Senate Finance Committee Tackles Health Budget

_{*Clarification appended.}

The Senate Finance Committee on Wednesday opened its discussion on how to finance the state's health budget by considering the impact of cost containment initiatives passed last session, how to proactively curb Medicaid fraud and ways to address the costs associated with federal health care reforms.

Sen. Tommy Williams, R-The Woodlands and chairman of the committee, said that if lawmakers don’t find a way to curb out-of-control health care costs, they will soon eat up most of the state's budget. The state's proposed health care spending is now nearly equal to its proposed education spending — traditionally the largest portion of the state budget, at roughly $70 billion per biennium.

“We can look for ways to serve these populations without having runaway cost programs,” Williams said. “It’s simply not sustainable. We can’t tax our citizens enough for what’s going on ... right now.”

The Senate’s proposed budget includes $22.5 billion in general revenue to fund Medicaid, the joint state-federal health providers for the poor, but does not account for anticipated increases in program costs because of caseload growth, medical inflation or higher utilization in the 2014-15 biennium. The proposed budget also reduces general revenue by $250 million in anticipation of cost containment initiatives that would be implemented in the coming biennium.

Texas legislators, who underfunded Medicaid last session in the midst of a budget shortfall, must also approve more than $4 billion in supplemental appropriations by March to avoid causing cash flow problems for the Health and Human Services Commission.

At Wednesday's hearing, lawmakers learned that cost containment initiatives they passed in 2011, including a measure to expand Medicaid managed care services statewide, fell short of the expectation that they would save $2.9 billion in the 2012-13 biennium; they will only save an estimated $1.8 billion. 

Medicaid providers have expressed concerns that the expansion of Medicaid managed care, which requires the state to pay capitated rates to managed care organizations to handle Medicaid clients’ services, has drastically reduced provider payment rates and limited access to care for patients. Senators questioned Health and Human Services Executive Commissioner Kyle Janek on whether the access to care issues had been addressed.

“That’s an easy question to answer: We will never address all of the concerns,” Janek said, adding that the agency will continue to work on addressing issues between managed care organizations, providers and Medicaid patients.

Sen. Jane Nelson, R-Flower Mound, who authored two omnibus Medicaid reform bills in the last session — Senate Bill 7 and Senate Bill 8 — to cut costs and curb fraud, said the state must take a proactive approach to identifying fraud and waste in Medicaid.

“I’m going to be like a dog on a bone on this issue, I’m not going to let up,” she said, adding that HHSC's Office of the Inspector General identified $6.2 billion in Medicaid fraud between 2004 and 2011. “We are going to put a stop to this.”

Over the last year, the inspector general’s investigations have intensified. Sen. Juan "Chuy" Hinojosa, D-McAllen, expressed concerns that the net to catch fraudulent providers had been cast too wide, and that investigations have denied providers’ due process rights. He said if providers make a mistake, they should be given an opportunity to correct that issue up front.

Janek insisted that the agency must pursue fraud while ensuring due process for providers. "We want to make sure that they’re treated fairly,” he said, so that the agency doesn't unnecessarily chase off providers.

Lawmakers at Wednesday's committee hearing also discussed the impact of federal reforms on increased Medicaid caseloads and costs. The issue of whether to expand Medicaid to cover impoverished adults, as directed by the Affordable Care Act, was mentioned only briefly when senators questioned the Legislative Budget Board staff on its recommendation to allow counties to expand Medicaid.

Sen. Royce West, D-Dallas, asked for clarification.

“We wouldn’t have to use state [general revenue] in order to fund this, counties would use their own [general revenue] and therefore the state wouldn’t be obligated?” he asked. The LBB staffer said that was correct.

Sen. Rodney Ellis, D-Houston has also proposed filing a bill to allow voters to decide whether to expand Medicaid statewide — and avoid the governor’s veto power — through a constitutional amendment.

The committee will reconvene later this afternoon to hear from additional health and human service agencies.

_{*Editor's Note: This story originally misattributed a quote by Sen. Royce West to Sen. Rodney Ellis. It has been corrected.}