January 17, 2001

For more information contact:

Stanley S. Jones, Jr.

404-817-6133

          Legislators met again today to discuss the FY 2002 Budget.  Members of the Appropriations Committee held discussions with several departments and agencies including the Departments of Education and Insurance, the Office of the Secretary of State, and the Board of Regents.  There were also some Committee hearings.  Below will summarize some of the day’s events:

 Budget News 

          One of the most impressive presentations made before the Appropriations Committee was made by the Board of Regents’ Chancellor, Stephen Portch.  Chancellor Portch introduced numerous members from the Board of Regents to the Committee.  During Chancellor Portch’s hour-long presentation, there were numerous props and special speakers to demonstrate what State dollars had done to benefit some Georgians.  There were a number of students from the University System who made special appearances – including a visually impaired graduate from Kennesaw State University, a great-grandmother who had recently received her graduate degree from Southern Polytechnic State University via 100% web-based classes, twins attending the North Georgia State’s Military College on military scholarships, and a young man from Albany State University who defied the odds as a high-risk student because he is the son of a single parent. 

          During Chancellor Portch’s presentation the tune of Pomp and Circumstance could be heard, a bamboo ‘shoot’ (grown by a system college) was used as an instructional pointer, and charts being used as an easel by the Board of Regents’ lobbyist were presented to the Committee.  Needless to say, all Committee members paid close attention to the needs of the Regents. 

          Chancellor Portch explained that it was critical that the Legislature continue to fund research dollars as Georgia was competing with all types of schools around the country.  Moreover, students, faculty, and the Regents have to continue in a partnership. 

          Some specifics of the recommendations include: 

-                     An additional $18 million to offset the enrollment decline resulting from semester conversion;

-                     The transfer of technology funding from “Special Funding Initiatives” to the funding formula to establish a 1.29% technology factor;

-                     $6,064,938 to increase the proposed technology factor from 1.29% to 1.75%;

-                     A $500,000 increase for funding ICAPP Advantage economic development incentives to meet demand from Georgia companies seeking highly skilled college-educated workers;

-                     $1 million to fund a Biomedical Services Network (which will be matched with $1 million from internal Board of Regents funding) as a collaborative effort between the University of Georgia and the Medical College of Georgia to leverage resources for recognizing, treating, curing and preventing human disease;

-                     $600,000 additional funding to expand the Postsecondary Readiness Enrichment Program (“PREP”) to support middle and high school students in ‘at-risk’ situations;

-                     $500,000 additional funding for CEISMC at Georgia Tech to train math and science teachers; and

-                     More than $4.5 million increased funding for Yamacraw in order to add faculty, increase research, enhance the commercialization of research and provide leased space for the faculty and staff. 

The proposal recommends that the Regents receive more than $6.6 million of the Tobacco Settlement Funds: 

-                     $921,821 funding for 5 positions, and operating expenses, for the Georgia Cancer Alliance;

-                     $3,340,000 to establish programs and funding incentives to support 17 eminent cancer scholars and professionals; and

-                     $2,400,000 to provide equipment for five Georgia Research Alliance eminent scholars recommended in the FY 2001 Supplemental Budget. 

          In his presentation, Chancellor Portch explained how “Quality Basic Education” (or “QBE”) had impacted the University System.  QBE was first implemented in 1985 and students are now beginning to graduate from the University System.  In his presentation, he did a ‘now versus then’ approach explaining the differences in SAT scores, numbers of diplomas awarded, and number of faculty employed.  In all areas, there was growth – interestingly enough there were fewer numbers of additional faculty than one would expect considering the increased number of students graduating.

          Portch reminded the Committee that it was important to look at and expand quality of education provided but at the same time not to reduce access.  Also, he pointed out that in the State of New Jersey, there is a very high percentage of persons between the ages of 18 and 24 who are going to college.  

As for remedial programs, Georgia, through its QBE, has made strides in reducing the numbers of ‘remediation.’  At Georgia State University alone, approximately 1/10 of 1% of students are taking remediation, which is a dramatically reduction. 

In the Budget recommendations, there are salary increases for Regents’ employees.  Nationally, schools have increased salaries at a rate of 3.8%.  In Georgia, there is a need to remain competitive in salaries for its teaching staff.  Thus, the Governor has proposed that a 4.5% increase be provided for all Regents’ faculty, effective fall semester 2001, and for Regents non-academic personnel effective October 1, 2001.  (Also in this same line item, there is a 4.5% increase for public librarians effective September 1, 2001.)  The total for these adjustments is $64,645,637. 

