HEALTH INDUSTRY ONLINE - SB10 Aims to Reform Medicaid and Reduce the Rate for Texans Without Health Insurance

On May 28, 2007 the Texas Legislature approved Senate Bill 10 (“SB10”) introduced by State Senator Jane Nelson, R-Lewisville, Chairman of the Senate Health & Human Services Committee. The bill’s intention is to improve the Texas Medicaid program by focusing on prevention, individual choice, better planning, modernizing services, reducing Texas’ rate of uninsured persons, and encouraging Texans to live longer, healthier lives. Among its provisions, SB10 calls for the development and implementation of a variety of programs, plans, and efforts relating to Medicaid patients, Medicaid costs, and the uninsured.

Provisions Relating to Medicaid Patients

SB10’s major provisions affecting Medicaid patients focus heavily on preventative health in order to help contain acute care costs over the long term.

1. Rewarding Medicaid patients who complete preventative health programs—A pilot program will be developed and implemented in one region of the state under which Medicaid recipients are provided positive incentives to lead healthy lifestyles. For example, recipients who engage in health-conscious behaviors or participate in health-related programs, like those for weight loss and smoking cessation, will be rewarded with expanded health care benefits, value-added services, and perhaps even individual health rewards accounts that allow recipients who follow certain disease management protocols to receive credits in these accounts. The credits may then be “cashed in” for certain health-related items not traditionally covered by Medicaid, such as the purchase of ACE bandages and over-the-counter medication at a local CVS.
SB10 also authorizes Medicaid managed care plans to offer patients “value-added” preventative health services, like a weight loss program. These services would be in addition to the services ordinarily covered and improve the health status of enrollees in the plan.

2. Creating customized benefit plans that are tailored to a patient’s individual health care needs—A pilot program will create a tailored benefit package for a defined recipient group of Medicaid, like foster care children with special health care needs. For example, this particular benefit model may include a medical passport for each child so that no matter where that child goes, the treating physician will have the child’s previous diagnoses, history of drug interactions, etc. The plan may also include a more robust provider network, requiring a full array of behavioral health providers, since children in foster care are more likely to need them. Implementation of a tailored benefit package will not reduce the benefits available under the Medicaid state plan to any recipient population.

3. Creating a pilot program for Health Savings Accounts under Medicaid—This program will be limited to adult recipients, and participation will be entirely voluntary. A participant in the program who is eligible for Medicaid, but is not suffering from a particular illness, can opt to create a health savings account in which money that the State would have spent on the participant’s health care would be saved. The participant could then use that money for health care not covered by Medicaid, like over-the-counter medication. The HHSC has the authority to determine what that monetary amount would be. A participant in the program may discontinue participation and resume receiving benefits under the traditional Medicaid delivery model.

4. Expanding efforts to assist with the cost of premiums for those who are Medicaid-eligible but have access to employer-based plans—The bill also allows individuals to voluntarily opt out of Medicaid in exchange for the state paying the employee’s portion of premiums for employer-based coverage. However, if the employee’s share of the requested premiums exceeds the total estimated Medicaid costs for the individual, as determined by the executive commissioner, then the individual has to pay the difference between the required premiums and those estimated costs. The individual will also be responsible for paying all deductibles, copayments, coinsurance, and other cost-sharing obligations mandated by the group health benefit plan.

Provisions Relating to Medicaid Costs

SB10’s provisions relating to Medicaid costs focus on better control and allotment of Medicaid funds.

1. Expanding efforts to stop Medicaid fraud and abuse—SB10 provides for a joint study, to be conducted by the Texas Health & Human Services Commission (HHSC) and the HHSC’s Office of Inspector General (OIG), regarding the use of technology to strengthen the detection and deterrence of fraud in the state Medicaid program. This study will include an assessment of the feasibility of using technology to verify a person’s citizenship and eligibility for coverage.

2. Authorizing co-pays for certain non-emergency visits to hospital emergency rooms—As an effort to control costs and avoid unnecessary use of Medicaid funds, this provision discourages inappropriate visits to the emergency room. If a Medicaid recipient seeks a non-emergency medical service from a hospital emergency room, after the hospital has performed an appropriate medical screening, determined that the recipient does not have an emergency medical condition, and informed the recipient of that determination, then the hospital may require a copayment, premium payment, or other cost-sharing payment by the recipient for the non-emergency service. The hospital must tell the recipient in advance that if it provides the non-emergency service, payment may be required. The hospital must also offer to provide the recipient with a referral to the non-emergency provider.

