January 19, 2001

For more information contact:

Stanley S. Jones, Jr.

404-817-6133

            Today, the House Appropriations subcommittee relating to the Department of Community Health held its first meeting since the Session commenced.  It heard testimony from the Governor's office as well as the Department of Community Health. 

          Bill Tomlinson, the Director of the Office of Planning and Budget ("OPB") within the Governor's office, was the first person to testify.  Rep. Mickey Channell asked a number of questions relating to FY2001 supplemental recommendations received from the Governor.  Specifically, in Item 5 of the Governor's recommendations for the supplemental budget, there is a recommendation of $42,872,645 to increase funding for Medicaid benefits to cover the projected cash deficit in the fourth quarter of FY2001 netted against federal matching funds by utilization of upper payment limit credits.  In the discussions, Mr. Tomlinson agreed that DCH has used reserves in the past for Medicaid deficits.  However, there have not always been sufficient reserves to cover those deficits.  Tomlinson stated that the OPB anticipates having enough surplus next year with the current revenues to cover any current expenditures.  Rep. Channell's concern was that there were missing projections (in other words, the OPB was not adequately predicting what the financial picture would be) and there was not enough cash to cover the expenditures.  Rep. Channell also noted that as the economy slows down, there will be a decline in revenues but higher Medicaid utilization.  Mr. Tomlinson agreed with Rep. Channell that that could be a possible scenario but the OPB is hopeful that DCH can draw down additional federal dollars.  There is also a two week delay in the payments made to providers.  Mr. Tomlinson stated that the Fiscal Affairs Committee will oversee any potential problem regarding shortfalls and deficits.  Rep. Channell asked again what the real number was as far as the underestimate.  He was concerned that it was not actually $42.8 million.  Tomlinson stated that it would be somewhere between $100 and $167 million.  It is hard to accurately predict this number due to the pharmacy management program which has just been implemented but there would be savings to the state as a result of this program.  Pharmacy costs still tend to be the largest problem for the Medicaid program. 

          Rep. Harbin asked Mr. Tomlinson about whether there was a planned deficit.  Mr. Tomlinson stated that there was no such plan for a deficit.  The supplemental budget, according to Rep. Harbin, was to be used for emergencies and the surpluses that the State had been enjoying were getting harder for legislators to explain to their constituents.  There was also some discussion about whether there would be a need for a special Session this year to deal with any budget shortfalls.  Mr. Tomlinson stated that he did not believe that there would be a need to hold any special Session just to deal with a Medicaid shortfall.  Tomlinson further noted that the 20% drug cost increases that the Department has experienced had not been anticipated.  Mr. Tomlinson also agreed that the projected numbers in FY2002 budget could be understated. 

          Comm. Toal then spoke to the Committee concerning this Item 5 on the $42.8 million request for Medicaid funding.  He agreed that the number could be closer to $100 million.  Further, Mr. Toal noted in the supplemental budget in FY2000 the General Assembly had dealt with a similar issue relating to the State Health Benefit Plan as there was a deficit of close to $263 million in the reserves.  Thus, the General Assembly needed to have additional dollars in order to pay the current claims as reserves were not sufficient. 

          Mr. Toal stated that a similar situation was happening with the Medicaid program in this fiscal year.  The Office of Planning and Budget was recommending that reserves be replenished.  There is a need to carry reserves as they roll forward.  Further, Mr. Toal noted that the General Assembly cannot technically appropriate dollars for prior years and had to wait for funds to be depleted to request additional funding.  Mr. Toal noted that the Department is hopeful that it can generate additional dollars through revenue maximization efforts that it is presently developing. 

          Concerning the estimated dollars for 1999, 2000, and 2001, there was actually a shortfall beginning in 1999.  Comm. Toal noted that approximately $100 million would replenish the prior year's reserves.  Thus, any possible deficit is lower.  Comm. Toal also noted that current reserves are zero. 

