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

SPONSOR Foley

DATE TYPED 3/7/05

HB 963

SHORT TITLE Consumer-Driven Medicaid Benefit Package

SB

ANALYST Hanika-Ortiz

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

$15.4 Non-Recurring General Fund

$138.4 Non-Recurring Federal

$2,869.7 Recurring General Fund

$2,869.7 Recurring

Federal

$187.5 Non-Recurring General Fund

$562.5 Non-Recurring Federal

SOURCES OF INFORMATION

LFC Files

Responses Received From

Department of Heath (DOH)

Human Services Department/Medical Assistance Division (HSD)

SUMMARY

Synopsis of Bill

HB 963 enacts a new section of the Public Assistance Act to provide for a consumer-driven cal-

endar-year-based Medicaid benefit program for persons entitled to Medicaid benefits pursuant to

Title 19 (Medicaid) or Title 21 (State Children’s Health Insurance Program) of the federal Social

Security Act. The benefit amount will not exceed the average cost for a Medicaid beneficiary

two years prior with adjustments for inflation, economic and geographic factors. The benefit

amount will be prorated for those who become eligible after January 1.

Cost-sharing, using any combination of deductibles, co-payments, coinsurance or other methods

will be included, not to exceed twenty percent of the benefit amount but may be lower based on a

sliding schedule that takes household income into consideration. An electronically readable eli-

House Bill 963-- Page 2

gibility card with the benefit amount will be issued to the beneficiary. Preventive care services

will be exempt from cost sharing except for a nominal co-payment. The benefit package would

be equal to the benefits mandated by federal law. Additional benefits may be provided if the

Department can demonstrate that they will provide a cost-benefit to the state and that the pro-

gram will remain actuarially sound.

Balances remaining on eligibility cards at the end of a calendar year will roll over to the next cal-

endar year with the beneficiary not accumulating a balance greater than five times the benefit

amount for the current calendar year and the card not containing a balance greater than two times

the benefit amount for the current calendar year. The beneficiary will be able to access accumu-

lated balance upon verification of eligibility and service. When the balance has been exhausted

and the beneficiary has met the annual cost-sharing amount, they will continue to be enrolled in

the Medicaid program in a “benefits-exhausted” status for the remainder of the year. They may

be billed for services from a Medicaid-participating provider at the Medicaid rate. The Depart-

ment may establish rules to provide for exceptions in cases of catastrophic illnesses or financial

hardship.

HSD shall provide educational materials, workshops, customer service, online information and

ongoing health care consumer training that provides information on health care services, cost-

sharing requirements, benefit limitations, planning, preventive care financial implications and

other health care considerations to ensure that Medicaid beneficiaries make the most appropriate

use of health care services and financing.

Significant Issues

HSD has the following comments:

HB963 represents a totally new approach to the provision of health care to the state’s poorest

citizens and will create a distinctly different Medicaid program in New Mexico. Benefits for

each individual will be “capped “each year. As Medicaid is an “entitlement” program (those eli-

gible are entitled to receive medically necessary services), HSD/MAD remains doubtful that a

waiver of this entitlement, particularly for mandatory Medicaid populations, will be granted.

All beneficiaries will be entitled to the same amount of benefits each year based upon the aver-

age costs. This does not take into account the varying needs of individuals. The healthiest will

not use the allotted benefits. Those with serious chronic conditions will have insufficient bene-

fits and once they exhausted their allotment their health care needs will likely go untreated. The

economic level of this population makes it doubtful that they could pay the provider.

This bill imposes cost-sharing which could be as much as twenty percent of the benefit amount.

Federal regulations require that cost sharing be nominal, that coinsurance not exceed five percent

of the payment the agency makes for services, and that co-payments not exceed $3.00. These

amounts can be waived, but allowing twenty percent is extremely doubtful. Nominal co-

payments will be required for preventive care services. This may result in a barrier to accessing

these services, resulting in poor health conditions which could have been prevented, had these

services been accessed.

House Bill 963-- Page 3

The New Mexico Medicaid program currently provides several optional services. HB963 will

have the state’s benefit package include only the mandated services, unless it could be shown

that optional services were a cost-benefit. The benefit package would no longer include such

things as the services of optometrists, psychologists, physical and occupational therapists, speech

and language pathologists, and dentists, as well as excluding prescribed drugs, dentures, pros-

thetic devices and eyeglasses.

HB963 will exclude the home and community based waiver programs from this program, yet it is

silent on individuals in institutional care. The waiver populations and institutional care popula-

tions are the same and must be treated equally. The waiver programs cannot exist without insti-

tutional care.