          Chancellor Portch also noted that an additional need of $10 million was not included in the Governor’s recommendations to address the Board of Regents Health Plan short-fall for FY 2001.  Presently, the Board of Regents Health Plan is now providing quality healthcare for a lower cost.  Hopefully, this additional funding will alleviate the need for further requests.  Chancellor Portch also asked the Committee to look at the needs of health insurance for graduate students – competing universities offer that coverage.  

          In reviewing the budget recommendations, Chancellor Portch explained that there was a real need for an electronic system to meet accountability.  Also, offering courses through a web-based program was very popular.  Currently, the University’s web-based MBA program is filled.  2.2% of the courses offered are through ‘distance learning.’  Thus, GLOBE funding is of great importance.  Another goal of the University System is expanding how students apply through the internet.  Georgia’s Board of Regents is the first in the country to have a standing technology committee. 

Another area not included in the Budget recommendations is the need for $265,000 for the land grant at Ft. Valley.  Current federal dollars must be matched with state funds. 

          There is also approximately $9 million in Lottery funding targeted for Regents in the recommendations.  These funding initiatives are for connecting teachers with technology; connecting students and services; GALILEO; and the P-16/Postsecondary Readiness Enrichment Program.  Finally, in this funding, there is also an inclusion of $1.5 million for the Internet Connectivity Project. 

Budget Subcommittee News 

          Earlier in the day, the Joint House and Senate Subcommittee on Human Development met to discuss issues relating to welfare-to-work and Temporary Assistance to Needy Families (“TANF”).  Maintenance of the state’s effort was one of the key focal points.  The Department of Family and Children Services (“DFACS”) is working with the federal government on education and training issues - this is being done in conjunction with the Department of Education and Department of Technical and Adult Education.  Eligibility issues relating to TANF are being reviewed as well as criteria for hardship.

When assessments of clients were conducted, the State found that more persons had mental health and mental retardation issues rather than substance abuse problems.  Also, DFACS found that a number of clients could be served through SSI benefits (especially those with disabilities). 

The Subcommittee also discussed the need for child care as a need which had to be addressed in order to get more folks back to work.  Low wages cannot support the child care needs.  Presently, child care can be paid at 100% but once a person is earning wages, it is based on a percentage of earnings. 

Within the welfare-to-work initiatives, the Good Works project has focused on clients who have received 30 or more months assistance.  The personal advisor has been a positive step as an effort in helping train persons to get back into the workforce.  This is being proposed for persons who are not at the 30-month mark. 

There was also discussion on what could be done to help recipients get any licensing fees paid in order for them to get jobs.  Questions were asked as to whether there was a way to pay for any special tools a person might require.  Overcoming barriers to employment is important – Rep. Childers asked specifically about those who are hearing impaired and barriers which need to be remedied for that specific population. 

In other discussions, the Subcommittee raised questions about the dollars spent which were obligated funds.  These funds had to have contracts in place.  There was a surplus of $96.8 million in unobligated funds.  There were $96 million in obligated funds.  One question was where was the increase to cover the unobligated dollars. 

Other concerns that the Subcommittee discussed dealt with getting transportation for recipients – such as the Wheels to Work initiative and addressing the waiting lists of persons at the Family Planning Clinics. 

Committee News 

          The House Insurance Committee, under the leadership of Rep. Jimmy Lord, met to hear a presentation on the status of the State Health Benefit Plan ("SHBP") by the Department of Community Health’s Commissioner Russ Toal.  This meeting was lengthy with a number of questions raised by Committee members.  Consumer’s Insurance Advocate Cathey Steinberg also appeared before the Committee for a brief presentation. 

          Ms. Steinberg explained that her office had been reviewing rate filings by insurance companies as a ‘watchdog’ for consumers.  Her office is also collecting data on issues which are raised by consumers.  Most of the calls received by her office have dealt with health insurance questions or problems.  The State Health Benefit Plan is “carved out” for her review.  Thus, if calls are received by the Department of Insurance pertaining to the State Health Benefit Plan, those calls are referred to Ms. Steinberg’s office and the Department of Community Health.  Other issues which have caused her concern relate to rate increases for small group health insurance products.  These small groups are persons where there are ten or fewer members.  If she or her staff see repeated problems, then the Department of Insurance is asked to conduct a market conduct study on that particular company. 

