1 texas revenues, medicaid & national health reform tma select committee on medicaid, chip, and...

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Texas Revenues, Medicaid & National Health Reform

TMA Select Committee on Medicaid, CHIP, and the

Uninsured February 13, 2010

Anne Dunkelberg, Assoc. Director, [email protected]

Center for Public Policy Priorities900 Lydia Street - Austin, Texas 78702

Phone (512) 320-0222 (X102) – www.cppp.org

www.texasvoiceforhealthreform.org

mailto:[email protected]

http://www.texasvoiceforhealthreform.org/

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LBB’s Best Case ScenarioAssuming revenue growth matches growth in expenses

Current Budget

2012-13 Budget

General Revenue $75.0 billion $75.0 billion

ARRA (instead of GR) $6.4 billion $0

Cash on hand $2.4 billion $0

Property Tax Relief Fund carryover

$3.0 billion $0

Permanent School Fund $0 $1.2 billion

Other adjustments $0.2 billion -

TOTAL GR BUDGET $87.0 billion $76.2 billion

GAP $10.8 billion

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Budget Scenario for 2012-13

$0

$25

$50

$75

$100

2002-03 2004-05 2006-07 2008-09 2010-11 2012-13

Local School Tax Cut (GR and PTF)

GR for Higher Ed

ARRA instead of GR

Other GR*

GR for HHS

Other GR for K-12

GR for Prisons

Additional GR Needed

$7 b

$1 b

None

$3 b

$3.3 b

$300 m

$700 m

4

Sources of State Revenue 2009Total $84.5 billion

Lottery, 2%

Licenses, Fees, Fines, Penalties, 9%

Interest,Investment Income, 2%

Other, 5%

Taxes, 45%

Federal Funds, 37%

Source: Comptroller of Public Accounts, Annual Cash Report

5Sources: Comptroller of Public Accounts, Annual Cash Report, Annual Property Tax Report.

Major State & Local Taxes in Texas, 2009

School26%

Special Districts

6%

County8%

City8%

Other State20%

Local 7%

State 25%

Sales Tax – 32%

Property Tax – 48%

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How to Balance 2012-2013?Options for a Balanced Approach:

“Easy Money”

Potential Revenue for 2012-13

Economic growth with no change in revenue system

$800 million for each 1% growth

Smoke and mirrorsPayment delays, etc.

$1.5 billion

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Funding a Balanced Approach: Rainy Day Fund

Rainy Day Fund Potential Revenue for 2012-13

Beginning balance $8.2 billion

Growth during 2012-13 $1.4 billion

TOTAL AVAILABLE $9.6 billionCurrent Balance: expected to reach $8 billion by end of fiscal 2011; another $922 million deposit slated for Fall 2011Uses:

1991: $29 million for public schools1993: $200 million for prisons2003: $1.2 billion — the entire balance that was projected at the time — was appropriated for CHIP and Medicaid shortfalls, retired teacher health care, and for brand-new Governor’s Enterprise Fund2005: $1.9 billion, for existing shortfalls, and for 2006-07 child protective services reforms and new Emerging Technology Fund

• 2/3 vote of each chamber needed to spend RDF “at any time and for any purpose”; slightly less (3/5 vote) required when state revenue is expected to drop in upcoming biennium

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Options for a Balanced Approach:Potential Revenue for 2012-13

Eliminate Current Exemptions:

• Sales tax on business, professional services (Legal, stock & real estate broker, accounting, management consulting – except health care)

$5.6 billion

• Eliminate high-cost natural gas exemption $2.3 billion

• Eliminate recognition of optional % homestead exemption: $1.0 billion

• Eliminate freeport property tax exemption (constitutional) $850 million

• Eliminate 10% property tax appraisal cap (constitutional) $650 million

• Eliminate sales-tax timely filer and prepayment discounts $425 million

• Eliminate sales tax holiday $100 million

• Eliminate gasoline-tax collection allowance $100 million

• Eliminate CAPCO credits$100 million

• Eliminate ineffective tax exemptions $100 million

• Eliminate reimbursement of school taxes for local tax abatements $20 million

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Options for a Balanced Approach:Potential Revenue for 2012-13 (more)