          Rep. Channell asked about the reserves at the end of FY2001.  Mr. Toal explained that it was hard to determine that.  DCH is hopeful that it will have sufficient dollars for 1999, 2000 and 2001 by June 30.  Also, there is enough cash for at least two weeks in order to pay for Medicaid claims in the reserves. 

          In FY1999, the General Assembly with the Legislative Budget Office, used the reserves for that period of time and spent those elsewhere.  Thus, the Department of Community Health did not have any dollars left in the reserves.  Comm. Toal noted that some additional reasons for the need for money included bringing additional nursing home beds online as well as increased Medicaid utilization as claims had risen, but the numbers of recipients had not actually grown by a large percentage (approximately 1%). 

          Comm. Toal then walked through the actual supplemental budget items for the committee: 

          In explaining item no. 1 concerning the realignment of object classes by transferring from the computer object class to personal services, real estate rentals and motor vehicle purchases, and item no. 2 concerning the transfer from per diem, fees and contracts to regular operating expense to cover relocation costs for the Composite Board of Medical Examiners, these were just purely reclassification items.  Under item no. 3, there is a proposal of $100,000 to receive funds from the Department of Human Resources in order to contract with St. Joseph's Mercy Care in order to provide primary care services to the homeless.  In item no. 4, there was an agreement to transfer funds from the computer object class to the health insurance payments object class to reflect insurance payments for the State Health Benefit Plan. 

          In item no. 6, there is a recommendation of more than $6 million to provide funds for the adjustment in nursing home rates for increased costs and liability insurance.  Mr. Toal noted that there had been escalating liability insurance for nursing homes.  This trend started in Florida and had now expanded nationwide.  Further, he noted that there were only a small number of companies writing this particular type of coverage. 

          In item no. 7, there is a request of $1.4 million to receive funding from the Department of Human Resources to supplement the cost of community placement for clients in the mental retardation waiver program.  Comm. Toal noted that this was pertaining to the closure of the Bainbridge facility. 

          In item no. 8, there is a $1 million transfer of funds to the Department of Human Resources for supportive employment services for mentally retarded persons pending waiver approval by the Healthcare Financing Administration.  This particular waiver did not get approval until after FY2001 actually began. 

          In item no. 9, there is a transfer of $375,000 to the Department of Human Resources for services for persons HIV positive or diagnosed with AIDS, pending approval of the Medicaid AIDS waiver by HCFA.  

          In item no. 10, there is an agreement to review scope of services and reimbursement for the Children's Intervention School Services Program to appropriately increase federal Medicaid funding for participating school systems.  This is being done in collaboration with the Department of Education and the provision of health care services for schools. 

          In item no. 11, there is an agreement to reflect the receipt of additional federal Medicaid funds through revenue maximization efforts for mental health services for children in out-of-home settings ($1,712,738), targeted case management services for Medicaid eligible adults and children ($794,279), and nursing services provided in state facilities ($5,730,000). 

          In item no. 12, Comm. Toal noted that there was a definite need to get additional staff at the Composite Board of Medical Examiners.  Thus, $104,177 is proposed to add three positions to support operations and $24,000 to provide funds to cover projected operating deficits in the various object classes. 

          In item no. 13, Comm. Toal noted that these items relate to the additional funding for the Georgia Board for Physician Workforce which is also attached to the Department of Community Health.  There were four items reviewed by the Committee including: 

a)                  The creation of a new object class for capitated payments to medical schools on behalf of medical students from existing funds in the SREB object class;

b)                 To replace funds received through the Indigent Care Trust Fund for the Mercer School of Medicine grant (this is $7,718,668);

c)                  The provision of funds to increase the Morehouse School of Medicine grant of $1 million;

d)                 The use of existing funds to support up to nine additional residents in family practice residency at the Medical College of Georgia. 

Comm. Toal noted that in items (b) and (c) above, there was an attempt to try to make Mercer University "whole" and to make room for them within the grant process.  Further, he explained that the contracts with the residency programs allow schools to fluctuate.  Now, the contracts have deliverables included.  Thus, the institution is not making the decision on the number of residency programs that they will support. 