          Commissioner Toal explained the status of the SHBP.  He noted that when he and his Department took control of this entity in 1999, it had no reserves and was needing an additional $263 million for FY 2000 to cover deficits (this included money for the short-fall in the Board of Regents Health Plan). 

          Now, there are more persons enrolled in the SHBP.  A good number of these persons are teachers and school personnel.  This group makes up approximately 60% of the persons covered by the SHBP.  If retired individuals are added, then this is approximately 70% of the members covered under the SHBP. 

          In noting some of the costs associated with the SHBP, Toal noted that 23% went towards HMO premiums and 4% was for administrative costs (noting that these administrative costs were much lower than a private insurance company’s administrative costs).  Presently, the SHBP has a 75% versus 25% division of responsibility for premiums – thus, the employer pays 75% of the health insurance and the employee is responsible for 25%.  This has made it possible to take steps to manage and provide cost controls.  This restructuring of employer contributions' rates has helped with the disproportionate share not being paid for school personnel coverage.  There have also been direct contracts made with the hospitals.  There are now 800 plus entities which pay into the plan.  Another cost savings has been an effort to consolidate as much of the contracting with entities as possible – previously, there were duplicate contracts with the SHBP and Board of Regents Health Plan.  In FY 2002, no recommendation has been made to raise the employer’s share of the costs associated with providing coverage.  Reserves are also at a level to hopefully deal with any unexpected shortfalls.  Another cost savings has been the switch of a number of persons from the indemnity product to the PPO product. 

          Claims data is now being analyzed in an effort to control costs and manage the plan.  A pharmacy benefit manager is also being implemented. 

          The PPO has more than 12,000 physicians.  Some 3,700 of these doctors have come on board since July 1, 2000.  Also, there are 170 hospitals in the PPO.  The State is now considering a ‘wrap-around’ option for State employees who live out-of-state or travel for the Board of Regents so that they can be covered under a national PPO. 

          In the provision of medications or pharmaceuticals, there has been the implementation of a new co-pay system.  Previously, members paid at 100%.  Now, a generic drug can be obtained at a $10 co-pay (or cost of drug if it is less than $10).  Also, there is a $20 co-pay for drugs on the preferred drug list (as being established by the Drug Utilization Review Board); and a co-pay of $35 to 20% of the drug cost for any non-preferred drug that a member might need.  This new process will eliminate the necessity for filing claims with the Pharmacy Benefit Manager (“PBM”).  The new system will also help control costs as the PBM gets better pricing on drugs and can participate in drug rebates. 

          Commissioner Toal explained to the Committee that the claims processing was using a system which was a “dinosaur.”  Also, with the current system, manual work was required to process the claims.  The Department has contracted with WellPoint (Blue Cross Blue Shield of Georgia) to take over this processing when the current contract expires in July.  Further, Toal noted that under the present system, there was no way for members to determine the amount of their deductibles. 

          There were questions on the following: 

Rep. Carolyn Hugley of Columbus raised questions as to why a hospital in her district, St. Francis, had been excluded as it provides cardiac care.  There are two other facilities in her area in the PPO.  Toal explained that members in the SHBP could have nominated this facility by signing up for the Consumer Choice Option.  There were 29,000 statewide in the PPO Consumer Choice Option, per Toal.  Ms. Hugley also asked when an HMO would be available in Columbus.  Toal explained that proposals for HMO products would be forthcoming in February. 

Rep. Lord has a number of questions. 

-                     Is it fair to exclude facilities paying taxes if the hospitals had agreed to the rates?  The response was that this was not a ‘small’ issue – any HMO or PPO would have to adopt any willing provider but the problem was negotiating rates.  Chairman Lord stressed that private companies have the right to contract with anyone; his concern is that state dollars are being used with exclusions being made – and that the State should work with all taxpayers.

-                     If a hospital was in the PPO why were those hospital-based physicians not approved?   Toal explained that those physicians were independent and not controlled by the hospital (in other words, not contractually bound or employees of the hospital).  He referred to an Albany radiology group that refuses to participate in the PPO and are currently balance billing patients.  This radiology group is providing services at both Albany facilities which are in the PPO.  Commissioner Toal noted that eventually a hospital may be negatively impacted if the doctors do not cooperate.