Increases to Existing Taxes:• Raise sales tax ½% (to 6.75% state/8.75% total, with

rebate for families in bottom 20% of income; 8 states would have

higher state rates) $3.0 billion• Increase franchise tax rate from 1% to 1.25%

(Retail from 0.5% to 0.625%) $2.1 billion• Raise gasoline tax by 5 cents per gallon (From 20¢

to 25¢ – 23 states now at 25¢ or higher) $1.6 billion– ($400 million to Available School Fund; $1.2 billion to State

Highway Fund)

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Increases to Existing Taxes:

Raise cigarette tax From $1.41 to $2.00 per pack

15 states now at $2.00 or above $1.2 billionRaise motor vehicles sales tax by ½%From 6.25% to 6.75% $450 millionRaise beer taxFrom 11 cents to 17 cents per six-pack

Last raised in 1984; 15 states would be higher $100 million

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New Tax Options:

Quality Assurance Fee

1% on revenues of hospitals, surgery centers $350 million

Plus federal match of $550 million

Soda tax

1 cent per 12 oz can of sugared soft drink $145 million

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Funding a Balanced Approach: Beyond this Session

Potential Revenue for Future Budgets

State personal income tax $14 billion net

(dedicated to education)

Eliminate school property tax abatements - Chap 313

$1.2 billion

Sales tax on Internet sales $1.2 billion

Sales price disclosure $350 million

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Medicaid in 2010-2011 TX Budget• No National Reform effect (expansion begin 2014; no state share $$

until 2017)

• Avg. Budgeted Caseloads in SB 1 3,105,445 for 2010, 3,168,320 2011 “recipient-months”

• Actual January 1 enrollment 2,918,958; converts to 3.3 million

• Over 735 eligibility staff added since 9/1/09.

• Feb 1 HHSC report to LBB projects HHSC Medicaid about $387 million GR over budget by end of FY 2010 (i.e., just for current year).

• Texas getting 70.94% match now; 69.85% Jul-December. IF Congress extends 2 more quarters, worth $925 million to Texas.

• HHSC has no “official” projection of current budget shortfall yet.

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Medicaid in 2010-2011 TX Budget• Shortfall numbers make it obvious: without more revenue, there WILL be

deep cuts.

• In 2003, Provider Rates were the largest category of cut. After partial restorations, the total projected reduction in Medicaid and CHIP rates was about $599 million.

• Federal law Medicaid maintenance of effort required:

– From BBA 1997 (CHIP Statute): States cannot adopt Medicaid eligibility criteria that are more restrictive than those in effect as of June 1, 1997.

– ARRA 2009 (stimulus): States cannot make eligibility standards, methodologies, or procedures stricter than 7/1/2008; includes disability standards or numbers served in community care waivers.

– If health reform passes, additional MOEs will apply: children in Medicaid and CHIP through 2019; adults until Health Insurance Exchanges operational in 2014.

• That leaves provider rates and “optional” adult benefits to cut

– 2003 Lawmakers rejected certain cuts: cutting off community care and nursing home care; eliminating Rx coverage for aged, disabled, and adult clients

– They DID eliminate services of LPCs, SWs, psychologists, LMFTs, podiatrists, and chiropractors; and adult eyeglasses and hearing aids. (Restored in 2005)

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How National Health Reform Fits In: Texas Update

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Only the Highest-Income Families Have Better-Than-U.S.-Average Chance of Being Insured

Texas average: 25.1%

Source: CPS Annual Social & Econ. Supplementwww.census.gov/hhes/www/hlthins/hlthins.html

12%

29%

35%

42%

Below poverty 100 to 200% ofpoverty

200 to 300% ofpoverty

Above 300% ofpoverty

11%

16%

24%

34% 36%

Below $25,000 $25,000 to $49,999 $50,000 to $74,999 $75,000 to $99,999 $100,000 and over

http://www.census.gov/hhes/www/hlthins/hlthins.html

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57.4 56.253 53 54 53.1 52.2

50.4 49.5

64.2 63.2 61.9 61 60.5 60.2 59.7 59.3 58.5

30

45

60

75

2000 2001 2002 2003 2004 2005 2006 2007 2008

% of Residents With Job-Based Insurance

Employer-Sponsored Coverage Declining in Texas and Nationwide, Even Before Recession

U.S. Average

Texas



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• Key elements of both bills:– Build on current system (Senate bill especially leaves curernt coverage potentially

unchanged for years)

– Medicaid expansion: cover all up to 133% or 150% FPL ($14,404-$16,245 for one; $29,327-$33,075 for 4).

