The Good, the Bad and the Ugly

This time around, legislators chose to first, do no harm — or much of anything else for that matter.

By Jonathan Nelson

The 79th Texas Legislature probably won’t be remembered among family medicine’s days of glory and you won’t see family physicians making victory laps around the Capitol any time soon. In fact, you’re more likely to breathe a sigh of relief and be glad it’s over — almost. With as many slings and arrows as medicine dodged this session, things could have gone a lot worse.

In the last session, medicine had a focused agenda: pass medical liability reform, prompt pay measures and strengthen the state’s Medicaid and CHIP programs. This time medicine played defense. A host of threatening issues filled the docket, including bills to limit physicians’ referral power, prohibit balance billing and force out-of-network physicians to accept health plans’ “usual and customary” reimbursement rates. There were bills seeking to limit who could bill for diagnostic services and to ban physicians from owning hospitals and other ancillary services. Of course there was the biennial battle over state health spending on Medicaid and CHIP, a concerted effort to rollout an HMO-only model for management of the aged, blind and disabled Medicaid population in the state’s urban areas, a complete overhaul of the workers’ compensation program and lest we forget, the sunset of the State Board of Medical Examiners and the inevitable scope of practice fights that come along with it.

All of this took place in the midst of a political showdown over school finance and property taxes, the two interlocked debates that dictated the pace of all other action. The showdown turned to meltdown by session’s end as legislators went home without resolving either issue only to be called back for the third time in three years to try again in a special session that began on June 20.

“It really was about Democrats versus Republicans last time,” says Harvey Kronberg, editor of Quorum Report. “This time it was about Republicans versus Republicans and the House versus the Senate.” If Texas politics is a full-contact sport, this session was a cage match. Arm-twisting, threats and retribution were the weapons of choice and compromise was a word seldom heard.

The dysfunction emanated from the top, where there is a power struggle between Lt. Gov. David Dewhurst and Speaker of the House Tom Craddick. In years past, leaders on both sides of the Capitol would give senior members assignments. Those leaders would build coalitions and from those agreements came legislation. “Craddick and Dewhurst are micromanagers,” Kronberg says. “They say what the bill will be and that’s what they want.”

The effects of last year’s legislative redistricting exacerbated this acerbic political atmosphere, and the ramifications have been damaging for Texas’ health care community. “Redistricting has diminished the political influence of medicine,” Kronberg says. With probably fewer than 10 competitive House seats, the general election has become irrelevant, leaving virtually everything to be decided in primary elections. In the primaries there is little competition to entrenched, well-funded incumbents. “The only people who ratify public policy in Texas are 600,000 Republican primary voters,” Kronberg says.

Among these voters and the legislators they put in power, there is a profound frustration with health care because its ever-growing costs compete with education. “They see medicine as sucking resources rather than contributing,” Kronberg says.

The recent trend has been to either cut benefits and services or shift as much health care cost as possible to counties and local health districts. That cost shift has not gone unnoticed. When legislators slashed health spending last session, those dollars were still spent. Kronberg thinks the next election cycle will be defined by whether legislators can represent their districts or whether they will be forced to tow the party line. If the party line wins, the cost cutting and cost shifting is likely to continue.

In this political dynamic, getting through the legislative session without sustaining major trauma was no small feat. In the arena of health policy, the Legislature ascribed to the old physicians’ adage, first do no harm, and sometimes no news is good news. Here’s our legislative post-mortem.

Dollars and cents
The good news is the budget calls for more health spending in the next biennium than there was in the last, but after the deep and painful cuts of last session, the state is still in a hole. Texas ranks 45th in the nation for per capita health care spending and holds the dubious distinction of having the nation’s largest percentage of uninsured children.

The Legislature did restore dental, vision and mental health services for CHIP enrollees, but they decided not to extend the enrollment period from six to 12 months. They restored some Medicaid cuts as well, and they tried to bring back eligibility for the adult medically needy population — people with too much income to qualify for the program but whose annual medical expenditures render them indigent. According to the former head of the Health and Human Services Commission and current TMA legislative consultant Don Gilbert, they elected to fund this initiative with county dollars rather than state funds. “I’m not sure that they will actually find their way into coverage, but a recognition that this is a population that’s pretty desperate is positive,” he says.