PERFORMANCE IMPLICATIONS

HSD/MAD notes that the General Services Department will essentially take over the administra-

tion of the program, including enrollment. Federal regulations require that eligibility be deter-

mined by the Single State Medicaid Agency, which is the Human Services Department. The In-

come Support Division of the Department conducts all of the eligibility determinations for Medi-

caid, except for Supplemental Security Income (SSI) recipients. The role of the Human Services

Department will appear to be limited to education and training activities.

By October 1, 2005, HSD will be required to request a waiver from and submit a state Medicaid

plan to the Centers for Medicare and Medicaid Services (CMS) in order to implement this pro-

gram, provide policy and legislative recommendations to the interim Legislative Health and Hu-

man Services Committee, and provide its financing and budget findings and recommendations to

the Legislative Finance Committee.

FISCAL IMPLICATIONS

HSD reports that with a capped benefit for each recipient the cost of the Medicaid program

should decrease. As fewer people access services, and those services are capped, it may be ex-

pected that the costs will go down each year.

Omnicaid, the current Medicaid Management Information System that maintains and delivers

Medicaid benefits, will need to be changed at an estimated cost of $750 thousand. $562.5 will be

federal monies and $187.5 will be from the general fund.

HB 963 will require that an additional category of eligibility be added to the ISD2 system at

HSD. HSD/ISD estimates $153.75 thousand is needed to program ISD2 (HSD’s eligibility de-

termination/benefits issuance system). Of these costs, $138,375 will be federal monies and

$15,375 will be from the general fund.

There will be a need for significant coordination in terms of systems and administrative proce-

dures between HSD and GSD. HSD/ISD estimates that additional staff of 112 FTE will be re-

quired. HSD/ISD estimates that it will cost $5,739,440 to fund these positions, of which

$2,869,720 will be federal monies and $2,869,720 will be from the general fund.

House Bill 963-- Page 4

ADMINISTRATIVE IMPLICATIONS

The General Services Department will provide administrative support through contracts with a

third party administrator for enrollment, claims payment, customer service, provider networks,

case or disease management and related activities.

TECHNICAL ISSUES

The bill gives responsibility for customer service to both GSD and HSD. The bill also states that

a beneficiary cannot accumulate “a balance greater than five times the benefit amount for the

current calendar year…”, yet also states that the card cannot contain “a balance greater than two

times the benefit amount for the current calendar year.” The reason for this is unclear.

DOH notes that HB 963 exempts persons enrolled in Medicaid waiver services, but several other

client groups have average costs that are inferentially far higher than the average cost for a

Medicaid beneficiary. These groups include children with special health care needs eligible for

the Family Infant Toddler (FIT) Program, children and adults with developmental disabilities,

and children receiving services under Medicaid Early Periodic Screening Diagnosis & Treatment

(EPSDT) Special Rehabilitation Services Program. The DOH recommends exempting these

groups from the provisions of HB 963.

OTHER SUBSTANTIVE ISSUES

DOH has the following comments:

Children eligible under the FIT Program are defined under Medicaid as being “Children with

Special Health Care Needs” which is defined as “Individuals under the age of 21, who have or

are at an increased risk for chronic physical, developmental, behavioral or emotional conditions,

and who also require health and related services of a type or amount beyond that required by

most children”. Children with special health care needs have an increased need for services and

care coordination due to the chronic nature of their conditions. Currently, Medicaid SALUD con-

tractors are required to identify children with special health care needs and provide an enhanced

benefit package to meet and coordinate their needs. In addition to intensive medical and health

care services, children with developmental delays and disabilities who are eligible for the FIT

Program also receive Medicaid (EPSDT) special rehabilitation services. These services include

speech, physical and occupational therapy; development instruction, counseling and case man-

agement.

The average annual per-capita cost of early intervention services, including service coordination

and the initial developmental evaluation for children in the FIT Program is $8,340.00. These

costs are in addition to other health and medical expenses they may have.

It may be inferred that Children and adults with diagnosed developmental disabilities, including

mental retardation, autism spectrum disorders, cerebral palsy and epilepsy, who are not allocated

to a Medicaid Waiver program, also have increased need for medical and health services that

would be above the average cost for a Medicaid beneficiary. These may include durable medical

equipment, such as wheelchairs, walkers, augmentative communication devices, feeding equip-

ment, or diapers, specialist clinic care and transportation to specialty providers. Due to the

House Bill 963-- Page 5

greater costs of serving the above groups, the DOH recommends that they be exempted from the

provisions of the bill.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL.

A consumer-driven calendar-year-based benefit program for beneficiaries entitled to Medicaid

benefits under Title 19 or Title 21 of the Federal Social Security Act will not be implemented.

POSSIBLE QUESTIONS

DOH recommends an amendment to Section 1(A)(7) page 3, line 6, after the word “patients” add

“…children with special health care needs, children eligible for the Family Infant Toddler Pro-

gram and children and adults with a developmental disability”.

AHO/lg