          In item no. 14, the recommendation is for $125,000 to explore the feasibility of a Medicaid buy-in program which would allow working people with disabilities to receive healthcare through the Medicaid program.  This is an attempt to help those who are uninsured presently.  They would be paying these premiums at reduced dollars. 

          In item no. 15, there is an agreement to pay health care premiums of individuals covered by the Consolidated Omnibus Budget Reconciliation Act with incomes of up to 150% of the federal poverty level.  Again, this is an effort to help those who are presently uninsured.  These people would otherwise be eligible for Medicaid. 

          In item no. 16, there is a proposal of $297,160 in order to reimburse 100% of costs for the cost-based outpatient services for hospitals which provide indigent care equal to 5% of their adjusted gross revenues as determined by the Department of Community Health.  According to Comm. Toal, this would go into effect in April if accepted. 

          In item no. 17, there is an inclusion of $375,000 in the proposals to expand community health, rural health and migrant health centers in an effort to promote access to primary care for uninsured populations.  This would be new federal dollars and would include six new sites around Georgia in each of the congressional locations.  There is also money included in the FY2002 budget for continuation of this program. 

          In item no. 18, there is an inclusion of $200,000 in order to provide matching grants to communities to eliminate disparities in health care and to support homeless services programs.  These are the hard to reach populations, according to Comm. Toal.  There is an effort to start out with one in each of the Congressional Districts. 

          Finally, in paragraph 19 of the recommendations, there is an $11,207 recommendation to increase reimbursement rates by 5% for home health providers who provide indigent care equal to 5% of their revenue and which participate in the community care services program. 

          Rep. Ron Stephens asked why the drug dollars were so large as far as costs to the Department.  Comm. Toal noted that rebates were not actually at the level which they had hoped.  Moreover, the state is trying to access the best possible price.  However, prices are determined by the manufacturers and the Healthcare Financing Administration.  Toal believes that this is not always occurring.  Thus, the Department of Community Health is now working with the Attorney General and the federal government (the Justice Department) to see what can be done with respect to this issue.  Moreover, the Department of Community Health is getting better rebates.  In FY2001, DCH anticipates $110 million; there is an anticipated $130 million for FY2002.  Manufacturers have been objecting to some of these particular rebates.  Also, the Department of Community Health believes it is doing positive things in order to impact the drug program on a positive basis.  Further, Mr. Toal noted that 80% of Medicaid is associated with the long term drug needs.  This is for persons not just in nursing homes. 

          Rep. Powell asked about the plight of the rural hospitals and noted that Georgia has continual "bad" conditions which may cause additional hospital closures.  He asked Comm. Toal if there were any additional ideas that the legislature could try to take on in order to increase or better the positions of the rural hospitals.  Mr. Toal noted that raising the Medicaid reimbursement rate would be one way.  He also noted that the payor mix is really at issue.  These rural hospitals have little commercial insurance payments and they also have more numbers of uninsured or indigent patients accessing their facilities.  The Balanced Budget Act of 1997 has really made a grave impact on all hospitals.  The Governor has recommended dollars which hopefully will help some of these hospitals.  Another way in which the legislature might be able to act is to move to reimbursement rates based on the current cost reports or perhaps move to the current cost reports for just the rural hospitals. 

          Rep. Powell asked whether or not something could be done in order to steer people to the local hospitals.  Comm. Toal noted there was not much that could be done under the Medicaid program as there was a freedom of choice.  As far as getting people who are incarcerated in the various state institutions, the Corrections Department would have to agree. 

          The State Health Benefit Plan has changed some of its requirements in order to try to get people to utilize Georgia facilities.  There has been too many dollars going to out-of-state facilities.  Also, Comm. Toal noted that the Lt. Governor had suggested that the Department of Community Health pay at a higher benefit level to those facilities where people were getting care close to home.  Thus, the Department is researching this idea.  Further, the Lt. Governor also asked whether or not anything could be done on weighting the actual copayments involved. 