Legislators refused to restore last session’s cuts to provider fees for CHIP and Medicaid, which will inevitably cause further deterioration of physician participation in those programs. TMA reports that physician reimbursement for Medicaid has remained flat for 12 years. “From nursing homes to physicians to home health providers to hospitals, providers have been losing ground to inflation and that’s not been accounted for,” Gilbert says. Meanwhile, caseloads are expected to continue to grow with the population, as are the expenses associated with running a medical practice. “While it’s good that the population in need has access to Medicaid benefits, it’s not good that the provider system is frayed and inadequate in my estimation in some parts of the state, and there’s no relief in sight in terms of addressing the issue of inadequate reimbursement.”

Now for the ugly part. The budget assumptions used for the Medicaid and CHIP programs lowball caseload growth and assume health care cost trends will remain flat over the next biennium. Yes you read that correctly, the state budget assumes no growth in hospital costs, drug costs, new technologies, utilization, etc., etc., etc., at a time when the private market trends show double-digit increases in those costs. These false assumptions can only lead one to wonder how deep the hole will be when the Legislature reconvenes in 2007.

Medicaid Managed Care: A Narrowly Averted Disaster
In one of the more surprising victories of the session, medicine blocked an attempt by HHSC and the managed care lobby to rollout the Star+Plus HMO plan to manage the provision of Medicaid services for the aged, blind and disabled in the state’s urban areas. The commission promised that the rollout would save $109 million over the biennium and the Legislative Budget Board built that savings into their base budget recommendation at the beginning of the session.

Over the legislative interim, the commission held dozens of hearings on the plan and received overwhelmingly negative feedback from hospitals, physicians, patients and long-term care providers but the commission forged on, posting a request for proposals and accepting bids from HMOs. Physicians were mostly concerned with the administrative burdens associated with HMOs to this sector of the Medicaid population and the idea that state tax dollars earmarked for patient care would instead be handed over to for-profit HMOs to cover administrative costs and boost their profits.

Don Gilbert says that in November, the commission was less than a week away from awarding the contracts. “They’d already done the procurement, they already had the bids, they’d already done the evaluations and they were ready to launch … We were able to raise that issue with the Legislature, stop the eminent rollout of the Star+Plus HMO model for the aged, blind and disabled and begin a dialogue that suggested that there are other ways and perhaps much more appropriate ways — less expensive administratively, less cumbersome from a provider’s perspective — to effect good care management for [that population].”

Medicine’s proposal would come to be called Integrated Care Management, or ICM, a system of care that adds some of the tools of managed care to the primary care, doctor-patient relationship. Health care visionaries have been kicking around the idea for some time now, and some states like North Carolina have implemented similar programs. It’s really an enhanced Primary Care Case Management system, complete with care utilization review processes, a focus on preventive care and disease management, physician “report cards” and a pay-for-performance structure.

While the ICM proposal sounds wonderful, what tipped the balance against Star+Plus was the realization that implementation of the commission’s plan would cost the state’s public hospitals $150 million in federal dollars over the biennium. It seems the Centers for Medicare and Medicaid Services won’t give those hospitals “upper payment limit” funds for expenditures made under a capitated plan. Dallas’ Parkland Hospital alone stood to lose around $50 million over the next two years.

That bombshell knocked the wheels off the Star+Plus bus, but the ride wasn’t over for ICM. The plan was pulled from the ash heap more times than John Travolta’s career. What eventually passed was a definitional structure of ICM and a directive to launch a pilot of the system in the Dallas market. In other areas, the Legislature directed public hospital officials and county officials to work with the commission to choose the most appropriate model for their communities, leaving ICM as an option in every community and more importantly creating a dialogue between local officials responsible for health care and HHSC.

Gilbert says the medical lobby further succeeded in blocking any rollout of managed care for the aged, blind and disabled Medicaid population that would result in the loss of federal dollars to public hospitals. The commission has proposed a carve-out plan where public hospitals would be kept in a fee-for-service funding arrangement and all other non-hospital providers would be wrapped up in the capitated HMO model. For this arrangement to work, HHSC has to get approval from CMS and Gilbert suspects that’s a hurdle the commission won’t clear.

“It’s never happened anywhere in the country and there’s no logic stream that will tell you it’s likely to happen in Texas,” he says. Even if CMS grants approval, HMOs will have to assure a savings target that will be extremely hard to reach. Should they fail, HMOs would have to make up the difference by surrendering dollars tagged for administrative costs and profits. “There are very serious restrictions that cause the expansion of managed care to the aged, blind and disabled to be improbable.”