– Reform Private Health Insurance: standardize benefits, no price variation for gender or occupation, limited age variation, no denial of coverage, no excluding pre-existing conditions, no annual or lifetime maximums. Changes first for uninsured, individual, small employer coverage.

– New Health Insurance Exchange(s) where private insurers’ options can be compared and purchased (like Amazon or Travelocity for insurance).

• May or may not include Public or Non-profit plan option?

• HIE is only a framework: effectiveness depends on subsidies, market reforms, standardized benefits, individual mandate, negotiating powers.

– Premium assistance up to 400% of FPL ($88,200 for family of 4)

– Out-of-pocket subsidies (reduces out of pocket for all consumers) and stop-loss caps, too, to increase affordability reduce medical bankruptcy

– Individual mandate to have coverage (with exemptions)

– Some Requirements for employers to contribute, with exemptions for small employers

Health Reform Basics

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Texas Uninsured by Income Today……6.1 million uninsured in 2008

300-400% FPL$66,200-$88,200

200-250% FPL$44,100-$55,100

250-300% FPL$55,100-$66,200

150-200% FPL$33,100-$44,100

>400% FPL>$88,200 <100% FPL

<$22,100/yr for family of four

100-150% FPL$22,100-$33,100

682K

622K

751K1.06

Million

1.611 Million

484K

Annual income limits given for a family of four, 2009 federal poverty level U.S. Census, CPS

898K

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……And if House Bill Implemented TomorrowCBO: 4.7 to 4.8 million out of 6.1 million gain coverage

<100% FPL

300-400% FPL

>400% FPL

100-150% FPL

250-300% FPL

150-200% FPL200-250% FPL

682K

622K

1.6 Million

1.611 Million

Up to 1.8 million in Medicaid:• 1.3 million expansion to 150% FPL (adults)•500K already- eligible (kids)

2.0 million 150-400% FPL qualify

for help w/premiums, out-of-pocketIn Exchange

751K

484K

898K

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Who Remains Uninsured?

• CBO assumes small percentage opt not to be covered (no penalty for lowest income and penalties much lower than cost of coverage)

• If premium subsidies lower, (Senate version concerns), larger share of low- & moderate income may stay uninsured.

• Undocumented: – no Medicaid/CHIP, – no premium subsidy, possibly cannot buy @ full cost from

exchange– Best estimates say 40% of undocumented in US TODAY have

private coverage• Legal Permanent Residents:

– continued exclusion from Texas Medicaid, – May be barred from subsidy, too, in first 5 years in US

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• Medicaid expansion—up to 133% FPL(S) or 150% FPL (H)

• “Static” Illustration based on current US Census data and Texas Medicaid costs:

• HOUSE: – in 2008, 1.3 million uninsured Texas adults aged 19-64 who (a) are U.S. citizens and (b) have incomes below 150%

FPL. – At 2009 cost of ~ $305 per adult/mo., covering 1.3 million more adults = about $4.7 billion in new health care

spending. – Under HR 3962, Feds pay 100% of costs for 2 years, and 91% after that.

– In year 3, Texas’ 9% state share of the $4.7 billion would be would be about $421 million,

– And Feds pay the remaining $4.25 billion. – In other words, about ten federal dollars in for every one state dollar. – Plus multiplier effect of over $12.5 Billion (economic multiplier of 3.25 per

Perryman). (↑State tax revenues + ↓Local taxes avoided) nearly = GR costs

• Lesson: Medicaid expansion, while not “free” for Texas, will yield substantial economic benefits.

• Texas economy will also benefit from federal premium assistance and out-of-pocket cost help to families from 150-400% FPL, which will not require any state budget contribution at all.

