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

SPONSOR Altamirano

ORIGINAL DATE

LAST UPDATED

02/15/07

HB

SHORT TITLE Medicaid Reimbursements to Certain Entities

SB 644

ANALYST Weber

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

$2,412.4

Recurring

General

(Parenthesis ( ) Indicate Expenditure Decreases)

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

$5,981.5

Recurring

Federal

Medicaid Fund

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Human Services Department

SUMMARY

Synopsis of Bill

Senate Bill 644 appropriates $2.412.4 million from the general fund to the Human Services

Department for the purpose adjusting certain Medicaid reimbursement rates.

On July 1, 2007 HSD shall adjust by 4 percent for inflation and cost indexing the Medicaid rates

paid to nursing facilities as specified by regulation.

On September 1, 2007 HSD shall adjust by 4 percent for inflation and Medicaid rates paid to

Senate Bill 644 – Page

2

intermediate care facilities for the mentally retarded.

The bill contains an emergency clause.

FISCAL IMPLICATIONS

The appropriation of $2.412 million contained in this bill is a recurring expense to the general

fund. Any unexpended or unencumbered balance remaining at the end of Fiscal Year 2008 shall

not revert to the general fund.

On July 1, 2007, $2.104.0 million is appropriated to include an inflation adjustment of four

percent as part of re-basing the Medicaid reimbursement rates, to licensed nursing facilities.

On September 1, 2007, $308.0 thousand is appropriated to include an inflation adjustment of

four percent, to licensed intermediate care facilities for the mentally retarded.

SIGNIFICANT ISSUES

HSD reports that July 1, 2007 is a rebasing year for nursing facilities, it is not however a

rebasing year for intermediate care facilities for the mentally retarded (ICF/MR). The estimated

increase for the nursing facility rebasing without the Market Basket Index (MBI) is 11.9%. With

an additional 4% added to this, the nursing facility rates would be increased by approximately

15.9% which means a state general fund cost of approximately $8.9 million. If the ICF/MRs are

given a 4% increase on July 1, 2007, this would mean an additional increase to the state general

fund of approximately $246,842.00. For FY09, with an estimated MBI of 3.1%, this would

mean an additional increase to the state general fund of $2.1 million. With the rebasing for

ICF/MRs and the MBI, this is an estimated increase of 13.1% which means an additional impact

to the state general fund of $840,745.00. Therefore, the appropriation of $2.4 million for FY08

would result in an additional estimated operating budget impact of approximately $12 million

GF in FY09. Subsequent years will continue to grow as rebasing is based on increasing costs as

well as the MBI increase which is normally not known until the beginning of the federal fiscal

year.

The projected FY08 expenditure level for nursing facilities is $180 million and $21 million for

ICF/MR facilities. A mandated 4 percent annual increase totals approximately $8 million

requiring a general fund appropriation of close to the appropriation included in the bill. However

as HSD notes, this amount will be included in the three-year rebasing process causing a

“compounding effect" that totals about $12 million as reported by HSD.

While annual increases should be expected in all areas of the Medicaid program mandating an

inflation factor takes away the power of the legislature to make appropriations consistent with

each year’s circumstances.

POSSIBLE QUESTIONS

Why would only these particular Medicaid services be protected by mandated annual cost

increases and not all services.

MW/mt