To tax or not to tax
Reducing property taxes and devising a new financing scheme for public education were the top priorities for lawmakers. Because the state’s main funding mechanism for education is property taxes, the two issues were tied at the hip. Both the House and the Senate proposed a mix of sales tax increases and new business taxes to make up the difference, but the gap between the two proposals proved too wide to close before the 140-day session closed. In essence, the House acted to protect businesses in favor of a higher consumption tax while the Senate voted to put more of the burden on businesses.

Try as they might, physicians could not escape being thrown into the mix, as both proposals included extending business taxes to include professional services. TAFP Past President Robert Hogue, M.D., testified along with many other physicians, telling the House Ways and Means Committee: “We believe that taxing illness and sickness is not good public policy.”

Most businesses would be able to pass along any new tax to their customers by raising their charges to reflect the increase in their cost of doing business, but physicians practices’ are not like most businesses. Physicians don’t have the luxury of setting their fees. They are locked into negotiated contracts with health plans for virtually all of their commercial business and reimbursement rates for Medicare, Medicaid and CHIP are set by the government. Hogue says this means a new business tax on his practice would essentially be a personal income tax. “No other business in the entire United States is restricted from passing on that cost to the end user.”

Physicians argued throughout the session that they already pay a sort of tax by providing uncompensated care and by participating in government-financed health care programs that pay a fraction of what the commercial market pays. Lawmakers pointed out that physicians would realize some relief from a reduction in property taxes but Hogue says that’s cold comfort. “It still comes down to the fact that all the lawyers and [certified public accountants] and grocery store owners are going to get the same property tax relief that we are. They all can still pass on the other tax to their end users. We still can’t.”

As a remedy, both the House and the Senate included credits for physicians participating in government-financed health programs. The House proposal would have allowed practices with more than 15 percent of their revenues coming from Medicare and Medicaid to receive a credit of 40 percent of those revenues against the new tax. They could include their CHIP revenues in meeting the 15-percent threshold, but they couldn’t count those revenues when figuring the credit.

Under the Senate plan, physicians would have been eligible for a 20-percent business tax credit for participating in Medicaid and CHIP, but nothing for seeing Medicare beneficiaries. The Senate did not require a minimum participation rate.

Hogue has a problem with the inclusion of a participation threshold. “If they say you’ve got to have at least 15 percent of your practice be all of these things, my question is who’s going to audit that and how is it going to be managed and regulated.” Tracking all of those receipts and calculating what portion of a practice’s business would count toward the credit would be a sizeable task.

He also thinks Medicare should be included in the final version of the tax credit. “I personally don’t have a lot of Medicare patients, but for all of the internal medicine doctors in the state, which is a fairly large group, they don’t see many Medicaid patients unless they practice in nursing homes and they don’t see CHIP because they don’t see children, so they don’t have any chance for a tax break.” The inverse would be true of pediatricians who see a lot of CHIP patients and no Medicare.

When lawmakers returned to Austin for the special session, they found themselves facing the same impasse as they were when they left. The governor has proposed a plan that doesn’t include a tax on professional services but does double professional occupation fees, which would mean an annual increase for physicians from $200 to $400. Gov. Perry’s plan also calls for a tax on cosmetic surgery, but does not define what is or is not cosmetic. The governor’s contender for the March primary election, Comptroller Carole Keeton Strayhorn, along with a number of other legislative leaders, says the plan doesn’t cover the bill.

No matter what happens, physicians have now been included in the tax debate and they are not likely to extract themselves from discussions in the future. TAFP and other medical organizations will have to continue to make the argument that because of physicians’ particular business arrangements, they should receive credit for providing care to the state’s most vulnerable populations.

BME Sunset, managed care, workers’ comp and public health
State agencies go through an evaluation process once every 12 years called “sunset” and this time it was the Texas State Board of Medical Examiners’ turn. Sunset can be a perilous and grueling ordeal for medicine. Basically everything in the law that governs the practice of medicine and the licensing of physicians is vulnerable. Scope of practice battles can bring the whole process to a screeching halt, but thankfully that wasn’t the case this time around.

Legislation to continue the Medical Practice Act sailed quietly through the Legislature, only picking up a few amendments dealing with abortion. “It’s one of the better acts in the country and it was not tampered with in any significant way,” says Doug Curran, M.D., chair of TAFP’s Commission on Legislative and Public Affairs. “By preserving the Medical Practice Act, we really did a good thing for patients.”

Legislators chose not to take up scope of practice issues and focused instead on guidelines and regulations within individual specialties. Joane Baumer, M.D., a TAFP member who was part of TMA’s Ad Hoc Committee on the Sunset of the TSBME, says the sunset process went better than it could have. She is the program director of the John Peter Smith Family Medicine Residency Program in Fort Worth, so she’s particularly happy about changes made affecting physician education.