-                     He asked for an explanation of ambulance coverage.  Toal explained that the Department is working on trying to bring more of these providers into the network as well as out-of-state run/managed emergency rooms.  Commissioner Toal explained that he was aware of the facilities who had asked to be admitted to the PPO who have been previously refused – such as Parkway Regional, St. Francis, and Coliseum Health System.  He again stated that these facilities could encourage folks to use the Consumer Choice Option.

-                     He also asked for an explanation as to why this would cost more if additional providers were added.  Toal explained that the costs would be different.  Presently, the network is driving business to providers.  The indemnity plan has direct contracts with hospitals; therefore there is a level of pricing and utilization management which is in question.

-                     He asked for an explanation of the new menu-type drug program.  Toal explained that there is not a  true formulary.  The vast number of prescriptions dispensed are generic products.  Highly utilized drugs have been placed on the preferred drug list with a limited number of exceptions.  Presently, the payment up front required is a real problem for SHBP enrollees.  The drug program being implemented on July 1 will address some of these issues.

-                     He asked for an explanation as to why there are, in some instances, 12-month lags in the payment of claims by the third-party administrator.  Toal explained that this is better now.  In the past year, there were problems with Y2K as well as the initiation of the PPO.  Blue Cross Blue Shield still has a number of claims in its inventory.  However, DCH still does not have control of the claims due to an antiquated system. 

Rep. Ron Dodson also asked some questions about opening the PPO network. Some of the requirements relate to credentialing of providers.  There were also questions relating to the difference between the Consumer Choice Option product and the High-Option (Indemnity Plan) product.  

Also, Rep. Harbin asked about the number of pharmacies in the network.  Toal explained that 1,900 pharmacies were in – thus, virtually all have been included.  Rep. Harbin also asked about changes to the third-party administrator.  Toal explained that a contract will go out again once the WellPoint contract expires.  The “request for proposal” for a system integrator will be sent out later this year.  Harbin also asked questions about the inclusion of ambulatory surgery centers (“ASCs”).  Toal explained that some hospitals feared the inclusion of ASCs as they were direct competitors – if the facilities were not hospital-owned.  Toal again stressed that the joint venture between GeorgiaFirst and MRN, who manage the PPO network, make the decisions on who was included in the PPO network. 

Rep. Keith Heard also raised questions about wellness and prevention.  He suggested that the state should consider contracting with gyms.  Toal explained that under the Board of Regents Health Plan, there is a $500 benefit given for employees to use towards wellness or prevention.  This is not so under the SHBP.  Preventive care and disease management is important and will be expanded over the next 18 months.  Treatment of chronic conditions is important to lowering costs.  A concern is the access to a patient’s medical history and how coercive the state wishes to be.  There is also a notion to waive co-pays for chronic conditions when management of patients seems at issue. 

Rep. Willard also raised some questions regarding the exclusion of some hospitals.  Toal explained that the state is competing with others such as HMOs.  Controlling the market is a problem. 

Rep. Hugley again raised questions about who currently has contracts and the value in the approval process with the Joint Venture overseeing the PPO.  To exclude providers does not necessarily mean that those providers are not providing quality care.  She again asked why her constituents had to travel 100 miles when cardiac services were available in Columbus.  Toal explained that some folks had not been welcome at St. Francis.  Also, St. Francis had a .7% charity load – thus, the hospital was not taking its share of Medicaid or charity patients. 

Rep. Golick asked about physicians outside the network and the nomination process.  This occurs prior to treatment of the patient per Toal.  The nomination of ancillary physicians is a problem.  Commissioner Toal pointed to the work done at Coliseum Health System in assisting enrollment in the Consumer Choice Option for the nominated providers.  Toal explained that the ease of nomination could perhaps be addressed by legislation (this problem is an industry problem and not just focused on the SHBP).  Rep. Golick also asked about the system issues and whether the third party administrator was a problem.  Toal pointed to the turnover in staff at Blue Cross and the acquisition by WellPoint of Blue Cross was causing uncertainty.  Toal also stated that the Department did not have the best relationship with Blue Cross. 

Rep. Stanley raised questions – primarily about Medicaid and drawing down additional federal dollars.  Toal explained that some of the Medicaid issues could be resolved if Medicaid recipients were signed up for coverage outside of the Department of Family and Children Services.   As for revenue maximization, the Governor has encouraged such.  Approximately $57.5 million will be taken out of the Department’s budget which will have to be replaced with federal dollars.