          Rural healthcare is just as problematic elsewhere in the nation, according to Comm. Toal.  In Texas, there have been approximately 80 to 100 hospitals which have closed.  It would appear that the contracts the hospitals have are the problems.  Financial support, however, is getting better.  The hospitals of Georgia and their Association have been working diligently on the problem.  They have gone to Washington to meet with Georgia's Congressional Delegation in an effort to get some relief under the Medicare plan. 

          Rep. Judy Manning asked about the services for the Children's Intervention School Services Program.  Comm. Toal explained that this item was in the recommendations as a means to go out and investigate what schools were doing and determine what dollars the state could get matched. 

          Rep. Nan Orrock also asked about the rising pharmaceutical costs and asked for additional clarification on the 80% number referred to.  Comm. Toal noted that the 80% of the dollars spent in long term care were not just those in nursing homes but also those in community-based services.  Further, the Commissioner noted that manufacturers have been asked for management protocols help.  Rep. Orrock asked about these "institutional" pharmacies and whether or not those are actually profit centers for nursing homes.  Comm. Toal noted that the pharmacies bill directly to the Department of Community Health.  She also asked about the ownership relationships of the nursing homes with those pharmacies.  Comm. Toal noted that perhaps capitation of pharmaceuticals could be proposed.  He noted that Arizona completely capitates all of their costs.  The Department has been meeting with consulting pharmacists at the nursing homes as well as others to determine what can be done.  They have also solicited help from the pharmacy benefit manager.  The pharmacy benefit manager's greatest impact will not actually be the unit cost containment but the offering of management to the program. 

Rep. Orrock also asked questions concerning the copayment issues which were raised at the recent Department of Community Health Board meeting and which the Board approved.  She noted that previously she had had a large issue concerning psychotropic drugs.  She is concerned that copayments will cause people to make life decisions on what drugs they will or will not be able to purchase.  Institutional persons, according to Comm. Toal, are exempted from the copays.  Thus, these individuals make up approximately 80% of the Medicaid budget.  He noted that getting a preferred drug list was actually essential.  Further, the Drug Utilization Review Board, which the Department has recently reconstituted, is working on trying to gather information on the clinical efficacy and costs involved for all drugs.  The Department of Community Health has been reviewing the recommendations received from the Drug Utilization Review Board and has agreed to most.  Further, he noted in the proposal accepted by the Department of Community Health that there are incentives paid to pharmacists if they dispense generic or drugs on the preferred drug list.  Copayments would range from 50 cents to $3 based on the type of drug.  Thus, the Commissioner believes that the individuals who lose the most are the pharmacists if they don't try to fill either a generic or preferred drug list item.  Moreover, the recipient is also protected as the pharmacist cannot refuse to serve the beneficiary.  Comm. Toal noted that the Department did not want nonpreferred drugs on a prior approval basis.  This would be very complicated and time consuming for the recipients as well as the providers. 

          Rep. Orrock also raised some questions concerning enrollment in the Medicaid program.  Comm. Toal noted DCH is going to try to do enrollment directly at the provider level rather than having the recipients go to the Department of Family & Children Services to apply for Medicaid benefits.  This would allow for faster access to the system.  Thus, there would be a one to two year impact where cash needs would be more pronounced as claims would be done on a faster basis.  Thus, this would also address some of those persons who are presently uninsured. 

          Rep. Channell raised additional questions concerning those critical access facilities which would be paid 100% of costs on their outpatient care.  Comm. Toal explained that his Department is still giving eligible hospitals a chance to participate if they execute a memorandum of agreement with the Department.  They have until the end of January to execute this memorandum.  He noted that 28 of the 68 eligible hospitals have signed or have notified the Department of their willingness to sign.  Those facilities that will not sign will not get 100% of costs.  Moreover, revenue maximization efforts may allow for such if they are public facilities. 