The sunset legislation clarified rules governing in-training requirements for international medical graduates and it gave the responsibility for vetting candidates to training programs back to the program directors. Also, the Legislature worked to define disciplinary actions more clearly. “Those three things from my perspective were real wins for us,” Baumer says. “I think that even though our board is narrow in terms of its disciplinary actions sometimes, it is at least clear what their expectations are now.”

From the perspective of a practicing physician, Baumer says the problem with some of those guidelines will be understanding how they translate into day-to-day practices in the clinic. She says the most important safeguard is thorough documentation, especially when prescribing narcotics.

“Overall, I think we actually did okay. I think as medical practice becomes increasingly more regulated, we will have to face the fact that we are going to need different kinds of documentation tools to demonstrate that we are doing things safely.”

On the managed care front, medicine did well enough just to stave off some potentially detrimental bills. Texas physicians have strung together a decade-long series of victories in this arena, including the patient bill of rights, the HMO liability bill, joint negotiations and prompt pay measures, but TAFP Director of Public Affairs, Tom Banning, says the managed care debate in Texas may be coming full circle. “Some of the cost savings measures that made managed care so unpopular seem to be coming back under a new guise as health plans look for ways to reign in costs.”

Efforts are underway in a variety of forums to institute economic credentialing of physicians, to prohibit pass-through billing, and to reduce premiums to a percentage of Medicare. In this legislative session, the managed care lobby attempted and failed to prohibit balance billing for hospital-based physicians and while TAFP did not take a public position on the issue, the downstream implications could affect all physicians.

“The real debate moving forward is going to be about transparency of cost,” Banning says. Several attempts to force disclosure of health care costs and hospital costs failed this session, but they’ll be back. “This can’t be a one-sided transparency discussion. Where are those premium dollars going? How much is administrative cost? How much goes to profit and how much to patient care?”

Banning says there will probably be efforts in the next legislative session to initiate so-called “smart card” technology that would provide information at the point of service such as what is covered, what is the responsibility of the insurance company and what will be left up to the patient. With this technology, patients and doctors could have open and informed discussions about treatment.

Legislators completely disassembled the state’s workers’ compensation program and rebuilt it from the ground up, this time putting it under the purview of the Texas Department of Insurance. The new program boasts a market-based fee system and the ability for physicians to negotiate their rates within provider networks. There are prompt-pay requirements and an expected reduction in administrative burdens.

In the public health arena, medical organizations worked to put some enforcement behind last session’s efforts to mandate physical education for school kids in the battle against obesity. The director of advocacy and health policy for the Texas Pediatric Society, Carrie Kroll, says this session’s obesity bill did not end up as strong as public health advocates had hoped when it was originally filed. It does require PE twice a week unless students participate in after-school physical activities. It also requires schools to report their compliance with the nutrition guidelines established by the Department of Agriculture and the new PE requirements.

Lawmakers also passed a measure calling for schools to work with doctors to develop maintenance of care programs for diabetic students while they’re at school. Another bill requires children to have received both a Prevnar immunization and a Hepatitis A shot before enrolling in regulated childcare facilities.

The Legislature did pass a child booster seat law, although this, too, was watered down some by the end of the session. The American Academy of Pediatrics recommends children sit in booster seats when traveling in vehicles until they are 8 years of age or 57 inches tall, so Kroll says that was the target. The final bill simply clears a statutory discrepancy, setting the limit at 5 years and 36 inches, but it does require a study by the Department of Public Safety to look at whether or not there could be legislative options available to improve child passenger safety laws.

Doug Curran, M.D., is proud of the public health successes. “Those are good white-hat issues for us that we want to do well in, and we ought to. We owe that to the public and to our patients, to really work hard to make things better and safer and I think we were able to do that.”

In his assessment, the Academy held its own in this legislative session, not gaining as much ground as hoped but not losing any either. Although the special session could result in a new tax on physician practices, Curran says medicine is in a good position. “They know our issues. They understand our dilemma and I think we’ll be well received by the Legislature again.”

With the growing cost of health care, increased pressure from employers and insurance companies to contain those costs, the certain population growth in the state and the rising numbers of uninsured patients, the road ahead for medicine will not be easy. “The next sessions are going to be tough and I don’t know who the players are going to be for sure,” Curran says, “but there’s always opportunity. I think the real area of focus for us is to improve pay for primary care … because we’re of great value.”