Medicaid: Issues in SB1and Comparison to FY2016-2017

08th Jun 2017

SB1 provides Funding of $62.4 billion in All Funds, including $25.6 billion in General Revenue Funds and $0.2 billion in General Revenue–Dedicated Funds, is provided for the Texas Medicaid program. This amount is a biennial reduction of $1.9 billion in All Funds, including $0.4 billion in General Revenue Funds.

SB1 provides funding for Medicaid client services while supporting caseload growth at fiscal year 2017 average costs for most services in fiscal year 2018. Fiscal year 2019 funding is maintained at the fiscal year 2018 level for each method of financing. The only exception to this level of funding is for long-term-care waivers, which are maintained at the August 2017 level throughout the 2018–19 biennium except for the Texas Home Living (TxHmL) and Home and Community-based Services (HCS) waivers. An additional 735 HCS waiver slots for promoting independence are funded by the end of fiscal year 2019. TxHmL slots are assumed to continue declining throughout the 2018–19 biennium. Funding levels include amounts to restore approximately 25.0 percent of reductions made to therapy reimbursement rates in the 2016–17 biennium and to phase in reductions associated with reimbursement policy for therapy assistants. Funding levels for the 2018–19 biennium assume $1.0 billion in All Funds ($0.4 billion in General Revenue Funds) in cost containment for Medicaid client services, which includes amounts related to reducing risk margin for Medicaid managed care, and includes specific direction to the Health and Human Services Commission (HHSC) to contain costs and execute savings.

Estimated Medicaid expenditures for behavioral health services total $3.5 billion in All Funds for the 2018–19 biennium and estimated CHIP expenditures total $48.7 million in All Funds. These amounts do not include cost growth for both programs and Medicaid caseload growth in fiscal year 2019, which is also not funded. Total behavioral health funding including estimated Medicaid and CHIP expenditures is estimated to be $7.6 billion in All Funds for the biennium.

To understand the fiscal dynamic that is at play in making a comparison between the 2016-2017 biennium with the funding present in SB1, it is important to review the history of funding in Medicaid.  Historically, the Legislature has never funded cost growth on the front end, instead Medicaid has been funded under the assumption that costs would be reconciled through a supplemental appropriation once that cost estimate is more reliable; during the last half of the last year of the biennium.  Hence, for the past 10 years, and longer, there has only been one biennium, 2010-2011, when a supplemental appropriation has NOT been needed for Medicaid.  Below the table presents the Medicaid supplemental funding required for the past ten years (5 biennia). The amounts shown are general revenue.  In addition,  federal funds would be matched depending on the FMAP, Federal Medical Assistance Percentage.

Supplemental Appropriations 2008-20017

2008-2009 2010-2011 2012-2013 2014-2015 2016-2017
$1,082,964,629*** ———— $4,182,581,145** $155,229,951* $793,586,397

*Includes 79.7 million for Health Insurance Provider Fee and Federal Income Tax

** Includes $1.0 billion for long term care Medicaid

*** Includes $323.9 for federal Medicare Give Back

The initial appropriation amounts in both the House Bill, HB1 and the Senate Bill, SB1 during the 85th Legislature were based on amounts that did not include cost growth from the previous biennium nor were they based on other short falls that HHSC had predicted would occur in 2017.  These matters were eventually addressed (though not completely) in HB2, the Emergency Supplemental Bill for this biennium. (HHSC had initially estimated $1.2 billion in General Revenue short fall need and was eventually funded at $793.6 million) Funding amounts for the 2016–17 biennium for Medicaid from that point on included supplemental funding for fiscal year 2017 provided in House Bill 2.  Subsequent comparisons would compare Legislative action against a biennium that had received a supplemental appropriation.  The amount that the 2016-2017 biennium was increased for acute care Medicaid was $793.6 million General Revenue or approximately $1.6 billion in all funds.  When comparisons are now made the difference between 2016-2017 and SB1 expands by $1.6 billion.

There were also other General Revenue Reductions assumed in SB1.  These included:

  • A more favorable FMAP for the upcoming biennium, reducing the need for General Revenue
  • Changes to a cash accounting system

During the five and a half month session the LBB adjusted the caseload numbers to address expectations and appropriations so when the conference committee met, their decisions would reflect the most current case load numbers the LBB could generate.  Other expenditure considerations were also a factor.  In this case the new numbers and conference decisions resulted in reductions that would play into any comparison with 2016-2017.  These changes included the following:

  • Maintaining lower estimate of August 2017 (included in LBB Conference Forecast Update) and continue decline in Texas Home Living. This lowers the proposed need for 2018-2019  (Reduction of $19.6 million)
  • Reductions to rates in Home and Community-based Services and Texas Home Living waivers, but exempt consumer directed services. (Reduction of $40,8 million all funds).

One of the major issues that would impact any comparison is that for FY 2019, SB1 assumes maintaining expenditures at the 2018 level for each funding source.

The Legislature for the past several biennia have funded Medicaid on the front end and then assumed savings could be found during the year that backs out funding for programs.  SB1 assumes savings (Reductions) of $350 million GR / $830 million All Funds in cost containment rider (Rider 34) plus $77.1 million GR / $193.7 million All Funds for managed care risk margin reductions.

All these decisions, short of some act of divine or other intervention, appear to set up the need for a supplemental appropriations bill for the 86th Legislature that will be significant. The federal regulations require that state rates be actuarily sound.  That does not change.  By not assuming cost growth, by funding 2019 at 2018 levels; and other assumed reductions, this is putting services on a charge card that will eventually come due.  Any change in the assumptions made in SB1 will only exacerbate the sure to follow short fall.  Like smoke and mirrors, these efforts may appear to fund the system adequately, but as has been seen numerous biennia in the past, the bill eventually does come due.



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