          In explaining the revenue maximization process, raising the dollars is the real issue.  Comm. Toal noted that there was a fundamental guiding principle to the state.  Thus, as a result of the new federal regulations imposed, they could get more than the state has presently been taking advantage of from the federal government.  Comm. Toal noted, however, there was a drawback.  Abusers of the system would also have an eight year time frame to continue to "rob the bank." 

          The new regulations outlined by the Healthcare Financing Administration on January 8, 2001 will hopefully address some of these issues.  In going forward, Toal noted that they needed to do the following: 

a)                  Go get what is due to Georgia;

b)                 Do no harm to the existing programs at the state level, including not changing the Indigent Care Trust Fund;

c)                  Not use additional new schemes for reimbursements to the disproportionate share hospitals;

d)                 Not change the Medicaid Plan Amendments filed with HCFA and the grants paid to the Department of Human Resources (such as for the residency programs and the regional perinatal centers, etc.);

e)                  Minimize the risk on proposals so that the Healthcare Financing Administration will not object;

f)                   Insure drawing funds down so that there will not be additional shortfalls (the state must get at least $57.5 million);

g)                 Minimize extraneous payments;

h)                 Demonstrate to hospitals that revenue maximization efforts will allow them to apply for new dollars in the future for funding; and

i)                   Inform hospitals they can elect whether they wish to participate. 

Comm. Toal noted that there would be a meeting of hospitals in Macon, Georgia later this month to discuss more about these issues.  The Department has already met with Grady Hospital in Atlanta as it is essential that the Department have its agreement on these ideas. 

          Rep. Jay Shaw asked about reimbursements to physicians and the impact of the new rulings.  Comm. Toal agreed that the Department has also been hearing from physicians concerning these reimbursements.  The question really relates to the difference between what is paid by Medicare versus what is paid by Medicaid (when a person is eligible for both).  Proposed in FY2002 there is a 100% of costs paid based on the 1999 RBRVS with a two year of inflation rate built in.  Comm. Toal noted that the doctors would prefer to have 100% of costs paid based on the 2000 RBRVS (or 2001 if such were available) and without any inflation. 

          Finally, the Comm. noted that the Department is committed to not cutting any services, not withholding claims payment, and not cutting any reimbursements to facilities. 

          There were also “Block Grant” hearings this afternoon regarding the various monies received to benefit: 

1)      Maternal and Child Health Services;

2)      Community Services (help with employment, education, income management for the poor, emergency services for health, nutrition and housing, self-sufficiency achievement, etc.);

3)      Social Services (day services for children and adults, protective services for children and adults, services for management and maintenance of the home, transportation, family planning, delivery of meals, etc.);

4)      Substance Abuse Prevention and Treatment (community-based alcohol and drug treatment programs, prevention and early intervention);

5)      Preventive Health and Health Services (health promotion such as physical activity and fitness, nutrition, tobacco, alcohol and drugs, and family planning; health protection such as unintentional injuries, environmental, and oral health; and preventive services such as heart disease and stroke, diabetes and chronic disabling conditions, sexually transmitted diseases, immunization and infectious diseases, cancer, HIV infection, and clinical preventive services);

6)      Community Mental Health Services (helps children’s mental health programs, psychosocial rehabilitative programs, mental health peer-support programs, etc.); and

7)      Low Income Home Energy Assistance (cash assistance for low-income eligible households, low cost residential weatherization, emergency energy assistance, etc.). 

There was testimony on behalf of the elderly population’s needs.  The Council on Aging stressed the need for more dollars for home-delivered meals and help with baths.  Out of the $64.1 million received under the Social Services Block Grant, only $2.7 million went to services for the elderly.  Also, another person testified on behalf of the Center for Visually Impaired; this entity has previously received funding and it asked for a continuation. 

A spokesperson on behalf of Georgia’s infants asked for better quality childhood programs stating that during the first three to four years of life is when 90% of the brain is developed. 

Therapeutic foster care also remains among services needing assistance.  Extra money is needed for the caregivers.  Also, many of these children have psychiatric needs. 

Better drug treatment programs for pregnant women was also discussed.  Testimony given claimed that this is the cause of many mental disturbances in children.