The Taxman Cometh

By Tom Banning

Not only is April the month when federal income taxes come due, but April 17 marked the date the Legislature re-convened for yet another special session on public school finance. In announcing the special session — the fourth extra session on the topic in two years — Gov. Perry declared the time for action had come.

As you will recall, after failing to address school finance during the regular session and three special sessions, the Texas Supreme Court ruled that the state was violating the Texas Constitution in the way it funds public education. The Court’s ruling narrowly focused on the question of how much discretion school districts have in their tax rate and gave lawmakers a June 1, 2006 deadline to come up with a new way to fund Texas’ public education system.

Since the Supreme Court decision, Gov. Perry appointed a task force, chaired by former Comptroller John Sharp and comprised of business leaders to tour the state and devise a plan for a “fair, low-rate, broad-based” tax to replace the current franchise tax and to lower local property taxes. The goal of the task force was to raise between $5.5 billion to $6 billion, which would reduce local property taxes by as much as one-third.

The current plan, dubbed the “alternative margins tax,” would replace the state franchise tax with a tax on business receipts. Businesses would be allowed to deduct payroll, health care costs and pensions, with a $300,000 limit on compensation deductions per employee, or deduct 100 percent of the cost of goods sold. The definition of “cost of goods sold” would be based on the IRS code. The balance of the income, minus deductions, would be taxed at 1 percent. Sole proprietorships, general partnerships and non-profit businesses would be exempt from the tax bill, as well as businesses earning less than $300,000 annually. Another component of the tax bill would likely include a $1 per-pack tax on cigarettes while using a billion dollars of the state surplus.

This plan is far from becoming law; it still has to go through the legislative process and it already has its detractors. Some conservative members of the Legislature are suggesting using the current budget surplus, estimated to be $8.2 billion, to buy down the property tax rate by 20 cents and stave off the Supreme Court challenge, thereby delaying a tax fight until the regular session. Still others want to expand and increase the state sales tax.

Unfortunately, physicians have yet to escape being included in any proposed new taxing scheme, but rest assured that TAFP will continue to strongly advocate for the best interests of family physicians, their patients and the health of all Texans.

TAFPPAC scores big wins in primary elections

Despite widespread speculation by many political observers that as many as 40 to 45 Senate and House members would retire after the rough regular and special sessions on school finance, the grim predictions didn’t come to pass. Texas will, however, have at least five new state Senators and 19 new House members when the Legislature convenes for the 80th regular legislative session in January 2007.

In the Senate, four members decided not to seek re-election, while one incumbent lost his re-election bid. Former Austin Mayor Kirk Watson (D-Austin) avoided a challenge in both the primary and general elections and will replace longtime legislator, Sen. Gonzalo Barrientos. Rep. Glenn Hegar (R-Katy) bested two opponents for the Republican nomination for SD 18, receiving 55 percent of the vote. Since the Democrat candidate withdrew from the race, Hegar will serve as the senator from that district. Sen. Bob Deuell, M.D., (R-Greenville) easily defeated Tim McCallum with 67 percent of the vote. Dan Patrick (R-Houston), a radio talk show host, received 69 percent in a four-way race that included two state reps and a Houston city councilman. Robert Nichols (R-Jacksonville) garnered 54 percent in a four-man field to capture the Senate seat held by Todd Staples. Perhaps the biggest surprise of the night, Rep. Carlos Uresti (D-San Antonio) knocked off incumbent Sen. Frank Madla, 57 percent – 43 percent.

In the House, at least 19 members won’t be back after this term. Some of those members decided to seek higher office, others were ready to move on, do something new or get their lives back, and five incumbent House members lost in their primary elections.

TAFPPAC came out swinging in a number of contested primaries and helped make the difference in a number of elections. With a strong grassroots showing and financial support, family physicians came together to help elect a slate of pro-medicine, pro-patient candidates.

If you want to be more politically active, know what candidates TAFPPAC has endorsed or learn more about TAFPPAC and how it represents family physicians’ political interests, please visit www.tafppac.org or contact Tom Banning at (512) 329-8666 ext. 22.

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Senate announces interim charges

Senate committees have been tasked to study and make recommendations on a variety of issues that will likely generate debate in the 80th regular legislative session. These interim studies are designed to provide more in-depth discussions of emerging issues. Here is a sampling of health-care-related issues the Senate will be studying over the interim.