Fiscal Benefit/Cost of Health Reform to State

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• Medicaid expansion—up to 133% FPL(S); same “Static” Illustration based on current US Census data and Texas Medicaid costs:

• SENATE: – in 2008, 1.0 million uninsured Texas adults aged 19-64 who (a) are U.S. citizens and (b)

have incomes below 133% FPL. – At 2009 cost of ~ $305 per adult/mo., covering 1.3 million more adults = about $4.7

billion in new health care spending. – Under HR 3590, Feds pay 100% of costs for 3 years: 2014, 2015, 2016– In 2017 the Texas would pay about 5.14% or $188 million, with the federal share $3.47

Billion– In 2018, Texas would pay 6.14% or $225 million, with the federal share $3.44 Billion– In 2019 and thereafter, Texas would pay 7.14% or $261 million, with the federal

share $3.4 billion. • $18 federal dollars for each $1 the state spent in 2017 on expanded Medicaid

coverage;• $15 federal dollars for each $1 the state spent in 2018; and• $13 federal dollars for each $1 the state spent in 2019 and thereafter

– Plus economic multiplier of 3.25 per Perryman

Fiscal Benefit/Cost of Health Reform to State

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Welcome Mat Effect• States that cover all children found that 50%+ of enrollment after

reforms were kids already eligible before reform but not enrolled: “Welcome Mat” effect.

• No Individual Mandate penalties apply to Texans below 100% FPL who remain uninsured, but based on other states, over time more of our currently-eligible Texas children will enroll in Medicaid.

• Because Texas has very limited eligibility for adults today, there is very low risk of Medicaid welcome mat effect for adults.)

• UNLIKE state costs for newly-eligible adults largely borne by federal budget, strong welcome mat response by already-eligible uninsured Texas children would add significant cost to the state budget, because state will be responsible for standard Medicaid share of just under 40% for those children.

• If welcome mat effect were as powerful as 12-month enrollment projected to be, the GR annual costs (at current costs and demographics) could amount to $200 to $350 million (LBB vs. HHSC).

• If 100% of the 440,000 Medicaid currently-eligible uninsured children were to enroll today, the current annual cost to the state budget would range from about $350 million to $466 million (LBB vs. HHSC costs), based on the “usual” state’s share of ~39%.

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Illustration: How House Bill Would Change Texas Medicaid Budget

Fed Share Expansion

Adults$4.25 Billion

State Share Expansion

Adults$421 million

Fed Share 2008

$10.8 Billion

State Share 2008

$7.0 Billion

State Share Welcome Mat

Kids: $400 million

Fed Share Welcome Mat

Kids : $600 million Baseline “Now” = Projected Texas

Medicaid Services Spending, 2008 (Texas HHSC)

Note: this does NOT model increased admin costs.

If Covered 1.3 million new adults; 400K kids, @ Current costs and demographics

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Top Advocate Concerns for Final Bill

Affordability remains the top focus of consumer and low-income advocates, and the experts we trust the most continue to advocate for these provisions in the compromise bill:

(1) House bill’s superior premium assistance for people under 250% FPL;

(2) Senate premium assistance for people between 250-400% FPL.

(3) House’s superior cost-sharing subsidies (which reduce out-of-pocket costs) for all incomes.

(4) House’s broader expansion of Medicaid to 150% FPL.

(5) House’s Medicaid primary care payment rate increases.

(6) National Health Insurance Exchange in House bill, or dramatically stronger minimum standards and federal oversight than in Senate bill at minimum.

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Roles/Functions

• Possible Administration of Health Insurance Exchange

– Senate: State or NFP must operate by 1/2014, or feds will do it; grant $$ available

– Likely includes major enrollment/subsidy eligibility function

– HIEs are to be $$ self-sustaining after first year

• Much Greater Role for TDI in Regulation

• Medicaid eligibility system enhancement CRITICAL

– Accommodate both expansion & increased participation

– Smooth interface with HIE system

– HIE may pay state to do income eligibility for subsidies

Other New Roles, Costs for State

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Other New Roles, Costs for State(cont’d.)

Costs

• In addition to max. 9% share of Medicaid expansion & (possible) reimbursement increases from 2015 (H) or 2017 forward (S); and welcome mat kid costs…

• Admin costs for state of expanded enrollment presumably @ 50%; financing of HIE interface costs unclear

• Increased costs of doing business passed through in Medicaid rates.

Issues

• Will a Texas Executive opposed to reform implement new state functions competently?

• 9% share--even offset 9-to-1 with federal funds--must be funded in stated budget, and in context of a severe structural deficit in our state tax system.

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Use of This Presentation

The Center for Public Policy Priorities encourages you to reproduce and distribute these slides, which were developed for use in making public presentations.

If you reproduce these slides, please give appropriate credit to CPPP.

The data presented here may become outdated.

