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

SPONSOR Marquardt

DATE TYPED 3-4-05

HB 876

SHORT TITLE Health Policy Commission Membership

SB

ANALYST Collard

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

$500.0

Recurring General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to HB 374, SB 358

SOURCES OF INFORMATION

LFC Files

Responses Received From

Department of Health (DOH)

Health Policy Commission (HPC)

Department of Finance and Administration-State Budget Division (DFA)

Public Education Department (PED)

SUMMARY

Synopsis of Bill

House Bill 876 appropriates $500 thousand from the general fund to HPC for expenditure in

FY06 and FY07 for the purpose of collecting and analyzing data for a biennial health care fi-

nancing report on the cost, expenditures, trends and economic factors related to the public and

private health care industry created in this bill. House Bill 876 also proposes to increase the

membership of HPC from eight members to nine members, and requires that a majority of the

members have no pecuniary or fiduciary interest in the health care industry while serving or for

three years preceding their appointment. The number of members serving for a one-year term

will be increased from two to three members.

Significant Issues

HPC indicates the purpose of increasing the number of commissioners is to build the capacity of

the commission to consider complex and varied health policy matters. This requires a strong

working knowledge of issues.

House Bill 876 -- Page 2

Additionally, the commission will have one additional member and will maintain a majority

comprised of healthcare consumers. A minority of the commission may be professionals who

understand the practical realities of policy alternatives, the implications of data trends, and the

effect that new policy will have on both the public and private sectors.

The biennial healthcare financing report to be produced by HPC is consistent with statutory du-

ties of HPC and certainly addresses issues of state health policy. At their February 11 meeting,

HPC supported the issue of conducting a state health expenditure account biennially under the

leadership of HPC.

DOH indicates the current statutory language (Section 9-7-11.2 NMSA) requires that no member

have pecuniary or fiduciary interest in the health services industry for the three-year period pre-

ceding appointment to HPC. The proposed changes will require that only a majority of the

membership, not the entire HPC, have no pecuniary or fiduciary interest in the health services

industry while serving or for the three year period preceding appointment to HPC.

HPC currently does not issue a health care financing report, which can be used in health care pol-

icy planning.

FISCAL IMPLICATIONS

The appropriation of $500 thousand contained in this bill is a recurring expense to the general

fund. Any unexpended or unencumbered balance remaining at the end of FY07 shall revert to the

general fund.

DFA indicates the bill creates an additional commission member who is entitled to receive per

diem and mileage expenses as provided in the Per Diem and Mileage Act, but does not appropri-

ate additional funding. HPC would require travel and per diem for one additional commissioner

at an average of $1.2 thousand for one year.

HPC notes the appropriation in the bill will provide appropriate resources to conduct a compre-

hensive study of the economics of health care system and its impact on the state’s economy.

DFA indicates a biennial health care financing report including an economic impact and trend

analysis would be costly. HPC has some capacity to implement the mandate proposed by House

Bill 876. However, additional positions and resources would be necessary if HPC were to pro-

duce a biennial health care financing report as outlined in the proposed legislation. An estimated

recurring cost analysis is as follows:

Expense

Annual Cost

Statistician

$46,082.20

Statistician

$46,082.20

Statistical Assistant

$41,239.04

Economist

$62,064.06

Financial Analyst

$62,064.06

Database Administrator

$78,479.15

Publication

$5,000.00

Sum

$341,010.71

House Bill 876 -- Page 3

DFA indicates this analysis assumes all positions are mid-level or advanced and includes 33 per-

cent for benefits and uses FY06 as a basis for projected salary costs.

ADMINISTRATIVE IMPLICATIONS

HPC cites minimal impact to the operation of HPC by the addition of another commissioner.

RELATIONSHIP

House Bill 876 relates to House Bill 374 and its duplicate, Senate Bill 358, which increases the

membership of HPC from eight members to nine members, and require that a majority of the

members have no financial interest in the health care industry while serving or for three years

preceding their appointment but would not require a health care financing report.

TECHNICAL ISSUES

HPC suggests on page 5, line 4 adding the phrase “health care sector’s impact on the” after “as

well as the.”

DFA indicates the bill violates current statute pertaining to health care data confidentiality. Un-

der current New Mexico statute health care data may not be released which identifies a health

care provider.

DFA also suggests on page 5, lines 4-5 delete "as well as the state's economy in general."

OTHER SUBSTANTIVE ISSUES

HPC gives some background on HPC membership:

HPC provides services to a variety of customers including individual citizens, legislators, educa-

tors, students, private businesses, non-profit organizations and other state agencies.

As an agency independent of the larger state departments, HPC plays a key role in facilitating

and coordinating collaborations among multiple partners. Successful projects in FY05 year in-

cluded: health infrastructure recommendations, Interagency Council for School Health, Tele-

health Commission development, Behavioral Health Workforce Licensing improvements, reduc-

ing the number of uninsured and helping employers and individuals obtain insurance through the

Insure New Mexico! Council.

HPC collects and analyzes data. However, its strategic significance is the exchange among data

users – public and private – in order to anticipate upcoming health policy issues. HPC ensures

that meaningful information is available to policy makers, consumers, businesses and providers.

