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

SPONSOR Jennings

DATE TYPED 2/25/05

HB

SHORT TITLE Medicaid Reimbursement at Medicare Rate

SB 840

ANALYST Weber

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY06

FY07

$5,600.0

$1,300.0 Recurring General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to SB 339

Conflicts with SB 339

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

$14,400.0

$3,400.0 Recurring Federal Medicaid

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Human Services Department (HSD)

Department of Health (DOH)

SUMMARY

Synopsis of Bill

Senate Bill 840 (SB 840) would amend Section 27-2-12.3 NMSA 1978, to require the Human

Services Department (HSD) to establish a rate not less than the rate for Medicare part B services

for the reimbursement of physicians, dentists, optometrists, podiatrists and psychologists for ser-

vices rendered to Medicaid patients. This change would become effective July 1, 2005.

Senate Bill 840 -- Page 2

The reimbursement would be equal for same or similar services provided by these health profes-

sionals without regard to the date on which the health professional entered into an agreement or

contract to provide such services or the location at which the services are provided. An excep-

tion to this requirement would apply when HSD contracts with entities for services rendered

through the Medicaid managed care system.

HSD would be required to increase (or decrease) the rates on July 1, 2006 and on July 1 of each

subsequent year, taking into consideration factors that affect the cost of providing services, in-

cluding increases in medical liability premiums and office overhead. Reimbursement for fee-for-

service and managed care services includes gross receipts taxes.

Significant Issues

SB 840 does not include managed care contract medical professionals in the group for increase,

leaving only the fee-for-service portion of Medicaid. There are approximately $100 million of

services that will qualify for the increase. Human services reports the difference in Medicaid

rates to the Medicare Part B schedule requires an estimated 20 percent increase, or $20 million.

At the FY06 state to federal match this will require $5.6 million general fund and generate $14.4

million federal funds to total the $20 million.

Human Services finds the average medical price had increased 3.93% a year from July 1994 to

July 2004 according to the medical care component of the consumer price index for all urban

consumers (Medical care of CPI-U), Using this as the inflator for FY07 the additional general

fund requirement is $1.3 million which will general $3.4 million federal funds.

Human Services contributes the following.

The Medicaid programs have implemented numerous cost containment initiatives during the past

two years to stay within budget. The fees increase will add costs to the programs without in-

crease in services. This may lead to drastic program cuts in other areas to remain within budget

in future years. Also, the methodology use and fees being increased annually require state plan

amendment and federal approval. The state regulations will also need modification

SB 840 also requires that reimbursement of Medicaid fees to physician, dentist, optometrist, po-

diatrist, and psychologist providers under fee-for-service and managed care service programs

include the gross receipt tax. HSD currently reimburses the fee-for-service providers listed in

SB 339 for gross receipts tax

.

FISCAL IMPLICATIONS

The reimbursement increase to the Medicare Part B schedule would result in significant in-

creases in the annual cost of the Medicaid program. Extending such increases to the managed

care professionals would result in almost 7.5 times higher.

MW/yr