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

SPONSOR B. Sanchez

ORIGINAL DATE

LAST UPDATED

02/03/06

HB

SHORT TITLE

MEDICAID SERVICES FOR MENTALLY

RETARDED

SB 734

ANALYST Weber

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

$10,000.0

Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to SB 663, HB 704

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

FY08

$25,000.0

Recurring

Federal

Medicaid

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Human Services Department (HSD)

SUMMARY

Synopsis of Bill

Senate Bill 734 appropriates $10 million from the general fund to the Human Services

Department for the purpose of increasing the Medicaid reimbursement rate for nursing facilities

and intermediate care facilities for the mentally retarded to maintain competitive wages,

adequate staffing and local minimum wage requirements.

Senate Bill 734 – Page 2

FISCAL IMPLICATIONS

The appropriation of $10 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 notes that currently, Medicaid rates are determined by variety of factors including wages

and staffing levels. This bill would require HSD to determine for each facility local prevailing

wages for similar work and adjust for any local minimum wage requirements. Those

determinations are complex and beyond the resource level of HSD. To meet these requirements,

HSD would have to enter into a contract for those determinations. No funds are provided for that

type of contract, which is likely to be expensive. In addition, the Department of Health currently

establishes requirements for adequate staffing for the enumerated facilities. Those levels are

considered when HSD establishes reimbursement rates. There are currently no requirements

regarding salary levels paid by facilities. Rates paid to the facilities would be adjusted when

Medicaid rates are adjusted if salaries are increased. This bill would require an annual

appropriation increase for the Medicaid Program to account for this increase.

Medicaid regulations allow for rebasing of the rates for nursing facilities and ICF/MRs every

three years with a percentage increase up to the market basket index (MBI) for the two years

prior to the rebasing year if budget is available. An increase in this amount exceeds what the

MBI would allow, as the MBI normally ranges from 2.5% to 3.5%. Also, because the rebasing

takes cost into consideration, any increase in costs in one year from an increase in rates would

drive up the rates for the next rebasing.

POSSIBLE QUESTIONS

Many provider groups are adversely affected financially by the relatively low Medicaid

reimbursement rates yet this bill offers relief to only one. Should other provider groups be

considered.

MW/nt