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

SPONSOR Heaton

ORIGINAL DATE

LAST UPDATED

02/06/06

HB 779

SHORT TITLE

MEDICAID REIMBURSEMENT RATES

SB

ANALYST Weber

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

$3,200.0

Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates HB 704, SB 734

Duplicates HB 663

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

FY08

$8,200.0

$10,000.0 Recurring

General

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Human Services Department (HSD)

SUMMARY

House Bill 779 appropriates $3.2 million from the general fund to the Human Services

Department for the purpose of adjust for inflation Medicaid rates paid to intermediate care

facilities for the mentally retarded. The new provider rates each year shall equal the previous

year's rate plus the current market basket index inflation adjustment as determined by the federal

centers for Medicare and Medicaid services. In years when the reimbursement rate is re-based,

the market basket index shall be used to index each provider's operating costs to a common point

of December 31 for the base year and then indexed to a midpoint of the rate year to adjust for

inflation.

House Bill 779 – Page 2

The funds are appropriated as follows:

•

two million two hundred thousand dollars ($2,200,000) to increase the Medicaid

reimbursement rate for licensed nursing facilities and licensed intermediate care facilities

for the mentally retarded, and

•

one million dollars ($1,000,000) to restore funding lost due to reductions in the Medicaid

reimbursement rate made in fiscal years 2005 and 2006 to licensed nursing homes and

licensed intermediate care facilities for the mentally retarded.

FISCAL IMPLICATIONS

The appropriation of $3.2 million 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.

SIGNIFICANT ISSUES

HSD indicates that the $3.2 million would create a rate increase for FY07 that would in effect

become part of the facilities' rates by the end of FY08. When those rates are rebased for FY08,

the normal rebasing increase for future rates would be augmented because the rate rebasing

process would have to take into account the increase from FY07 as well as any other costs

associated with the facilities' operation. This increase would, therefore, compound the increase

associated with the FY08 automatic rebasing. HSD estimates the FY08 general fund

requirement would jump to $3.9 million.

POSSIBLE QUESTIONS

Many medical providers are affected by the relatively low Medicaid reimbursement rates yet

only this one provider group is offered relief. Should more providers be included.

MW/mt