For the most recent information or to sign up for our free E-Mail Updates, visit www.cppp.org.

© CPPP

Center for Public Policy Priorities900 Lydia StreetAustin, TX 78702

P 512/320-0222 F 512/320-0227

http://www.cppp.org/

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Resource Slides

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2010-11 Biennial State Budget

Source: Legislative Budget Board, Fiscal Size Up 2010-11

Other K-1222%Other K-12

28%

Property tax cuts 12%

Property tax cuts 8%

Higher Ed 13%

Higher Ed 16%

HHS 33%

HHS 27%

Prisons 3%

Prisons 7%

Highways 10%

All Other 10%

All Other 9%

$0

$50

$100

$150

$200

General Revenue $80.6 billion All Funds $182.2 billion

91%

77%

32

How Would An Income Tax Work?

$13.7 billion $2.2 billion

$4.6 billion Two-thirds of income tax revenue would be returned to taxpayers through lower property tax rates

Uncle Sam would pick up 10% of the cost of an income tax through higher deductions on federal tax returns

Net cost to Texas taxpayers after lower property taxes, federal tax deduction changes

Total income tax revenue = $20.5 billion

annually

33Source: Comptroller of Public Accounts, Annual Cash Report.

State Tax Collections 2009Total $37.8 billion

Sales56%

Motor Vehicle Sales

and Rental7%

Motor Fuels8%

Sin (Cigarette, Tobacco,

Alcohol)

6%

Franchise11%

Gas/Oil Production

6%

Insurance3%Other

3%

34

100-200% FPL, 464K

300-400% FPL, 108K <100% FPL,

446K

200-300% FPL, 282K

> 400% FPL, 118K

Uninsured Texas Children, (0-

18) 2007-2008

By Family Income

Total uninsured

children: 1.418 million

US Census, March 2008 & 2009 CPS

35

Income Caps for Texas Medicaid and CHIP, 2009

0%

50%

100%

150%

200%

250%

PregnantWomen

Newborns Age 1-5 Age 6-18 TANFparent of

2, noincome

WorkingParent of

2

SSI (agedor

disabled)

LongTermCare

CHIP

Mandatory Optional

$24,352/yr

$33,874/yr $33,874/yr

185% 185%

133%

$18,310

100%$2,256 $3,696

12.3% 20.2%74%

$7,884

222%

$24,264$36,620

200%

Income Limit as Percentage of Federal Poverty IncomeAnnual Income is for a family of 3,

except Individual Incomes shown for SSI and Long Term Care

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Texas Medicaid: Who it Helps

Children, 1,944,555

Disabled, 359,937

Elderly, 374,395

Poor Parents, 91,838

TANF Parent, 30,758

Maternity, 96,036

October 2009, HHSC data.

Total enrolled 10/1/2009: 2.97 million

37

Uninsured Texans by Age Group, 200865+

0-18

19-64Rate: 32% of

19-64 are Uninsured

Rate: 20% of 0-18 are uninsured

~2/3 are below

200% FPL57% are below

200% FPL

Source: U.S. Census

38

Texas Worst Among the States

Texas: 24.1%

Massachusetts: 4.1%

U.S. average: 15.1%

All Ages, 2008

39

Almost All Congressional Districts Worse than U.S. Average

% Uninsured (All Ages) by U.S. Congressional District, 2008

U.S. average: 15.1% — Texas average: 24.1%

Inset: Dallas/ Fort Worth

Inset: Houston Area

District 3

District 26

2432

7

District 16

2815

27

2520

40

0

5

10

15

Under 19 19 to 64 65 and over

Millions of Texans

Job-based coverage Medicaid Medicare Uninsured

Working-Age Texans Are Most Likely to be Uninsured

19% uninsured

3% uninsured

32% uninsured



41

Employed65%

Unemployed7%

Not in Labor Force28%

Uninsured by Labor Force Status, 2007-08 Average

2 Out of 3 Uninsured Working-Age Texans Have a Job



42

U.S.-born citizen

68%

Naturalized U.S. Citizen

6%

Not a U.S. Citizen

26%

Uninsured by Citizenship Status, 2007-08 Average

Most Uninsured Texans are U.S. Citizens(6.1 million Uninsured in 2008)


4.1 million352,000

1.6 million (~40%

legal immigrants)


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