Senate State Affairs Committee

• Study the Employees Retirement System of Texas including the actuarial soundness of the ERS pension fund; the implementation of cost-saving measures in the ERS group health insurance plan; the suggestion of further cost-saving measures such as the implementation of a three-tiered provider network; the effectiveness of the third-party administrator of the ERS group health insurance plan in managing inflation; and the feasibility of consolidating the administration of all state group health plans under a single state agency.
• Study the Teachers Retirement System of Texas including the actuarial soundness of the TRS pension fund; the implementation of cost-saving measures in the TRS group health insurance plan; the suggestion of further cost-saving measures such as the implementation of a three-tiered provider network; the effectiveness of the third-party administrator of the TRS group health insurance plan in managing inflation; and the feasibility of consolidating the administration of all state group health plans under a single state agency.
• Monitor the implementation of HB 7, 79th Legislature, regular session, relating to the workers’ compensation system of this state.
• Study the regulation and management of health care plans, including the following:
  1. Study the reimbursement methodology of health care plans for out-of-network claims, the adequacy of health plan networks to provide appropriate coverage, the impact of out-of-network balance billing by physicians and health care providers and the accurate disclosure of patients’ out-of-pocket costs.
  2. Study the discounting and/or waiving of co-pays, deductibles and co-insurance by physicians and health care providers, specifically, how this practice can impact the cost to private and public health plans and the impact to acute, multi-service hospitals, including safety net hospitals.
  3. Evaluate health care cost transparency by health care providers and access to that information by patients.
• Review data reported to the Texas Department of Insurance by health care plans, investigate possible expansion of health plans’ reportable data, including, but not limited to administrative costs and what, if any, is the appropriate release and publication of the information.
• Study the costs associated with mandates to insurance companies for increased coverage for specific illnesses, medical conditions or diseases, including obesity. Provide a cost assessment of the impact of such mandates to the state and local units of governments. Include data and analysis of the costs and medical impact associated with insurance mandates, which have been enacted in other states, as well as any short and long-term cost savings. Develop recommendations on how to provide increased cost-effective coverage, especially to populations with impairments and diseases, as well as the underinsured/uninsured.
• Study and make recommendations regarding the cost drivers of emergency medical services. Make recommendations on how to improve and sustain EMS services for Texas, as well as reduce costs to health care plans, businesses, and individuals.

Senate Finance Committee

• Review health care funding, focusing on the Medicaid program, Medi­care Part D, hospital reimbursements and trauma and indigent care.
• Complete a comprehensive review and evaluation of the state budget, including projected revenues, costs and long-term implications of Hurricanes Katrina and Rita on health care, public and higher education and criminal justice. Examine the entire budget process, including the establishment of spending limits, performance and accountability measures and other measures to control spending.

Senate Health and Human Services committee

• Study and make recommendations for improving the delivery of Texas’ mental health services. Consider local and regional delivery systems including access to care, cost effectiveness, choice and competition and quality of care.
• Monitor state and federal Medicaid reform proposals, including their impact on the Medicaid program in Texas, as well as cost-containment measures in other states, and make recommendations for legislative action, as appropriate.
• Study and make recommendations relating to filling shortages in the health care workforce and improving medical educational services. Evaluate the state’s use of National Health Services Corps and Federally Qualified Health Centers (FQHCs) to address the needs of the Medicaid/Medicare and underinsured populations.
• Examine the strategies used by other states that have had success with FQHCs and make recommendations for increasing the number of FQHCs in Texas.
• Study and make recommendations for improving vaccination rates and ensuring an adequate vaccination supply in the state. Include an analysis of vaccine manufacturing and purchasing policies.
• Evaluate and make recommendations relating to the creation of a comprehensive and statewide nutrition and physical activity plan to address obesity and chronic diseases. Examine options for funding components of such a plan.
• Monitor the implementation of HB 2292, 78th Legislature, regular session, relating to health and human services. Focus on implementation of service coordination and consolidation efforts to assess the impact on service quality while reducing costs.
• Examine and make recommendations, if necessary, regarding the state’s role in regulating pharmacy benefit managers in the interest of consumer protection. Examine alternative methods of dispensing maintenance drugs, including mail service and retail pharmacies, and provide an analysis of the state’s role in protecting consumers.
• Study how to reduce dependence on Medicaid for the provision of long-term care by increasing use of long-term care insurance and health savings accounts. Include a study of options for increasing the use of advanced planning tools, such as health care power of attorney and living wills, to ensure more effective decision-making regarding critical end-of-life and other health care decisions. Finally, study the feasibility of implementing innovative models of nursing facility services that encourage autonomy, choice and dignity of residents.