of practice is always a dangerous thing,” Harvey Kronberg says, “because it’s playing to the stereotype of the greedy docs.” TAFP did successfully negotiate a moratorium on scope of practice battles with the nurse practitioners and physician assistants in the last legislative session, but threats still persist.

“A number of specialties will be embroiled in scope-of-practice fights this session,” says Tom Banning, TAFP’s director of legislative affairs. He cites numerous looming battles including: Optometrists wanting prescriptive authority as well as the ability to perform laser surgery, psychologists wanting authority to prescribe psychotropic medications, podiatrists arguing over where the ankle begins, physical therapists wanting direct access to patients and lay midwives looking for independent authority to practice.

The Texas Workers’ Compensation Commission is also up for Sunset review this session. The Sunset Commission did not look so favorably on the agency, recommending that it be disbanded and that workers’ comp be moved under the purview of the Texas Department of Insurance.

According to State Rep. Burt Solomons, Chairman of the Sunset Advisory Committee, “There isn’t a single participant in this system — employer, employee, health care provider or carrier — who is happy. I believe radical framework changes are going to be necessary to make the delivery and dispute of benefits more efficient for this system to work in the future.”

Indeed, many other changes are being considered for the state’s workers’ comp system including creating physician networks large and diverse enough to provide quality care, creating appropriate fee guidelines, independent review of an insurance company’s denial of medical care, and applying the state’s prompt pay laws to insurance carriers who duck contractual requirements to pay claims in a timely manner.

Meanwhile the Texas Association of Business and the insurance companies have signaled that they plan to push a platform of reforms designed to lower costs to employers. TAB released a report in September entitled “Employers & Health Care: Crisis and Solutions,” in which they propose the expansion of consumer choice health plans, the adoption of a tougher health care fraud statute modeled after the Texas Deceptive Trade Practices Act, and medical errors reporting that would result in an annual report detailing each reported medical error and fully disclosing the identity of all physicians and hospitals involved.

“I think they’re going to try to use medical errors as the fulcrum to continue to gain advantage over the docs,” Kronberg says.

TAB also proposes a “Consumers Right to Know Act” that would require disclosure of information regarding the cost and quality of health care services. “Consumers would receive full, advance disclosure of all treatment costs and be assessed only reasonable charges for health care services and supplies provided by a hospital,” according to the report. They also proposes an “Unprofessional Conduct Act” to crack down on abuses by health care professionals. The act would ban the practice of “balance billing” or “overbilling” in which health care providers attempt to bill a patient for services in excess of the price that the health care professional has negotiated with the consumer’s insurance carrier.

Banning says that as the cost of health care continues to spiral out of control, a debate on health care costs is not unwarranted and probably necessary. “There is a legitimate concern about the cost of health care,” Banning says. “Unfortunately, the business community chose to focus their misguided efforts attacking symptoms of a much broader problem.”

What is really needed according to Banning and Shellie Pruden, legislative chair of the Texas Medical Group Manager’s Association, is infusing more transparency into the entire health care system and implementing smart card technology.

“For the business of medicine, the smart card would be a leap into the 21st century,” Pruden says. “What we’ve battled the managed care companies for over the last decade would easily be solved with the technology of a smart card.”

Patients would present their smart cards when they check in at the doctor’s office. The card would contain information like the patient’s name, address, group number, as well as co-pays, deductibles and covered services, allowing the patient and the physician to discuss what the insurance will cover and what the patient’s financial responsibility will be before services are provided. According to Pruden this sort of information would significantly cut down on basic information errors that occur in day-to-day practices, and plans should also see cost savings for reductions in the provision of non-covered services or fraud.

“What other sector of the economy operates in the dark the way health care does?” Banning says. “No one knows how or where their health care dollars are being spent and perhaps it’s time to shed some light on where those dollars are being spent.”

So class, this semester promises to be a tough one with some difficult subjects and lots of homework. Flanked from several directions, medicine will have to hold fast to its set priorities and play some solid defense.

“Historically, medicine has been in situations before where they’ve had to play defense,” Harvey Kronberg says, “but part of the way they’ve played defense is with a strong offense. It’s less clear that they’re going to have a strong offense.”

As the physician from North Carolina said, family doctors in Texas have to be engaged. Opportunity abounds as the session begins. Your voices and your presence makes the difference, as is apparent in the victories of last session.

“Last session was described by many as the perfect storm, and yet we had a historic session, we passed medical liability reform and prompt pay,” says Doug Curran, M.D., Chair of TAFP’s Commission on Legislative and Public Affairs. “The political dynamics of this legislative session will be infinitely more challenging for medicine. We must take the intensity, passion and commitment we had last session into our efforts this session.”

TAFP’s Legislative Priorities

1. Improve access to care by increasing the number of covered lives in programs such as Medicaid and CHIP, and to promote appropriate benefit coverage in such programs. Efforts to provide affordable resources to middle and lower income families who are currently without any form of health care coverage will be pursued through innovative legislation and cooperative ventures with the business community.

2. Recognizing that physicians are currently economically pressured, any further attempt to decrease physician resources through taxation, devaluation of services or increases in the “hassle factor” will be aggressively resisted unless appropriate financial incentives offset the impact.

3. Carefully monitor medical liability carriers through legislative and regulatory means to be sure medical liability premiums decrease significantly in response to 2003 tort reform initiatives.

4. Recognizing the medical and financial complications of obesity to the public, the TAFP will work through education and legislation to address this issue.

5. Realizing the impending significant shortage of the physician workforce, the TAFP will work to increase funding for graduate medical education.