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Current FIRs (in HTML & Adobe PDF formats) are available on the NM Legislative Website (legis.state.nm.us).  Adobe PDF versions include all attachments, whereas HTML versions may not.  Previously issued FIRs and attachments may also be obtained from the LFC in Suite 101 of the State Capitol Building North.

 

 

F I S C A L    I M P A C T    R E P O R T

 

 

 

SPONSOR

Jennings

DATE TYPED

2/2/04

HB

 

 

SHORT TITLE

Medicaid Reimbursement Payment Rate Increase

SB

112

 

 

ANALYST

Weber

 

APPROPRIATION

 

Appropriation Contained

Estimated Additional Impact

Recurring

or Non-Rec

Fund

Affected

FY04

FY05

FY04

FY05

 

 

 

$1,257.2

Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

 

Relates to Appropriation in the General Appropriation Act

 

REVENUE

 

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY04

FY05

 

$3,895.3

 

Recurring

Federal Funds

(Parenthesis ( ) Indicate Revenue Decreases)

 

SOURCES OF INFORMATION

LFC Files

 

Responses Received From

Human Services Department (HSD)

Health Policy Commission

 

SUMMARY

 

Synopsis of Bill

 

Senate Bill 112 amends existing law to provide that the Human Services Department (HSD) shall set the reimbursement rates for services rendered by physicians, dentists, optometrists, podiatrists and psychologists to Medicaid patients at not less than the percentage increase provided by HSD in the previous fiscal year for managed care organizations (MCO).  This increase does not apply for managed care organization contractors. The effective date of this Act is July 1, 2004.

 

 

 

 

Significant Issues

 

The percent rate increase established for MCOs is the sum of many variables, most which do not affect the potential cost increase faced by the individual providers listed above.  The MCOs function as insurance companies and are exposed to a variety of cost factors that include but are not limited to:

 
  • Pharmacy costs
  • Inpatient hospitalization
  • Out-patient hospitalization
  • Medicaid client transportation costs
  • Increased utilization factors
  • Contractual quality control requirements
  • Outreach efforts

 

The additional parameters involved in a MCO environment result in percentage cost increases that exceed the requirements of the individual provider. 

 

Utilization is an obvious example of increased costs the MCOs must pay that the individual provider does not face.  In the past few years, the number of times a client sees providers has increased.  This utilization increase results in higher overall payments to providers, but does not increase their incremental costs. The MCOs must build utilization increases into percentage rate increases.  Another obvious cost escalator MCOs must build into their rate is pharmacy cost.  Double digit pharmacy cost increases must be covered by the annual MCO percent increases while the providers mentioned are not impacted at all by these increases.  Recently there has been much concern regarding rising hospitalization costs due to various factors, but again the individual provider is not impacted.

 

The following table reports how total medical costs have increased since 1991 compared to various sectors.

Annual Change Per Capita in Health Care Spending and Gross Domestic Product, 1991-2002

Spending on Type of Health Care Service

 

 

Year

All Services

Hospital Inpatient

Hospital Outpatient

Physician

Prescription Drugs

Gross Domestic
Product (GDP)

1991

6.9%

3.5%

16.8%

5.4%

12.4%

1.8%

1992

6.6

2.8

13.9

5.9

11.7

4.2

1993

5.0

4.8

8.9

3.3

7.1

3.8

1994

2.1

-2.0

8.7

1.7

5.2

4.9

1995

2.2

-3.5

7.9

1.9

10.6

3.7

1996

2.0

-4.4

7.7

1.6

11.0

4.4

1997

3.3

-5.3

9.5

3.4

11.5

5.2

1998

5.3

-0.2

7.5

4.7

14.1

4.3

1999

7.1

1.6

10.2

5.0

18.4

4.4

2000

7.8

2.5

11.5

6.3

14.5

4.8

2001

10.0

7.1

16.3

6.7

13.8

1.7

2002

9.6

6.8

14.6

6.5

13.2

2.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes: GDP is in nominal dollars.
Sources: Health care spending data are the Milliman USA Health Cost Index ($0 deductible); GDP is from the U.S. Department of Commerce, Bureau of Economic Analysis

 

All services increases, which would be more closely aligned with an MCOs inclusive concept, has always been higher than the physician component.

 

FISCAL IMPLICATIONS

 

The amounts shown in the Appropriation and Revenue tables above correspond to fee-for-service only increases at the estimated FY05 MCO contract increase of 7 percent that does not include the 3 percent insurance premium tax..  The impact is for physician services, dental services and other practitioners listed in the Medicaid projection.  It is anticipated that even though not applicable to MCO contract providers, increases of this nature would put upward pressure on the MCO contract and create additional hidden costs in the program.

 

MW/yr:prr