The commission responds to a complex range of health policy and data issues.

Examples of recent areas of commission work include: cultural competency and disparities,

workforce distribution, recruitment and retention, teen suicide and child health, incidence and

distribution of traumatic brain injury, diabetes and stroke, small employer provision of health

insurance.

House Bill 876 -- Page 4

Health care in New Mexico is a growing and very significant part of New Mexico’s economy

that impacts all New Mexicans. The House Bill 955 study shows that it was almost an $8 billion

industry in 2002. As such, interest in health care can be large and will generate conflicting and

controversial solutions to issues. Often individuals such as physicians or clinic managers with

direct experience and involvement in healthcare can be a valuable resource and knowledge base

utilized by other commissioners and staff about policy matters.

The commission would benefit from having physician or other healthcare members who help the

commission understand clinically related issues and the perspectives of practicing caregivers and

their patients. From their practices, physicians and others bring a “real world” context to the

commission’s work and would help the commission make better-informed decisions.

A physician or other healthcare provider would have the same fiduciary responsibility to the

commission as every other commissioner. Voting physician commissioners must make decisions

based on the best interests of the citizens of New Mexico, not the interests of physicians.

A 2000 survey study of hospital boards of directors done by the Governance Institute indicates

that the median hospital board had 12 members, including two medical staff members. Among

the survey respondents 56 percent of hospital boards had 1-3 physician members and 26 percent

had 4 or more physician members.

HPC also gives some background on the biennial health care financing report:

State health expenditure accounts (SHEA) are measures of personal spending for health care ser-

vices and products. Levels of spending, growth in spending over time, and the mix of services

purchased vary considerably among states and across time. The SHEA allow researchers and

state policymakers to track broad historical trends in state health care systems, evaluate the ef-

fects of historical policy decisions on the delivery of health care services, and envision and

model possible impacts of future policy recommendations. This bill proposes to have HPC pro-

duce a SHEA or SHEA-like report on a biennial basis detailing financing issues.

An example of information that might come from a SHEA report is the amount of per capita

health care spending over time, and relative to other states’ amounts and percentage of the state’s

gross state product. Another would be to update information that shows the1998 per capita hos-

pital expenditures in New Mexico to be above that of surrounding states. In 1998, New Mexico

was at $1,389 versus Arizona at $1,085, Colorado at $1,147, Utah at $1,016, and Texas at $1,274

while use rates (admissions per 1,000 population and outpatient utilization per capita) were com-

parable or below neighboring states.

The Legislative Council Service in conjunction with the legislative Health and Human Services

Committee and HPC recently completed a study authorized under House Bill 955 from the 2003

legislative session. The purpose was to “conduct a comprehensive study to review or determine

the impact of health care expenditures on the health care industry and the state's economy, in-

cluding compensated and uncompensated costs; the expectations and outcomes of state and na-

tional health care reform efforts over the last ten to fifteen years; and the public and private costs

of providing health care to all New Mexicans. The impetus for the study was the recognition that

despite 10 to 15 years of state and national health care reform efforts, the cost of health care con-

tinued to rise, outpacing regular inflation; more than 40 million Americans were without health

care; and more than 20 percent of New Mexicans were uninsured.”

House Bill 876 -- Page 5

The problem for the state of New Mexico related to healthcare can be summarized with one

paragraph from a recent national journal article, Health Affairs -

Although growth in total national “health spending decelerated in 2003,

health spending was

faster than growth in both the aggregate economy and

employee compensation, which suggests

an increasing burden on

sponsors and employers. In the past, persistent gaps between

health

spending growth and economic growth—similar to

the one experienced recently—have

prompted policy changes

by both governments and employers. Continued rapid increases

in

health insurance premiums require trade-offs from employers,

possibly through slowing wage

gains, reducing health benefits,

or shifting more health care costs to workers. For those small

em-

ployers that experience the largest premium rate increases,

it may mean dropping coverage alto-

gether. If the job market

doesn’t improve, employers have even less incentive to

continue to

shoulder rising health care costs. Competition may

force employers to shift a larger share of costs

to workers,

who then must weigh the benefits of health care against the

value of other discretion-

ary purchases. As fiscal problems continue

in many states, budget constraints may continue to

affect publicly

funded health coverage.”

Slower economic growth and less discretionary income may mean more individuals and business

not being in a position to procure health insurance or more expensive insurance, more uninsured

needing Medicaid, fewer tax dollars to support Medicaid on a per beneficiary basis, and ulti-

mately poorer health status for many New Mexicans. A SHEA study could confirm or not con-

firm that as a state, the health insurance and delivery systems are delivering more expensive care

with poorer results.

A Boston University study released this week concluded that “spending on healthcare will grow

to $1.9 trillion this year, an increase of $621 billion from 2000. That would account for a little

over 24 percent of the expected increase in the nation's gross domestic product from 2000 to

2005. Increased defense spending, by comparison, would only account for 10 percent of the

growth in GDP over the same period.” A study done though this bill could show where New

Mexico is for this measure.

DOH notes the data collected, analyzed and reported by HPC may also be beneficial to the new

Behavioral Health Purchasing Collaborative. DOH has worked effectively with HPC on past

projects and utilized information it has collected and reported.

KBC/yr