3. Standardizing the way hospitals report uncompensated care to eliminate guesswork involved in the state’s cost projections—The current method of paying for uncompensated care is neither systematic nor efficient. Under SB10, the executive commissioner of the HHSC will create a “work group” in which representatives from the Office of the Attorney General and the hospital industry will study and advise the executive commissioner in (1) standardizing the definitions used to determine uncompensated health care, (2) developing and applying a standard set of adjustments to a hospital’s initial computation of the cost of uncompensated hospital care (accounting for all funding streams that are not patient-specific and are used to offset the hospital’s initially computed amount of uncompensated care), and (3) developing a standard and comprehensive center for data analysis and reporting with respect to uncompensated hospital health care.
With this information, the executive commissioner will then adopt rules providing for a (1) a standard definition of “uncompensated health care”; (2) a methodology to be used by hospitals to report the cost of uncompensated care that incorporates the standard set of adjustments developed by the work group; and (3) procedures to be used by those hospitals to report the cost of that care to HHSC and to analyze that cost.

4. Evaluating possible expansion of integrated care management to areas where it is currently unavailable—HHSC will conduct a study regarding the feasibility and cost-effectiveness of developing and implementing an integrated Medicaid managed care model. Unlike traditional integrated care management, this managed care model would be managed by the physicians who actually treat Medicaid patients, instead of by insurance companies and other third parties.

SB10 Provisions Relating to the Uninsured

1. Developing a “three-share” or “multi-share” model in which the state can partner with employers and local governments or charitable entities to get Texans health coverage—The purpose of three-share or multi-share programs is to reduce the need for residents of Texas to rely on the Medicaid program by providing incentives for employers to provide health insurance to their employees. They would also serve to reduce the number of individuals in the state who are uninsured. In such programs, employees, employers, and local governments or charitable entities would share the costs for health insurance. These plans generally have less generous benefit packages than traditional health insurance and focus coverage on primary care, specialty care, drugs, and limited inpatient services.

2. Establishing a low-income funding pool that could be used to set aside a portion of federal uncompensated care dollars to connect low-income families with private health care—Currently there are two programs, the disproportionate share hospital (DSH) program and the upper payment limit (UPL) program, in which funds are collected and distributed to hospitals with uncompensated care costs, meaning hospitals that treat those without health insurance or who receive government assistance, such as Medicaid.
Under the DSH program, the state augments payment to a DSH – a hospital with a disproportionately large share of low-income patients. Medicare inpatient hospital payments are also adjusted for this added burden. Currently, the DSH is a fixed allotment per state. The UPL program provides additional assistance to hospitals with uncompensated care costs. UPL is a financing mechanism used by Texas to provide supplemental payments to hospitals. The basis for this funding is the difference between what Medicare and Medicaid pays for essentially the same services. The formula results in increased payments because Medicare’s aggregate payments are higher than Medicaid’s. Texas uses intergovernmental transfers to provide a portion of the state’s contribution to these UPL payments.
The Texas health opportunity pool (HOP) is a trust fund outside the state treasury to be held by the comptroller and administered by HHSC as trustee on behalf of uninsured Texas residents and health care providers providing uncompensated care to those residents. Deposits to the fund include all federal money provided under the disproportionate share hospitals (DSH) supplemental payment program and the hospital upper payment limit (UPL) supplemental payment program (not including money provided under these programs to state-owned and operated hospitals), and all other non-supplemental payment program federal money. Hospitals will continue to receive their DSH and UPL funds, calculated by the same formula for allocation as used in the past, despite the funds being housed in a separate trust fund.
SB10 also directs the HHSC to look at local funds, used for indigent health care, that may be added to HOP so that those local funds can be matched with federal dollars, thereby creating a greater pool from which funds can be drawn to assist the uninsured.

3. Creating a committee to recommend incentives for more employers to offer health and long-term care insurance—The goal of this provision is to offer incentives for employers so that they may provide health insurance, long-term care insurance, or both, to employees who would otherwise rely on the Medicaid program to meet their health and long-term care needs. The committee will analyze the cost of health care coverage under health benefit plans and ways of reducing that cost. It will also determine how to expand coverage through a variety of methods, including the three-share or multiple share programs and the inclusions of individuals or employees under the Texas Health Insurance Risk Pool.

Conclusion

For the 5.5 million uninsured Texans, the success of SB10 brings hope of better, cheaper, and more accessible health care. The bill also points towards reform of the Medicaid program through its encouragement of preventative health programs, curbing of unnecessary use of Medicaid funds, and standardization and modernization of health services. Although SB10 has found favor in the Legislature, the bill has one last step to take before its finalization; it must obtain the Governor’s signature of approval. Since passing both houses of the Legislature, SB10 has been sent to the Governor, who has until June 17 to either sign or veto the bill. If the bill is not returned to the Legislature by that date, then it is filed without the Governor’s signature and automatically becomes law.¹ If enacted into law, SB10’s provisions will become effective on September 1, 2007.

For additional information on this topic contact kathy.darling@strasburger.com

¹Tex. Const. art. IV, § 14.