April 5, 2017

Texas Legislative Digest – Issue 13

Issue 13 – April 3, 2017

TAHP and BCBSTX Applaud Senate Passage of Mediation Bill
Sen. Kelly Hancock (R-North Richland Hills) successfully steered his Senate Bill 507 to Senate approval on March 28. The Texas Association of Health Plans (TAHP), the statewide trade association representing commercial and public health plans operating in Texas, applauded the bill’s passage. Hancock’s legislation expands mediation protections for members of a preferred provider organization (PPO) plan to apply to claims submitted by all out-of-network emergency providers, including freestanding emergency rooms, and out-of-network providers working at a network facility.

Mediation is already being used successfully on a limited basis by consumers in Texas. Health plan members may request mediation through the Texas Department of Insurance. The mediation process enables health plan members to challenge the balances of surprise medical bills greater than $500 after their out-of-pocket payments have been met. SB 507 builds on legislation that Hancock passed in 2015 that made mediation available to those who were balance billed by six types of facility-based providers: radiologists, anesthesiologists, pathologists, emergency room physicians, neonatologists and assistant surgeons.

SB 507 heads to the House chamber where it will meet up with its companion there, House Bill 1566, filed by Rep. John Frullo (R-Lubbock). HB 1566 was considered by the House Insurance committee on March 21 and left pending at the end of public testimony.

Blue Cross and Blue Shield of Texas (BCBSTX) is a member of TAHP and a strong supporter of SB 507.

The Budget Advances
On March 28, the full Senate, on a 31-0 vote, approved Senate Bill 1, its version of the two-year, $217.7 billion state budget for the 2018-2019 biennium. In keeping with Senate tradition, the budget wasn’t amended on the floor. Senate Bill 1, upon its arrival in the House, was promptly referred to the House Appropriations committee and replaced with the House budget plan by Chairman John Zerwas, M.D. (R-Richmond). The House committee version comes in at $218.2 billion, reduced significantly from the $221 billion price tag on the bill as filed.

The Senate proposal includes some significant cuts, including about $400 million in “cost-containment” measures that comes from the state’s health and human services programs, but would also cost the state roughly $600 million in federal matching funds. The Senate proposed funding cuts of 6 percent to 10 percent for public universities. The budget proposal reduces state funds for public education by about $1.8 billion, but uses local property taxes and other revenue to make up the difference. In total, the proposal boosts public school funding by $4.6 billion compared to the prior budget, including a $2.6 billion provision to cover student enrollment growth. The Senate provides Child Protective Services and the foster care system with an additional $450 million, compared to the previous budget, which is slightly less than half of the amount child welfare officials requested in order to make serious reforms.

The House’s budget proposal, substituted in committee for the Senate version, cuts $1 billion in state funding for Medicaid, which, in turn, will cause the state to forfeit an additional $1.4 billion in federal funding because of the federal-to-state funding matching. Medicaid is the joint state-federal program that provides health care to low-income Texans. The House proposal directs the Health and Human Services Commission (HHSC), which administers Medicaid, to work with the federal government to find “flexibility” to reduce costs. It would amount to almost a 4 percent cut to the total two-year funding for the state’s Medicaid program. The House proposal draws $2.5 billion from the state’s $10.2 billion “Economic Stabilization Fund,” commonly referred to as the Rainy Day Fund, which the Senate opposes. Previously, the committee recommended using $2.5 billion from the fund to cover outstanding costs from the 2017 budget, but instead chose to apply that amount to the upcoming two-year budget. Funds from the Rainy Day Fund were used to cover a shortfall in a pension program for retired teachers ($500 million), continue increased border security spending begun in 2015 (about $650 million), and finance basic improvements at dilapidated state-run mental health hospitals (about $240 million).

State lawmakers have less money at their discretion this year in drafting the 2018-2019 budget. By cutting taxes in 2015, lawmakers reduced state revenue available to them for this session by about $4 billion. Nearly $5 billion that year was dedicated to highways and approved by voters, which resulted in less funding available for budget needs such as health care and education. In addition, revenue growth was less than state officials had projected.

SB 1, as substituted with the House budget language, passed unanimously out of the Appropriations committee. The bill has been set for House floor debate and vote on April 6. Once approved by the House, SB 1 will head to a conference committee made up of lawmakers selected from each chamber who will negotiate and reconcile major funding differences between the two versions. The budget is the only bill state lawmakers are constitutionally required to pass.

Medicaid PDL Bills Considered by Committees
On March 27, the House Human Services committee heard testimony on House Bill 1917 by committee chairman, Rep. Richard Peña Raymond (D-Laredo). As written, the bill amends the current statute to postpone planned changes to the Medicaid preferred drug list (PDL) from 2018 to 2030. Without changes to the current statute, HHSC will give complete control of the PDL to Medicaid managed care organizations (MCOs) beginning in 2018. The PDL is a list of medications, i.e., a formulary, that a Medicaid beneficiary may receive without prior authorization.

As Raymond presented the bill to the committee, he indicated that he and other lawmakers remain unconvinced that the planned formulary carve-in scheduled for 2018 is in the best interest of the state at this time. Raymond stated that this bill has no fiscal impact to the state.

Jamie Dudensing, with TAHP, testified against the bill. She asserted that the current system is broken and continuing the current PDL program is unacceptable for Texans. Dudensing told the committee that HHSC contracts with MCOs to contain costs and improve access to care, quality of care and outcomes. The state-operated PDL fails to do these things and creates difficulties for patients and doctors. Mary Dale Peterson, M.D., with Driscoll Children’s Health Plan, and Scott Simpson, M.D., with Dell Children’s Health Plan, both spoke against the bill. Several witnesses, including a representative with PhRMA — the Pharmaceutical Research and Manufacturers of America — testified in support of the bill.

Although the bill was left pending following public testimony, a committee substitute for HB 1917 was voted favorably by the committee later in the week. The bill next goes to the House Calendars committee to be scheduled for consideration by the full House.

The Senate Health and Human Services committee also considered a bill that would make changes to the PDL planned carve-in. Senate Bill 1922 filed by committee chairman, Sen. Charles Schwertner, M.D., (R-Georgetown), was considered on March 29. The bill allows MCOs to control the Medicaid PDL and puts several patient protections into statute. These provisions would: (1) prohibit step therapy in certain situations; (2) require continuity of care for 90 days even when the drug is not preferred; (3) require MCOs to share rebate agreement information with HHSC; and (4) require MCOs to post their preferred drug lists on their websites. Resource witness testimony was provided by HHSC and its consulting actuary, Rudd and Wisdom, which worked with the agency to forecast the impact of giving MCOs control of the PDL. The report showed that MCO control of the PDL would save the state $40 million funding.

TAHP testified in favor of the bill and reiterated the testimony provided on HB 1917: that MCOs have three duties: (1) to contain costs, (2) improve access to care, and (3) improve quality outcomes. TAHP also stated that the current PDL program is broken and must be fixed. The bill was left pending until the committee’s next meeting.

Bills of Interest


April 3 is the 84th day of the 85th Legislature with 56 days remaining until final adjournment. Important dates related to the legislative session are: